The government plans to establish a special fund into which all unclaimed retirement benefits will have to be paid, to prevent abuse of this money by funds.
Retirement funds currently have millions of rands of unclaimed benefits, and billions more may be paid out over the next few years when funds start dishing out their surpluses as they are obliged to do under new legislation which took effect at the end of last year.
In terms of the new law, funds that have surpluses must come up with a surplus apportionment scheme to divide the surplus among current members, former members, pensioners and employers.
Former members from as far back as January 1980 may be allocated a share of a fund's surplus, but the challenge for funds will be tracking down these members.
Unduly enriched
Wilma Mokupo, the head of retirement funds at the Financial Services Board (FSB), says the regulator is concerned that unclaimed benefits are reverting to other members in funds. This means that members may be unduly enriched by sharing in benefits that are not due to them.
Another concern of the FSB is that members may be losing their benefits simply because they don't know where and how to claim these.
A third problem is that unclaimed benefits are being eroded by administration costs.
Rod Stevenson, a senior legal consultant at Old Mutual and a member of the Institute of Retirement Funds' legal and technical sub-committee, says a few years ago it was common for funds to include a prescription period of three years, so that if you didn't come forward to claim your benefit in that time, you would lose your claim against the fund. But the FSB, concerned about consumers losing out, refused to register rule amendments which limited the rights of members.
Different funds deal with benefits that are not claimed in different ways and the FSB believes the time has arrived for a uniform approach to dealing with unclaimed benefits.
According to Mokupo, proposals to be discussed at the FSB's Pensions Advisory Committee are that funds should search for the legitimate owners of the benefits for a period of two years, after which the money must be paid to a central unclaimed benefits fund. Money that is unclaimed for 30 years would be used for the benefit of the retirement fund industry.
This fund will be managed by a board of trustees which will be appointed by Trevor Manuel, the Minister of Finance, in consultation with Dube Tshidi, the Registrar of Pension Funds.
Stricter-than-normal accounting practices will apply to the central fund and a central register will be maintained, so that when members of the public phone in, the fund will be able to advise them whether they are owed benefits, Mokupo says.
Criticism
The idea of a central unclaimed benefits fund was criticised by delegates of the Institute of Retirement Funds conference. Some believe that current difficulties that funds face in dealing with unclaimed benefits is a result of lack of guidance from the FSB, and that the creation of yet another fund will result in millions of rands ending up in state coffers if nobody comes forward to claim their benefits.
In response to the criticism, Mokupo said that retirement fund trustees, already over-burdened with the huge task of allocating surpluses and death benefits, were reluctant to take on further responsibilities.
The FSB is disturbed that when funds were asked for information on unclaimed benefits, only 1 400 out of about 15 500 funds bothered to provide the FSB with the information.
The unclaimed benefits in these 1 400 funds alone amount to R824 million. In many cases, funds have not kept records and cannot tell the FSB how much they have in unclaimed benefits. The FSB finds this state of affairs "totally unacceptable", she says.