Marianne Thamm | Daily Maverick | 10 November 2019
The R42-billion in unpaid benefits owed to more than four million South African pensioners is ‘a fundamental failure’ of public interest by state regulators and pension fund administrators, a year-long investigation by Open Secrets has concluded.
Open Secrets researchers Michael Marchant, Mamello Mosiana, Leila Khan and Zen Mathe found that the pensions industry had been structured to “benefit its dominant corporations while leaving pensioners and other fund members out in the cold”.
The report, titled “The Bottom Line”, probed the “multiple failures” that led to the mass cancellation of 6,000 pension funds by the FSB between 2007 and 2013 while many still had assets and beneficiaries.
These unpaid funds were shifted to the “unclaimed benefits funds” of private companies appointed by the Financial Services Board to administer them, at a fee. According to the FSB’s 2018 Annual Report, more than R42-billion in benefits is owed to more than four million pensioners and pension fund members.
How did this come to light?
We can mostly thank two whistleblowers, pensions lawyer Rosemary Hunter and former Liberty Corporate employee Michelle Mitchley.
In 2013, Hunter, a respected employee benefits and pension fund lawyer, was appointed as the deputy registrar of pension funds of the then Financial Services Board (FSB), now known as the Financial Services Conduct Authority (FSCA).
The FSB or FSCA is the market conduct regulator for all services in the fastest-growing sector globally — financial services. Its job, essentially, is to protect you and me from predatory, unethical and abusive practices in this sector.
A few days into her job at the FSB in 2013 Hunter was presented with a pile of documents which required her signature. The documents related to the cancellation of the registration of pension funds.
The project was initiated by the FSB in 2007 and saw the cancellation of 6,757 supposedly “dormant” pension funds. The project followed a shift from single-employer or stand-alone occupational retirement funds to umbrella funds.
In the process, thousands of original stand-alone funds were turned into “orphan funds” — apparently without properly constituted boards and seemingly without assets or liabilities.
Companies appointed to administer these included Liberty, Alexander Forbes, Sanlam, Momentum and NBC. It was their job to ensure that members were traced and paid out any outstanding benefits before the fund was deregistered.
Enter Michelle Mitchley.
