The Financial Services Board (FSB) is stepping up its campaign aimed at reducing the massive R20 billion owed to 3.5 million retirement fund beneficiaries and at blocking “charlatans” who are seeking to exploit the situation.
Rosemary Hunter, the deputy FSB executive in charge of retirement funds, gave details of improved plans for the regulation and supervision of unclaimed benefits at a round-table discussion held this week at the FSB offices in Pretoria.
There are many reasons why billions of rands are still unclaimed. These include the failure of employers and funds to provide information about benefits, poor administration, the fact that many foreign workers who are owed benefits leave the country soon after their work permits expire, the failure of members to inform their dependants that they can claim benefits on their death, and the failure of funds to trace members. In addition, many funds have had surpluses to distribute, and former members may be unaware that they have been allocated a portion of the surplus.
Hunter says retirement fund administrators and even employers must up their game to ensure that members, former members and dependants of members receive their fair share of the treasure.
Measures being considered or implemented by the FSB include:
* The establishment of a searchable central data base that includes the names of all former retirement fund members who have not claimed their benefits. Hunter says that the database will take about two years to complete.
* Stepping up the FSB’s monitoring of retirement funds and unclaimed benefit administrators to ensure they are taking all reasonable steps to trace and pay former members or beneficiaries.
Hunter says that administrators and retirement fund trustees must be able to show that they are conducting “diligent searches” for beneficiaries.
She says funds should be:
– Contacting employers or former employers of the beneficiaries for up-to-date contact information.
– Using social media to advertise unclaimed benefits or trace beneficiaries.
– Speaking to other employees or fund members who might know the whereabouts of missing members.
“The purpose of a pension fund is to pay benefits. Funds must therefore take all reasonable steps to trace and pay the beneficiaries,” Hunter says.
* Issuing FSB guidance notes to funds on unclaimed benefits. This will include a guidance note on what costs should be paid by the fund.
Hunter says that those beneficiaries who are traced should be paid 100 percent of their due benefit, without any of the tracing costs being deducted. She says it can be assumed that funds will trace, at best, only 80 percent of the beneficiaries. So the costs of tracing members can be offset against the amounts due to those who will never be traced. The estimates of the percentage of members who will never be traced will vary from fund to fund, however, Hunter says.
She also says that the FSB may allow funds to reduce the amounts (reserves) they allocate for unclaimed benefits based on the fact that some beneficiaries may never be found.
Hunter rejected any argument that a timeline should be placed on tracing beneficiaries.
* Ensuring fund administrators and unclaimed benefit fund administrators do not use flimsy excuses to avoid paying out benefits. She says benefits can be reduced by administrators' high costs together with low investment returns.
However, she says, administrators and retirement funds are subject to the new Treating Customers Fairly regulatory environment and they have to be able to show that you were treated fairly when you made a claim.
Hunter acknowledged that funds are facing fraudulent claims for unclaimed benefits, but efforts by funds to counter legitimate claims with flimsy arguments are unacceptable. She says the FSB will refer complaints to the Pension Funds Adjudicator where necessary.
* Protecting beneficiaries against exploitation. This includes action against “charlatans” who are charging, sometimes fraudulently, potential beneficiaries. She says there have even been cases where:
– So-called intermediaries have charged members R50 to tell them that they are entitled to a death benefit, even though the members are still alive.
– Intermediaries getting beneficiaries to agree to pay as much as 25 percent of any benefit recovered.
Hunter says anyone providing advice on claiming a benefit must be registered as a financial services provider with the FSB in the terms of the Financial Advisory and Intermediary Services (FAIS) Act, and any intermediary must also adhere to the advice code of conduct under the FAIS regulations.
* Developing a broad consumer education and empowerment campaign.
Hunter says the campaign should include community organisations, employers and their associations, trade unions, the funds and the FSB.
HOW TO CLAIM
If you, as a former retirement fund member or dependant of a former member, think benefits may be due to you, you should:
* Contact the member’s (or your) last employer, who will be able to inform you who administers your fund.
* Contact the retirement fund or fund administrator.
* If you cannot establish the name of the fund or its administrator you can contact the call centre of the Financial Services Board (FSB) on 0800 20 20 87 or 0800 110 443, or email [email protected]. The FSB cannot tell you if you are owed benefits, but it can assist you to trace an administrator or fund. It will assist you free of charge.
* Once you have established the name of the fund or administrator, you will need to provide documents that prove your membership or the membership of the former member, such as an identity number, benefit statement, payslip or correspondence from the fund.
* If a benefit is available, the fund will advise you on the supporting documentation to provide.
* If you are dissatisfied with, for example, the reason for refusal of payment, you can take up the matter with the FSB or the Pension Funds Adjudicator (PFA). To contact the PFA telephone 012 346 1738 or email [email protected]
Rosemary Hunter, the deputy FSB executive in charge of retirement funds, says you should be cautious when dealing with intermediaries who want to charge you a fee. You should deal only with tracing agents authorised or appointed by a fund, who should not charge a fee.
RULES ON SURPLUSES UNDER FIRE
The National Treasury is opposing a move by the curator and liquidator of several retirement funds, Tony Mostert, to set aside regulations that deal with retirement fund surpluses. Heads of argument have been filed and a court date is likely to be set soon.
Mostert has applied to the Gauteng High Court to declare ultra vires (“outside of the law”) and unenforcable the regulations issued under the Pension Funds Act that require unclaimed retirement fund surplus benefits to be transferred to contingency reserve funds, including unclaimed benefit funds and the Guardian’s Fund, which is administered by the Master of the High Court.
The application brought by Mostert relates to the liquidation of the Picbel Groepvoorsorgfonds, one of a number of funds that were subject to surplus-stripping by employers in the 1990s.
Mostert argues that the regulation governing the handling of unclaimed surplus benefits is inconsistent with and contradicts other provisions of the Pension Funds Act. He says that there is no legal provision for the release of funds from a contingency reserve account or the Guardian’s Fund, even when there is no reasonable possibility of a beneficiary being traced.
The exact numbers are unknown, but it is estimated that there is R1 billion of unclaimed benefits from surpluses.
Mostert wants the unclaimed benefits to revert to the fund to be distributed among members who can be traced.
Rosemary Hunter, the FSB deputy executive in charge of retirement funds, says legislation dealing with unclaimed benefits from retirement fund surpluses is different from that which deals with general unclaimed benefits.