Empowering Financial Customers: Unclaimed Pension Fund Benefits

1. UNCLAIMED PENSION FUND BENEFITS Rosemary Hunter Deputy Registrar, Pension Funds FSB Media Roundtable, Pretoria 19 AUGUST 2015

2. Content • Historical Background (Unclaimed Benefits) • Unclaimed benefits statistics • Reasons for not claiming • What funds do with unclaimed benefits • How does the FSB assist? • What beneficiaries should do • Tracing beneficiaries? • What funds should do • All of us should help to empower financial customers

3. Historical developments • PFA regulation 30(2)(r) requires fund rules to say how unclaimed benefits will be treated • December 2001: The enactment of the surplus legislation • 2002: Draft bill prepared to provide for the establishment of a national unclaimed benefits fund • 2003: Regulation 35(4) issued to require funds to hold full face values of unclaimed shares of surplus until paid to intended beneficiaries • November 2007: Circular PF 126 issued saying fund rules may not provide that benefits unclaimed for a period will “revert back to the fund”

4. Historical developments • 2007 start of most recent project to cancel the registrations of thousands of ‘shell’ and ‘dormant’ fundsabandoned in the massive shift from stand-alone to umbrella funds • November 2008: • Insertion of sub-section (8) into section 14 of the PFA • Insertion of a definition of ‘unclaimed benefit’ in the PFA and amendment of Income Tax Act to grant special tax treatment to special purpose ‘unclaimed benefits’ preservation funds • January 2012: Exemption from section 14 supervision for transfers to unclaimed benefit funds

5. Unclaimed Benefits Statistics • Approximately R15.8-billion in unclaimed benefits is owed to about 3.07-million beneficiaries - 2013 Annual Report. • Estimated to increase to R20 billion owed to 3.5-million beneficiaries - 2014 annual financial statement submissions • 50 ‘active’ registered unclaimed benefit funds with an estimated R4,6 billion in unclaimed benefits owing to 792,000 beneficiaries. • Recently conducted reviewin the mining industry estimates R5.2 billion owed to 200 000. • Excludes funds established in terms of other statutes, such as the Government Employees Pension Fund, the Telkom Pension Fund, the Post Office Retirement Fund and the three Transnet funds.

6. Unclaimed Benefits Statistics • Unclaimed benefits amount and beneficiaries increases year on year. • BUT fund membership also increases. • There are always ‘new’ unclaimed benefits that arise in funds every year.

7. Reasons for not claiming • Invalid/incomplete member data maintained by funds/administrators (inability to contact members) • Lack of expertise or resources by funds to trace beneficiaries • A member did not know he or she was entitled to a benefit, or deceased member’s dependants unaware of the benefit. • In the past, rules of many funds said that no benefit was payable on dismissal due to misconduct • A member may be a migrant worker (cross-border migration)

8. Reasons for not claiming • A member’s employer may be unwilling or unable to provide the fund with sufficient information • Some former members deliberately not claiming because: • they may believe the amount is too small • they may not want to provide personal payment information to the fund or its administrator • of trying to avoid tax-related issues

9. What funds do with unclaimed benefits • Prior to 2007, retirement funds had provisions in their rules that allowed for unclaimed benefits that remained unclaimed to revert back to funds. • In 2007, PF Circular No. 126 was issued, and from 2008, funds: • Retain the liabilities for their unclaimed benefits until claimed. • Transfer both the assets and liabilities to ‘special purpose’ retirement funds.

10. How does the FSB assist? • Unclaimed benefits policy drafting and implementation. • Liaising with the fund/administrator of the fund free of charge. • Assist with facilitating a response from the fund/ administrator. • Refer cases to the Pension Funds Adjudicator where appropriate. • Establishment of a searchable central database. • Protects beneficiaries against exploitation.

11. What beneficiaries should do • Any member of the public who suspects the might be benefits due to him/her should: • Contact the employer, who will be able to inform them who the fund administrator is. • Contact the retirement fund or benefit administrator (information usually available on payslips). • Check with the FSB if they have their fund’s details and the FSB can provide the necessary contact information.

12. What beneficiaries should do In order to claim:

13. Tracing beneficiaries? • Beneficiaries need to be cautious in dealing with intermediaries. • However, some are contracted by retirement funds to trace beneficiaries. • Important to establish if intermediaries are authorised by the funds to perform this function. • The FSB assists free of charge.

14. What funds should do • Contact the employer/former employers of the beneficiaries. • Funds should insist that employers supply them with up to date contact information including ID numbers, cellphone numbers, etc. • Find other ways to help funds trace and pay their beneficiaries, both local and foreign • e.g. consider the use of social media as a means for advertising unclaimed benefits or tracing beneficiaries. • Reminder to funds that the purpose of a pension fund is to pay benefits, they must therefore take all reasonable steps to trace and pay the beneficiaries.

15. All of us should help to empower financial customers • Funds and unclaimed benefit funds must take all reasonable steps to trace and pay the member or beneficiaries. • Consumer education and empowerment • Personal finance information conveyed through the media • Community events • Advice centres • Education and empowerment of trade unions • Education and empowerment of employers and their associations • Education and empowerment of community organisers

16. Questions?