Pensions are sacrosanct, so any initiative to use unclaimed pension benefits for worthwhile social causes will have to tread very carefully.
The amount unclaimed is more than R47bn, a substantial amount that is lying idle and generating fees for asset managers in the midst of dire social need and impoverishment. There are a host of good causes for which the money could be used: building schools, eliminating pit latrines, tackling youth unemployment and even financing relief efforts in the wake of the flood disasters last week in KwaZulu-Natal.
Negotiations among the government, business and labour will be necessary on how the funds should be used in a corruption-free manner. And before that takes place a concerted effort, including an intensive publicity campaign and the employment of a dedicated team of tracers, should be initiated in a bid to trace the beneficiaries of the pensions or their heirs, many of whom are probably living in destitution without any knowledge of what is due to them. After all they have the first claim to any benefit.
Not enough has been done to trace the beneficiaries, though the creation of a central database by the Financial Sector Conduct Authority (FSCA) is a great help. According to the FSCA, the number of identified beneficiaries of unclaimed pension benefits are 4.4-million.
The unclaimed benefits date back many years, if not decades, and belong mostly to migrant mineworkers and their heirs. Tracing them has been difficult because of poor record keeping and inaccurate identification numbers or even names.
The size of the unclaimed benefits also increased with the passage of an amendment to the Pension Funds Act about 15 years ago which required that actuarial surpluses of pension funds be distributed to present and past members, many of whom were likewise untraceable. Then there is the practice of people leaving their jobs without taking their pension fund benefits with them, which just adds to the amount.
Of course, the entire R47bn would not be available for worthwhile purposes. Some of it would have to be retained for what actuaries determine is necessary to meet future claims.
The Treasury has made a bid to tackle the problem of unclaimed pension benefits, but it has been long in the making. The first version of the Conduct of Financial Institutions Bill, which was released for public comment in December 2018, provided for the creation of a centralised unclaimed benefit fund with a board of trustees that could be used for social good. A second version of the bill was published in September 2020 and the Treasury is now processing the public comments with a view to tabling it in parliament before the end of the year. However, there is some uncertainty whether the creation of a centralised fund for unclaimed pension benefits will be retained in the bill or whether it will be included in another future-dated bill.
Earlier this year the UK passed the Dormant Assets Act to expand the original scheme launched in 2008 which transferred dormant funds in bank and building society accounts to a central fund for use for good causes. The scheme was expanded to include dormant funds from the insurance, pensions, investment and wealth management and securities sectors.
The previous scheme released £800m for good causes and its expansion is expected to unlock a further £880m. A process of public consultation is envisaged to determine what good causes to invest in.
The issue is a controversial one and any bid to appropriate the unclaimed benefit funds could come up against a legal challenge by pension fund trustees, but it is one that needs to be tackled. It is unconscionable that in a country with such great social need as SA there is such a large pot of unutilised money. And perhaps, following the UK example, there needs to be a broader look at what dormant assets generally exist in the economy and how they should be dealt with.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.