According to the FSB, retirement funds have some R 20 billion in unclaimed benefits owed to 3.5 million beneficiaries. This amounts to a little more than R 5 700 per beneficiary. There is no indication of the distribution of benefits by size, but if just 10% of them are 10 times the average size then there would be barely R 50 million left for the other 3.15 million beneficiaries or just under R 16 each. While this exercise in arithmetic in no way represents what is actually the case, it demonstrates that even if there are only a small proportion of high value unclaimed benefits the vast majority of them are of trivial size.

Moreover, there is no indication of the age distribution of these benefits. Consider the attrition of just mining and industrial employment over the last two decades and many may be quite old, not to mention those resident outside the borders of South Africa. In many instances employees produce fraudulent Identity documents to employers causing them to be untraceable when they exit employment. The FSB‘s anticipated 80% success rate therefore seems improbable.

These kinds of considerations have important consequences for the management of the unclaimed benefit problem. Consideration of them may lead to more focussed and ultimately more successful strategies than the predictable curtseys to education and awareness made by the FSB.

Managing the current situation

Large value benefits can afford active and intensive tracing activities with a high probability of success. The majority of benefits however, will have their values rapidly eroded by other than passive approaches; entirely neglecting the incidence of administration and investment costs.

In this context it seems that the FSB interpret TCF as maintaining at least the nominal value of unclaimed benefits indefinitely (not for them the possibility of benefits expiring on the untraced beneficiary reaching a biblical age!). Over time maintaining nominal values will further trivialise benefit amounts in the face of inflation unless there is some sophisticated and ‘fair’ cross subsidy of small benefits by large ones.

The tracing of small (however defined) benefits is really only amenable to the kind of ‘passive‘ approaches the FSB suggest. All funds could be required to post appropriate information regarding unclaimed benefits on their websites. Alternatively, as the FSB propose, a national register of unclaimed benefits can be constructed. It could be mandatory to register all benefits which become classified as unclaimed in terms of the Pension Fund Act (over two years old).

This sounds like a working reincarnation of the Guardians Fund (about which the least said the better). Perhaps the funds should be transferred to such a national unclaimed benefit fund. Whether or not one goes that far, a single register and access point could (I will not say would, given the scope of human ingenuity) greatly reduce the scope for unscrupulous intermediaries. Being the regulator of the retirement fund industry it may be best practice if the FSB managed all the unclaimed benefits in a single fund.

The FSB‘s proposal for a central register deserves support.

The notable organ of state Home Affairs might also be persuaded to come to the party by making the National Population Register and other databases available to help trace RSA nationals/residents.

Minimising future accretions to the sand pile

There is no doubt that, for the future, the best way to manage the problem is to minimise the occurrence of unclaimed benefits.

It seems to me doubtful that many employees leave their employment without some contact with their employer (it may be though that the level of absconding is high!). Every terminating employee should receive some advice about their benefit situation. It may be that the fund cannot respond fast enough to provide absolutely up to date and accurate information, but that is not the point. The aim is to make the employee aware of the need to enquire about benefits. Precision can be achieved later.

The future scenario is where individual and group employee awareness has the greatest value. Social media, including the spoken word (gossip), must be used allow the fund to network with employers and former workmates to contact potential beneficiaries.

Doubtless all members receive an annual benefit statement, most often in a language and in terms they do not comprehend (we must deny ourselves the pleasure of HR, or Pensions or Legal Speak). TCF requires that funds, in conjunction with employers, consider how best to communicate in order to obtain a positive outcome.

The role of the employer is critical in this, but often grudgingly played, if at all. And retirement funds usually have neither the resources nor the inclination (not their responsibility) to act effectively. It may be that further regulatory action is necessary to cajole employers to keep full employee contact information. As regards funds and their administrators, prompt processing of benefits (months not years) could be a sovereign remedy; S 37C is too often abused in this context.

All parties need to give attention to TCF. After all, the ultimate customer in the retirement fund arena is the individual member/beneficiary, not the board of trustees who are the members representatives, not the administrator striving to maintain administrative standards, nor yet the consultant whose advice is targeted at ‘meeting customer needs’.

And if some benefits remain unclaimed a central register remains an essential first step.