UNCLAIMED BENEFITS: Editorials: Edition: July / September 2019

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A higher standard

Better processes in place for uniting money with its owners.

ASISA is off to a good start.

Rather proud of its members is the Association of Savings & Investment SA. During last year, it reveals, they got R8,1bn returned to their rightful owners.

Every little bit helps, as it’s said. Relative to the many billions of unpaid assets sitting in pension funds (TT April-June), and the additional untold billions of unclaimed amounts sitting elsewhere (see box), R8,1bn is a little bit.

However, the payments do show a serious intent for monies not to remain indefinitely where they shouldn’t. More than this, R8,1bn is quite a lot relative to the estimated R17,1bn held in 147 221 products of ASISA members that still need to be paid over.

A good start has been made. The R8,1bn in “forgotten assets”, as ASISA describes them, were held in 71 233 risk (group life and disability) policies, savings and investment policies, annuity policies and accounts in the portfolios of collective investment schemes.

No breakdown of the respective categories is available. Neither is there disclosure of amounts held by pension-fund administrators who are ASISA members. The explanation is that the ASISA standard on unclaimed assets doesn’t apply to retirement-annuity policies and preservation-fund products as these are separately handled under the Pension Funds Act.

The standard, when first introduced in 2013, applied only to long-term insurance members. In

Lightbody . . . valuable progress

2016 it was extended to include the management companies of collective investment schemes and linked investment service providers. Its purpose is to encourage the use of enhanced tracing procedures so as to keep unclaimed assets at a minimum and guide ASISA members on how to treat them.

Encouraging is that, as ASISA senior policy adviser Rosemary Lightbody notes, members will honour claims on unclaimed policy benefits and investment proceeds no matter how long it takes for the policyholder, beneficiary, investor or heir to come forward. Members won’t rely on the Prescription Act where it might apply to valid claims.

She adds: “When customers reach an advanced age, for example, our members cannot assume that they’ve died. They may be alive and wanting their policies or investments to remain in place. Or, if they have passed away, their beneficiaries and heirs might be unaware that a policy or investment exists. Unclaimed assets aren’t defined by the standard as it’s expected that members will investigate the actual positions.”

The standard encourages member companies to remind customers of their entitlements on appropriate trigger events such as a policy reaching maturity date, a risk-benefit claim having been approved, communication marked as undelivered or a customer reaching age 80.

It also encourages members to be proactive; for example, by making contact with individual customers and tracing them through the various means available.

Once an ASISA member company concludes that all reasonable tracing efforts have been exhausted over a three-year period, the unclaimed assets may be used for socially-responsible investments with commercial returns. But valid claims will still be met.

For products where the investment risk is carried by the company, it may invest the assets as it considers appropriate. Where the risk is carried by the customer or beneficiary, the company must aim for investment returns in line with reasonable expectations.

These are distinct positives in a saga too neglected for too long. 

TIP OF AN ICEBERG

Safely assume that the total amounts in unclaimed/unpaid accounts is scary. But they will be difficult to quantify unless or until ASISA’s lead is followed by others, specifically:

• Banking Association (for bank accounts including custody accounts where dividends are held);

• Guardians’ Fund (number of beneficiaries, categories of amounts and their aggregate values);

• Department of Justice for third-party funds (such as unclaimed bail money, put at R18m in 2018);

• Compensation for Occupational Injuries & Diseases Fund (number of beneficiaries and aggregate value of benefits per category);

• Unemployment Insurance Fund (number of beneficiaries and aggregate value of their unclaimed benefits);

• Road Accident Fund (number and aggregate value of unpaid benefits);

• SA Social Security Agency (number of beneficiaries, categories of grants and aggregate value of benefits unpaid);

• SA Board of Sheriffs (unclaimed monies in their trust accounts).

That should be sufficient to get going. It all comes atop the unpaid R50bn-plus in pension funds