1 The role of FSB in supporting efforts towards the disbursement of benefits for mineworkers Presentation for Regional Dialogue Financial Services Board.

1

The role of FSB in supporting efforts towards the disbursement of benefits for mineworkers

Presentation for Regional Dialogue

Financial Services Board

By: Carlo da Gama

26 March 2015

FinancialServices

Board

Slide 2

Overview of FSB

•Established in 1991;

•Independent institution established by statute to oversee the South African Non-Banking Financial Services Industry in the public interest;

•Our vision is to promote and maintain a sound financial investment environment in South Africa;

•Our mission is to promote the:

• Fair treatment of consumers financial services and products;• Financial soundness of financial institutions;• Systemic stability of financial services industries; and• The integrity of financial markets and institutions.

FinancialServices

Board

Slide 3

Overview of Retirement Fund Industry

•Administrators: 168

•Number of funds: 5,000

•Members: 13,4 million

•Total assets: R1,8 trillion

FinancialServices

Board

Slide 4

What is an unclaimed benefit?

Defined in the Pension Funds Act (‘PFA’) as:

• benefit other than those mentioned below, not paid to a member, former member or beneficiary within 24 months of the date on which it, in terms of the rules of the fund, became legally due & payable;

• a benefit payable as a pension / annuity to a member, former member or beneficiary within 24 months of –

i. the expiry of the guarantee period for pension payments provided for in the rules of the fund; orii. the date on which any pension / annuity legally due & payable in terms of the rules of the fund

became unpaid;

• surplus benefit payable to former member that cannot be traced - not paid within 24 months after surplus approval;

• any benefit that remains unclaimed/unpaid to a member, former member or beneficiary when a fund applies for cancellation or registration or where the liquidator is satisfied that benefits remain unclaimed / unpaid, excluding –

i. section 14 transfer, where annuity is purchased i.r.o pensioner or otherwise in terms of the PFA;ii. death benefit payable to a beneficiary i.t.o s37C not paid within 24 months from date of death of

member.

FinancialServices

Board

Slide 5

How do unclaimed benefits arise?

•Employer provides inaccurate or incomplete member information;

•Fund administrator capture errors;

•Administrator churn;

•Member education/awareness;

•Information changes after member leaves fund;

•Member not registered for tax;

•Incomplete or no withdrawal documentation received;

•Migrant labour particularly in mining sector.

FinancialServices

Board

Slide 6

Establishment of Unclaimed Benefit Funds

• Prior to 2007, retirement funds had provisions in their rules allowed for unclaimed benefits that remained unclaimed to revert back to funds. Prescription Act allowing for benefit not claimed within 3 years to prescribe;

• In 2007 PF Circular No. 126 issued to all retirement funds:

• Provided guidelines on treatment on unclaimed benefits;• Introduced a definition of an unclaimed benefit.

• Retirement funds were required to amend their rules to in-line with Circular before 31 December 2008.

• Financial Services Laws General Amendment Act 22 of 2008 inserted a definition of an unclaimed benefit in section 1 of the PFA.

FinancialServices

Board

Slide 7

Establishment of Unclaimed Benefit Funds(continued)

• The Revenue Laws Amendment Act 60 of 2008 provided for establishment of unclaimed benefits funds – ‘special’ purpose preservation funds.

• Financial Services Laws General Amendment Act No. 45 of 2013 inserted a definition of an unclaimed benefit fund in section 1 of the PFA to mean:

“a fund that is established for the receipt of unclaimed benefits contemplated in the definitions of a pension preservation fund and a provident preservation fund in section 1 of the Income Tax Act, 1962 (Act No. 58 of 1962)”;

• Since 2009 a number of funds submitted applications in terms of section 4 of PFA to register as unclaimed benefit funds.

FinancialServices

Board

Slide 8

Overview of Unclaimed Benefits

•Unclaimed benefit funds (50 ‘active’ funds):

- R4,6 billion

- 792,000 beneficiaries

•Aggregate unclaimed benefits (including occupational, retail and unclaimed benefits funds):

- R20 billion

- 3.5 million beneficiaries

•Mining Sector:

- R5,2 billion

- 200,000 beneficiaries

FinancialServices

Board

Slide 9

Role of the FSB in relation to unclaimed benefits

• Complaints in terms of the PFA dealt with by the Office of the Pension Funds Adjudicator;

• Section 30I (1) of the PFA: “The Adjudicator shall not investigate a complaint if the act or omission to which it relates occurred more than three years before the date on which the complaint is received by him or her in writing.”

• The PFA only empowers the FSB to make enquiries with administrators, funds and other parties (employers);

• On this basis, we assist complainants who are unable to lodge a complaint with the Office of the Pension Funds Adjudicator – ‘walk-in’, telephonic (call centre), electronic mail and post.

FinancialServices

Board

Slide 10

Statistics on complaints

•Following the publication of article in Business Day we received +/-3,000 calls per day (average is 150) up to December 2014.

•Dedicated email address ([email protected]) in December 2014. 847 emails to date.

•Of 847 emails only able to assist +/- 15% of members.

•More than 120 walk-in clients since November 2014 to date.

FinancialServices

Board

Slide 11

Challenges in assisting with unclaimed benefits

• No central database;

• Member education/awareness;

• Information required in order to investigate such as name of pension fund, name of employer, proof of membership (benefit statement) and payslip;

• Time lapse – adverse impact on data / record keeping;

• Nature of funds might not have required employer names to be provided to our office therefore not on our records.

FinancialServices

Board

Slide 12

Challenges in assisting with unclaimed benefits(continued)

• Access and means to complain/enquire with administrator, funds or FSB office;

• Misinformation leading to exploitation - No regulation of tracing agents and/or 3rd parties acting on behalf of members;

• “Red tape” when claiming benefits eg. stamp by employer or originals documents.

FinancialServices

Board

Slide 13

Solutions and Proposals to Other Stakeholders

• Central database maintained by the registrar (issue PF. Circular to collect information from funds/administrators - preliminary info to assist member);

• Unclaimed benefits communication project – media and print;

• Enhancing FSB supervision of unclaimed benefits within occupational, retail and unclaimed benefit funds:

• Draft PF. Circular for exemptions of transfers of unclaimed benefits;

• Supervision of tracing agents;

• Reporting of tracing and payment efforts by funds;

• Quality audit on member information and additional prescribed minimum information (such as cellphone number)

FinancialServices

Board

Slide 14

Solutions and Proposals to Other Stakeholders(continued)

• Greater co-ordination between FSB, funds, administrators and organisations representing members;

• Preparation of information circular to inform members in major labour sending countries (Lesotho, Swaziland, Mozambique and Botswana) of unclaimed benefits;

• To address POPI concerns, work with industry to draft a proposed code for employee benefits industry which would allow us to collect and subject to appropriate controls share information on unclaimed benefits.