“I have saved enough to retire peacefully. But now I will turn in my grave because I will die in poverty.”
This was said by Douglas Maila, a member of the Unpaid Benefits Campaign, at a protest outside Alexander Forbes demanding that it pay pensioners the benefits they are owed. Maila’s experience of contributing a portion of his salary every month for years, only to retire and face great difficulty accessing what he is owed, is shared by millions of workers whose pensions sit in “unclaimed” benefits funds worth over R42bn.
The unpaid benefits crisis in SA worsened with the Financial Service Board’s (FSB) “cancellations project”, which entailed the mass deregistration of over 5,000 pension funds between 2007 and 2013. This allowed the regulator to clear its books of funds thought to have no assets, boards or members. It was later discovered, however, that many of these funds still held assets, owed money to beneficiaries and should never have been cancelled.
In a 2014 investigation that analysed a sample of 510 funds deregistered during the cancellations project, KMPG found that the registrar of pension funds did not have the requisite information to reasonably order 500 of the cancellations. Even more damning is KPMG’s estimation that R2.5bn was unaccounted for in these 500 funds alone.
It remains to be seen how the new regulator — the Financial Sector Conduct Authority (FSCA) — will address this problem. Last week, Francois Groepe of the SA Reserve Bank said that SA has for too long prioritised prudential regulation at the expense of market conduct regulation and that not enough has been done to address exploitation of the most vulnerable by private financial institutions.