A Victory in the Long March Towards Justice for Unpaid Pension Beneficiaries
In December 2021, Open Secrets and the Unpaid Benefits Campaign (UBC), represented by the Centre for Applied Legal Studies (CALS), brought an application in the Gauteng High Court against the Financial Sector Conduct Authority (FSCA). In the spirit of greater transparency and responsiveness to the plight of pensioners, the application asked the Court to ensure that the FSCA take clear steps towards remedying the unlawful cancellation of pension funds.
The unlawful cancellation of pension funds saw fund administrators, enabled by the Financial Services Board (the FSCA’s predecessor), deregister thousands of funds, some of which owed pensioners and beneficiaries money. This occurred despite the fact that a deregistered pension fund cannot pay people what is owed to them. In order to remedy this, in 2019 the FSCA published Circular 1/2019, which requires private fund administrators to apply to court to reinstate all funds that were unlawfully cancelled.
At the time, out of potentially thousands of affected funds, only 48 have been reinstated over a period of more than a decade since their cancellation. Despite the apparent lack of compliance by pension fund administrators with the Circular, the FSCA had seemingly done little to enforce it. Our application therefore sought to ensure that the FSCA enforces its own obligations in an open and transparent manner and with the urgency required.
As at the time of the institution of the application, beneficiaries were in the dark as to what was happening and were thus prevented from accessing their benefits, resulting in financial harm that impacts families across generations. Significantly, it is unclear who the beneficiaries of these cancelled funds are because of the lack of transparency and slow pace of the reinstatement process. What we do know is that there are over 4 million people who are owed their benefits, some of whom could be beneficiaries of unlawfully cancelled pension funds. Each year of delay also means more money accrues to fund administrators and asset managers, who sometimes derive fees from the unpaid benefits.
The FSCA filed their answering papers to our application in early July 2022. In the almost seven months since the institution of our application, it was apparent that some significant progress had been made by the regulator to ensure that fund administrators take active steps to remedy unlawfully cancelled pension funds. These steps demonstrate a recognition, after years of delay, that the matter cannot be ignored; unpaid beneficiaries and victims of the unlawful cancellation of pension funds deserve redress and cannot achieve this without the assistance of the regulator enforcing its obligations against fund administrators.
In recognition of this progress and the performance of its duties by the regulator, we entered into a settlement agreement with the FSCA in August 2022, and have accordingly withdrawn the application. This is consistent with our view that legal action is a last resort when direct engagement proves unsuccessful. As such, we welcome the steps taken by the regulator, which vindicate our initial decision to proceed to court.
We are nevertheless disappointed that the progress occurred alongside the continued absence of transparency and communication with the public, which we believe to be in violation of the constitutional duty of all state bodies to act transparently and in the broader public interest. Without such openness, unpaid beneficiaries and victims of the unlawful cancellation of pension funds remain 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 assured that the FSCA is acting independently.
We will continue to monitor both the steps taken by the FSCA, and the compliance by the fund administrators. We will likewise continue our approach of robust engagement with all relevant bodies, in the pursuit of broader social justice and in support of the interests of unpaid beneficiaries and victims of the unlawful cancellation of pension funds.
As part of ongoing efforts to give voice to the experience of millions of people who have not been paid pensions across Southern Africa – Open Secrets and the Unclaimed Benefits Campaign have organised a one day People’s Hearing on Unpaid Pensions that will take place on Tuesday 13 September from 10h00 to 16h00 at the Woman’s Jail at Constitution Hill in Braamfontein, Johannesburg. An esteemed panel will hear the testimonies of people directly impacted by this injustice in an ongoing manner.
Members of private financial institutions and the FSCA have been invited to attend.
For more information contact Mamello Mosiana at 072 565 0173 or visit our website here.