R30bn in pensions unclaimed

THERE is R30-billion in unclaimed pension benefits sitting idle in South African retirement funds – more than enough to build another Gautrain system and nearly enough to host another Fifa soccer World Cup.

Speaking at the 2012 Sanlam Benchmark Symposium, an annual review of South Africa’s retirement industry, Danie van Zyl, head of guaranteed investments at Sanlam, said 84% of South Africa’s pension funds reported they had unclaimed pensions in their accounts.

The beneficiaries of these funds do not know that they are owed the money. Van Zyl said this was usually because workers changed jobs or their particulars, and the funds did not know to whom the money should be paid out.

However, pension funds are not allowed to pay the funds out to anyone but the former member or his or her beneficiaries.

While pension funds have to employ tracing agents to find the beneficiaries, the amounts of money owed to the beneficiaries are often much smaller than the amount it costs to trace them.

But while the individual amounts may be small, they do add up. The national Treasury has mooted setting up a central “unclaimed benefits fund” that would have a duty to trace former members and try to make payment to them or their dependants.

Van Zyl also said 24% of funds surveyed by Sanlam reported that people resigned in order to access their retirement savings.

The proceeds of the retirement savings, after being taxed, would be used to pay off short-term debt. The worry was the short- term debt grew again after retirement savings were spent on it.

“It should not be as easy as it is for members to access retirement cash,” Van Zyl said. “People should be advised of the consequences. A lot can be done to improve what is happening.”

Treasury retirement policy specialist David McCarthy said the Treasury was investigating the charges of retirement products, which were high in South Africa, and hoped to release its report on the matter in October. Additional reporting by Business Day

TJ Strydom