Unclaimed benefits – is the retirement fund industry doing enough?

Jeanine Astrup, a consulting actuary representing the Actuarial Society of South Africa

The Financial Sector Conduct Authority (FSCA) has advised that R47.3 billion was still sitting in retirement funds as unclaimed benefits in 2021. The obvious question is whether the industry is doing enough to get these benefits paid?

Consulting on the South African Institute of Chartered Accountants (SAICA) Retirement Funds Project Group, I asked myself this question and here is what I have learnt along the way. 

1.           Data is often limited or wrong

In the digital age where everyone records your ID number and name, we often forget that this was not always the case. Old payroll systems, some of which were not even electronic, did not capture ID numbers, seldom had first and second names, and rarely recorded gender. Even where information was captured, there were no such things as system verifications, and information was often captured incorrectly or not at all. Roll forward 20 years and we now have a tracing company trying to trace A Smith who was supposedly born on 2 January 1956 but who could just as easily have been AP Smith born on 1 February 1959. 

Whilst changes to the last three digits of ID numbers are well known, we have had many cases where entire ID numbers have changed when members have resolved disputes regarding their date of birth.

These data discrepancies will trigger untraced results if the fund, employer, and tracing agent don’t work together to try to determine if a person found with slightly different details could be the person everyone is looking for. 

2.           People are hard to find

Most tracing agents will trace members using information related to the member’s financial transaction history. These “desktop” traces are often successful for members still employed and living in the country. However, these “first-level” traces become less useful for former members who have left the country, no longer work and rely on their children for financial support, or who have since remarried and changed their surname once or possibly twice. Even more complicated are former members who passed away after having left South Africa. 

There are a few tracing agents who have found more creative ways of tracking members down, but they will cost a little more given that each case will take time to solve. 

3.           People pass away

Sadly, as time passes, the chances increase of these unclaimed benefit members being deceased. This turns a former member trace into a beneficiary trace. Once you have found the beneficiaries, in or outside of South Africa, you have the challenge of understanding if the deceased had an Estate, the value of the Estate, if the Estate is still open, and how to get hold of the Executor. Thankfully the process is simpler if the amount of money you are trying to pay is small and the Executor is happy for you to pay the Estate beneficiaries. But in all other situations, it becomes complicated both for the beneficiaries who need to arrange the paperwork and the administrator trying to assist the family. 

4.           People don’t believe you

With all the scams out there at the moment, it is no surprise that members are sceptical when out of the blue they receive a phone call or email advising them that the employer they left 5 or 10 or even 20 years ago would like to pay them money. People react differently when they have trust concerns – some will tell you that you have the wrong person, whilst others will accuse you of being a horrible human being for trying to steal money from people. The challenge is to keep at it and to try not to take it personally. 

5.           The paperwork is enough to send anyone running

With the financial regulations surrounding benefit payments made by fund administrators, the paperwork required to make a benefit payment to someone who barely exists in the administration system is hard work. Some of the challenges we have identified through this journey include:

• Did you know that the previous template marriage certificate asked for a woman’s maiden surname and married surname but never asked for the surname at the time of marriage, which may well have been the surname from your first marriage? This creates problems for women who have been married more than once when the surname you have on record came from the first marriage but the marriage certificate has a maiden surname and a second marriage surname. The only way to solve this for the woman involved is a trip to Home Affairs to ask for a marriage certificate that shows their surname at the time of marriage and the surname after marriage. Waiting for this certificate can take weeks or even months. 
• Financial immigration out of South Africa means that the former member no longer has a South African bank account. The administrator has to confirm that the former member correctly financially immigrated and you have to hope that the member kept a copy of his/her South African ID and SARS financial immigration number. Only then can payment be made into a foreign account.
• Former members who were working in South Africa but who were never South African citizens often return to their country of origin. The former members do not have a South African bank account and cannot meet FICA requirements to open one. Payment to these members becomes a challenge for the administrator and for the former member who must produce the paperwork requested. 

Unsurprisingly, members are not happy with the paperwork requested and the fact that some documentation could be very old and unavailable. 

6.           The exercise takes time and resources

It makes no sense for a company to go through the pain described above for a small tracing and documentation collection fee and funds therefore must recognise that this next level of unclaimed benefit tracing will come with costs. Also, questionable cases where ID numbers, dates of birth, or surnames differ, will require further investigation by potentially the employer, fund, and administrator. This again has time and cost implications.

Therefore, if one has to ask “can the industry do more”, my view is – absolutely. However, all parties involved need to recognise that it will result in higher costs and resource allocations and will need a whole lot of perseverance. 

For individuals who did not receive a benefit payout when they left employment, the FSCA has created an online unclaimed benefits search engine.

Members should note any previous surnames or changes to ID numbers. If former members withdrew from a defined benefit fund before 2004, have not been paid an additional surplus benefit and have not already confirmed that their former fund did not undertake a surplus allocation, they should also consider getting in contact with their previous employer.