Speaker after speaker at the People’s Hearing on Unpaid Pensions on Constitution Hill in Joburg on Tuesday detailed the heir’s Kafkaesque efforts to lay hands on unclaimed pensions accumulated over decades of hard work.
Just when you think you’re getting somewhere with your claim, a new administrator is appointed and the paperwork starts over.
One speaker waited seven months for the fund administrator to say that there was no pension for him.
Andrew Zwane, a member of the Unclaimed Benefits Committee (UPC), which helps pensioners track unclaimed pensions, has spoken of his frustration at tracking the pension payments he received after decades of working for companies such as African Cables, Fidelity Guards and XPS Services. . “I submitted claims, but nothing came of it. No one is coming forward to explain the way forward.”
As years and decades go by, the beneficiaries leave and leave the battle to get any benefits for their families.
Another speaker, Johannes Moloi (58) from Sharpeville, was a former South African Post Office worker before parts of its business were absorbed by Telkom. He was fired in 2003 and received a payout of about 280,000 rand, which included a pension fund he had been paying into for decades. All this made no sense to him then or now.
“I have three children to look after and I got a severance package of 50,000 rand,” Molloy told Moneyweb. “I am also here to fight for the unclaimed benefits of my father who was an army cook before joining SA Rail (later part of Transnet). He paid 45 rand a month into his pension for decades, but got nothing when he retired. He passed away. I think this money is sitting in one of these dormant pension funds and the administrators are trying to steal it.”
UPC’s Bruce Kapi says millions of South Africans are running in circles trying to claim the payments they are legally entitled to, despite assurances from the Financial Sector Conduct Authority (FSCA) that it is doing everything it can to track down the beneficiaries , evidence suggests that not all administrators share his enthusiasm.
That the unclaimed benefits are estimated at 50 billion rand is not disputed, although UPC members say the figure is likely much higher.
That’s the figure estimated by investigative and advocacy group Open Secrets, which has taken on the issue of unclaimed benefits as one of its campaigns.
Solving the puzzle
How the unclaimed amenities accumulated to a staggering 50 billion rand is a little more opaque and appears to be a uniquely South African mystery.
Poor corporate governance was partly to blame, but a much bigger problem was the number of migrant workers traveling to the mines from Malawi, Mozambique, Lesotho and other countries. Unable to pronounce or write these workers’ names, administrators gave them more comprehensible names such as John or Johannes, names that did not match what was accepted as ID cards in the 1950s and 1960s. Personal circumstances forced workers to return to their rural homes, often forgetting that they had unclaimed pensions.
Companies went bankrupt, merged, or periodically downsized. Management of the pension fund was transferred from one company to another. There has been a shift from defined benefit funds to defined contribution funds and a further shift from standalone to umbrella funds.
One of the biggest corporate scams well known to MBA students was the buying up of companies almost exclusively to get their hands on employee pension funds.
The courts have been criticized for going against pensioners in two of the most high-profile cases of recent years: Two Pensioners v Tongaata Hulet Pension Fund; and that former deputy registrar of pension funds for the Financial Services Committee (now FSCA) Rosemary Hunter against the FSB for trying to de-register funds that still held assets of ex-employees.
Read: The twisted story of SA’s pension fund embezzlement
In 2021, the FSCA outlined the extent of the problem:
- There were 45 billion rand (now estimated at 50 billion rand) of unclaimed pension payments,
- Owned by 4.5 million South Africans.
- There were 6,757 inactive superannuation funds in the so-called ‘cancellation’ project initiated by the FSCA between 2007 and 2013. Almost a third of them were abolished even though they had properly constituted councils.
- Dormant pension funds could not pay out benefits, but could still earn an administrator fee.
According to research by Open Secrets, more than 16 million South Africans belonged to a pension fund in 2019, with around 90% of members belonging to around 5,000 private pension funds, usually managed by the country’s largest financial institutions.
We have an even better idea of the state of unclaimed benefits from the FSCA’s response to the (now withdrawn) Open Secrets case, in which it asks the court to ensure that the FSCA takes clear steps to tackle the illegal termination of pension funds.
The FSCA says it launched the repeal project in 2007 “because of the large number of dormant or insolvent funds which undermined the integrity of the pension fund register and the effectiveness of supervision”.
When she took over as deputy head of the FSB’s pensions division, whistleblower Hunter raised concerns about how the repeal project was being carried out. She led a years-long campaign within the FSB to force an open and transparent investigation into the liquidation of thousands of pension funds, some of which still had assets.
Hunter took her case to the Constitutional Court but lost in 2017 on the grounds that the FSCA had already launched an investigation into the defunct pension funds.
Hunter says there is evidence of improved administration under the FSCA, with Liberty named as one of the largest administrators involved in the irregular winding up of pension funds, showing a much higher level of transparency and efforts to restore winding up funds.
“There is also a new executive committee at FSCA and there appears to be a change in culture and a greater willingness to address the issue of unclaimed benefits,” adds Hunter.
Liberty says those who believe they are entitled to unclaimed benefits can access the Liberty Unclaimed Benefits service.
Another database run by BenX is a free search engine that allows anyone to check for unclaimed benefits. He estimates that more than R85 billion is owned by more than five million South Africans.
The FSCA also has a database search facility for unclaimed benefits.
Open Secrets says it has withdrawn its legal action against the FSCA, recognizing the fact that the courts should be a last resort.
“However, we are disappointed that progress has come alongside a continued lack of transparency and communication with the public, which we believe is a breach of the constitutional duty of all government agencies to act transparently and in the interests of the wider public. Without such openness, unpaid beneficiaries and victims of wrongful termination of pension funds are left in the dark. This is the only way that affected beneficiaries will know what is happening to their hard-earned pensions and that the public can be sure that the FSCA is acting independently.
“We will continue to monitor both the steps taken by the FSCA and compliance by fund administrators. We will also continue our approach of actively engaging with all relevant authorities to achieve wider social justice and to support the interests of unpaid beneficiaries and victims of wrongful termination of pension funds.”