Where the culpability lies between life companies and the regulator, depends on who you ask, but the fact that a combined R47 billion has been owed to thousands of beneficiaries of deregistered and dormant pension funds for over 10 years, is nothing less than a travesty. This week, it was confirmed that the amount has ballooned to R90bn, as dormant bank accounts and dividend transfers enter the fray.
Where the culpability lies between life companies and the regulator, depends on who you ask, but the fact that a combined R47 billion has been owed to thousands of beneficiaries of deregistered and dormant pension funds for over 10 years, is nothing less than a travesty. This week, it was confirmed that the amount has ballooned to R90bn, as dormant bank accounts and dividend transfers enter the fray.
Where the culpability lies between life companies and the regulator, depends on who you ask, but the fact that a combined R47 billion has been owed to thousands of beneficiaries of deregistered and dormant pension funds for over 10 years, is nothing less than a travesty. This week, it was confirmed that the amount has ballooned to R90bn, as dormant bank accounts and dividend transfers enter the fray.
Stakeholders say efforts to trace the estimated 4.8-million people owed the staggering amount in benefits are proceeding far too slowly, if at all.
Advocacy group Open Secrets and the Unpaid Benefits Campaign (UBC) have continuously questioned the reasons why these numbers remain so stubbornly high since, on the fact of it, the Financial Sector Conduct Authority (FSCA) has made little to no effort in addressing this problem.
Late last year, a Victory in the Long March Towards Justice for Unpaid Pension Beneficiaries, advocacy group Open Secrets and the UBC, represented by the Centre for Applied Legal Studies, took matters into their own hands and, brought an application in the Gauteng High Court against the FSCA.
“In (was in) the spirit of greater transparency and responsiveness to the plight of pensioners,” Open Secrets states in a recent press release, and “the application asked the court to ensure that the FSCA takes clear steps towards remedying the unlawful cancellation of pension funds.”
Based on the FSCA’s answering affidavit filed in the Open Secrets/UBC litigation, the unlawful cancellation of pension funds saw fund administrators, like Alexander Forbes, Liberty and Momentum, enabled by the Financial Services Board (the FSCA’s predecessor), deregister thousands of funds, some of which owed pensioners and beneficiaries money. This occurred despite the fact that a deregistered pension fund cannot pay people what is owed to them.
And despite the FSCA publishing Circular 1/2019, in that very year, which required private fund administrators to apply to court to reinstate all funds that were unlawfully cancelled, less than a hundred of funds’ deregistration has been reversed.
So at the time, which was December 2021, out of potentially thousands of affected funds, only 48 have been reinstated over a period of more than a decade since their cancellation, Open Secrets states in its report. “Despite the apparent lack of compliance by pension fund administrators with the Circular, the FSCA had seemingly done little to enforce it. Our application therefore sought to ensure that the FSCA enforces its own obligations in an open and transparent manner and with the urgency required.”
The FSCA only filed their answering papers to the application in early July 2022, almost seven months since the institution of our application, but Dale McKinely, member of the steering committee at UBC tells Business Report that the matter has since been settled outside of court, as the regulator has shown to be more open to resolution than the executive of the previous regime.
However, Business Report is still in the process of dissecting all the details of the the First to the Fifth respondents answering affidavit to the motion filed in the Pretoria High Court, which includes the current executive of the FSCA and the Minister of Finance, and also still awaits the answers to questions posed to the regulator in this regard, which means this remains an evolving story. It has also reached out to Liberty, the largest pension fund administrator in the country.
In the meantime, McKinley says it seems apparent that some significant progress had been made by the regulator to ensure that fund administrators take active steps to remedy unlawfully cancelled pension funds.
“These steps demonstrate a recognition, after years of delay, that the matter cannot be ignored; unpaid beneficiaries and victims of the unlawful cancellation of pension funds deserve redress and cannot achieve this without the assistance of the regulator enforcing its obligations against fund administrators.”
In February 2017, the FSCA established an unclaimed benefit search engine, on its website, to start identifying the unknown beneficiaries of these cancelled funds. It was supported by SMS function, and a walk-in client service option, however, the unclaimed benefit funds total has accumulated, going from just over R40 billion, to almost R50bn, and in a media briefing this week, FSCA Commissioner Unathi Kamlana revealed that the total value of unclaimed assets in SA is now around R90bn, with collective investment schemes and life insurers holding a further 38% of benefits unclaimed.
The FSCA stated that central securities depository participants, had unclaimed assets of R4.5bn belonging to 391 000 beneficiaries in 2019, and the five banks canvassed by the regulator had 5.7bn dormant accounts amounting to R3.36 billion.
Kamlana said the quantum of funds across all financial sectors remains a concern, though good progress has been made in tracing beneficiaries in recent years.
Olano Makhubela, the FSCA’s executive for retirement funds supervision, told Today’s Trustee in June that the number of unclaimed benefit members decreased by just under 100 000 members between March 2020 and March 2021. Kamlana confirmed this notion stating that, “despite the increase in the value of unclaimed benefits over time, the number of members had declined since 2018.”
As the regulator, the FSCA has officiated this recommendation of establishing a centralised database, and establishing a dedicated central unclaimed that establishing recommends establishing
Former Finance Minister, Tito Mboweni mentioned in his 2020 budget speech that, unclaimed money in retirement funds and the guardian fund - which is under the administration of the Department of Justice - were being considered for infrastructure development, and that legislation to centralise unclaimed benefits funds and establish a central registry of all members of retirement funds will be introduced. Not much has come from that, however the Guardian Fund’s annual report for the 2020/21 financial year states that it has over R15.5 bn in assets under management.
The fund also revealed that cases still under investigation, meaning money that went missing from the fund’s coffers, as at 31 March 2021, amounted to over 21 Million. It was almost double that of the previous financial period.
President Cyril Ramaphosa had issued a proclamation to the Special Investigations Unit to investigate possible maladministration, fraud and loss at the various Masters of the Court branches, but not much more has been reported in this regard since then.
The Guardian’s Fund ( is a statutory trust established in terms of the Administration of Estates Act, and receives funds as ordered by the Master of the High Court in circumstances such as a person dying intestate or without any known beneficiaries or descendants.
Meanwhile, Open Secrets says it will continue to monitor both the steps taken by the FSCA, and the compliance by the fund administrators, where unclaimed funds in deregistered retirement funds are concerned.
As part of ongoing efforts to give voice to the experience of millions of people who have not been paid pensions across southern Africa – Open Secrets and the UBC organised a one day People’s Hearing on the matter last week (13 September) at the Woman’s Jail at Constitution Hill in Braamfontein, Johannesburg. An esteemed panel heard the testimonies of people directly impacted by this injustice in an ongoing manner, the press release states, but McKinely says only two Liberty representatives were sent to the hearings, and one left after the first session. “The FSCA was also present at the organised event, but met with the UBC in private the previous day.
“We’ve been asking for a meeting for close to three years, he says, and sent the agenda for this encounter over a month ago, to talk about the irregular cancellations, regulatory oversight, tracing efforts and the FSCA search engine, to name a few.”
“But on the day the executive insisted that they would only respond to these issues in writing, and due course, which caused a lot of frustration and tension and the proceedings,” McKinely concludes. The UBC intends to follow up on the matter this week.
BUSINESS REPORT