Unclaimed benefits – R7.5 billion on behalf of 938 000 members

January 2017

By David Hurford, Director: Marketing and Consulting, Fairheads Benefit Services

According to the Financial Services Board, registered unclaimed benefit funds currently hold around R7.5 billion in assets on behalf of close to 1 million members. That’s around R7 500 per member that’s sitting in unclaimed funds, generating administration fees for the administrator and investment fees for the investment manager.

A cursory review of the fee structures of many of these funds reveals a fundamental flaw in the funds, one which urgently needs to be addressed.

Essentially, administrators and investment managers who are charged with finding “missing” members have no incentive to do so. In fact, because they charge fees based on a percentage of assets, there is a dis-incentive to finding the members and paying out their benefits.

Further, a closer understanding of what is required to trace members is needed. Traditionally, the relationship between the retirement funds and their members has been facilitated by the employer or union – and much of the retirement fund’s consulting focus has been on keeping the employer or union happy. However, in the case of unclaimed benefits, the employer no longer has a role to play because the very fact that the funds are in an unclaimed fund means that the member no longer works for the employer.

Unclaimed benefits

At Fairheads, we believe that a new approach is required, which is why we are launching two unclaimed benefit funds, the Fairheads Unclaimed Benefit Preservation Pension Fund and the Fairheads Unclaimed Benefit Preservation Provident Fund.

Fairheads has long been South Africa’s leading independent beneficiary fund provider, having looked after and paid out over 200 000 members and beneficiaries. We have developed sophisticated communication methods and accessibility options for
members to interact with us and have a proven track record in tracing those who are unaware of the benefits that are due to them.

Our intention is to use the capabilities we have developed in the unclaimed benefits space to make significant inroads into the huge unclaimed benefits problem our country faces.

Expert tracing capability

Our multi-level approach to tracing ensures that finding missing members is done effectively without incurring the high costs associated with many funds. We have developed innovative tracing mandates which use client profiling, and have effectively used our field agent programme to work with employers to trace missing members.

And by combining our expert capabilities with a fee structure which incentivises finding and paying out members, we believe we are perfectly placed to do so. Some of the features of this fee structure are low administration fees with an emphasis on a fixed Rand fee and institutional investment fees negotiated with arm’s length managers.

Our aim is to help alleviate some of the financial hardships faced by many South Africans by helping them to get what is rightfully theirs.

Contact: David Hurford, Director: Marketing and Consulting, at david@fairheads.com

Published in Fairheads Times, issue 36, January 2017