Unclaimed benefits: Never forget whose money it really is
At the end of 2019 the research and advocacy group, Open Secrets, revealed that there are over R42 billion in unpaid benefits under the administration of South African funds. These funds have not been paid out to their rightful owners, who are unaware that money is owing to them, and is currently drawing administration fees for being looked after by funds.
What is an unclaimed benefit?
Unclaimed benefits are more common than you might think. It arises when a person is due a retirement benefit, but they cannot be located in order for them to receive it. One of the commons reasons why this happens is that people often work for multiple employers throughout their lifetime and then choose to settle down in rural areas with limited access to communications, for example, or their fund failed to keep their contact details up to date through the years.
Legally, if a person can’t be located within 24 months their funds are transferred to an unclaimed benefits fund until they are tracked down and reunited with their money. Funds are expected to take every care possible to make sure they locate these individuals and high-profile court cases have made it perfectly clear what funds’ ethical duty towards their members should be. Sadly, not all service providers have resisted the temptation to indulge in the high fees these unclaimed benefit funds attract for them and have let their efforts to locate members fall by the wayside.
How to overcome this
Pension funds who realise the challenges of ensuring unpaid benefits are handled ethically and efficiently have started to use expert unclaimed benefit fund administrators to help them reunite as many of their members with their money as possible.
Fedgroup is one such specialised administrator.
As an independent financial institution, we recognise that handling unclaimed benefit funds is a specialised service, and we have shown remarkable success in tracing the beneficiaries in our Unclaimed Benefits Fund.
“The reason for the existence of an unclaimed benefit fund is to find and pay people their money in the shortest possible timeframe. Our success in tracing and paying our clients, compared to the industry norm, shows that many other providers are not taking full responsibility for their fiduciary duties. Many make a weak initial attempt to trace members, and then never again,” says Bash Govender, Operations Manager of Group Benefits at Fedgroup.
“Recently, we received benefits from a new pension fund client. Within three months we had found 40% of the beneficiaries. We never consider a tracing attempt complete, no matter how old. We still manage to locate beneficiaries after five years, where other providers have long given up.”
Doing things differently
Finding members of unclaimed benefits can be a complex affair and every care should be taken to ensure that it doesn’t become a costly one as well, as that would erode the value of the final payout.
“We make use of a two-stage process to keep costs to a minimum,” explains Govender. “First we see whether we can find the person using the documentation we have in our possession. This is an electronic process and the cheapest way to locate a beneficiary.
“If this proves unsuccessful, we will do a foot trace, which is more expensive, but necessary if no other way to locate a member has proven successful. We have several checks and balances in place to ensure our tracing agencies are top-notch and we only pay for successful traces. We have used quite a few tracing agencies and where the performance is not up to our standards, we change providers.”
When it comes to protecting our members’ interests, we only work with tracing agencies that do no have creditor arms, because in many cases tracing agencies have handed beneficiaries over to creditors for the payment of other, unrelated debts once they located them.
Our efforts to locate beneficiaries are further supported by our proprietary single-view administration IT system that was built in-house. All client interactions across all product lines can be seen on a single screen where many other providers use old legacy systems that do not speak to each other.
“Recently, a client contacted us because he forgot his password to our Impact Farming App,” says Govender. “Although this is a separate arm of the business, when he provided his ID number, our system immediately flagged that he has unclaimed benefits with us and we could pay him his money. It is doubtful whether this would have happened with any other provider in the country.”
With many service providers now having to mend their ways thanks to whistle-blowers and court rulings, it is encouraging to know that they can look to us for an industry best practice model that already works.