unclaimed benefits

When members go missing: The art of tracing retirement fund members

April 2016

by Olefile Moea, Executive Director, Fairheads Benefit Services

It seems odd – and tragic – that in a country where poverty and unemployment are such a major issues there are literally thousands of people who have money due to them but can’t be found. Some estimates of these unclaimed benefits run into billions of Rands. Surely it shouldn’t be that hard to track down these individuals and pay them the money?

In South Africa we have some unique challenges – a sophisticated financial services system yet low levels of financial literacy, a postal system which cannot be relied upon, massive churn in cellphone numbers and large numbers of people who don’t have credit records. These challenges combine in a perfect storm where ex-members are left out of pocket. Tracing these ex-members becomes an expensive affair, and financial services companies have been accused of dragging their feet, seeing little incentive to find ex-members and pay out their funds because this would of course reduce the assets under their management.

In the medical industry, early interventions to change lifestyle choices have proven to be the most successful way to deal with health care issues. We believe this principle holds true when dealing with retirement fund members – early intervention to educate members through two-way communication is the most effective and efficient way to prevent their funds from becoming unclaimed. Some of the most important messages to communicate to your members are:

• Why it is so important to keep contact details updated
• How much money will be available on exit
• What access options are available.

In keeping with the practice of early intervention, trigger points which should spur some level of internal tracing are:

• returned post
• non-submission of proof of life
• failed SMS due to incorrect numbers
• annuity payment rejections by the bank account, or
• any other indicator which suggests failed contact with the member.

Administrators should build the capability internally to follow up on these items as these early interventions are usually far more cost effective than engaging an external tracing agent at a later stage.

It is also good practice to formally document a tracing mandate which outlines when an external tracing provider should be engaged, and at what level. There are various levels of tracing available, such as a simple desktop search against credit bureaus and other databases or a full-scale investigative trace that includes field agent visits. The former can be quite inexpensive, whereas the latter far more costly.

It is always good practice to limit the information provided to tracing agents so that they have enough to find the member, but not enough to facilitate fraudulent activity. After all, there is a high fraud risk in dealing with unclaimed benefits.
A final issue facing many administrators is whether it makes economic sense to spend money tracing an individual where small amounts are concerned. It goes without saying that administrators should negotiate the lowest possible fees available, but our view is that it is always preferable to pay a small amount to an ex-member net of tracing fees, rather than nothing at all.

A final issue facing many administrators is whether it makes economic sense to spend money tracing an individual where small amounts are concerned. It goes without saying that administrators should negotiate the lowest possible fees available, but our view is that it is always preferable to pay a small amount to an ex-member net of tracing fees, rather than nothing at all.