Liberty and Alexander Forbes named in complaint against FSB

FINANCIAL giants Liberty, Alexander Forbes and others are accused of colluding with the Financial Services Board (FSB) to close thousands of pension funds illegally, to the detriment of savers and their families, many of them working class and poor.
The allegations, previously not aired in public, are contained in an affidavit by the board’s head of pensions, Rosemary Hunter, who is taking her employer and Finance Minister Pravin Gordhan to court while still employed at the FSB.
Ms Hunter says it is clear from the speed with which the companies acted that they made little or no effort to find absent beneficiaries. In one example she cites, 668 funds were closed within three days. In another, a single Liberty employee closed 923 funds between 2012 and 2013.
Ms Hunter also makes a specific claim against Alexander Forbes, in which she says that 29 orphan funds that were still owed money from "secret profits" in the "bulking" scandal in 2008 were closed without receiving this income. The "bulking" scandal arose when the firm took a share of its pension fund clients’ interest income and was required to pay it back.
Neither Liberty nor Alexander Forbes is a respondent in the application, as Ms Hunter’s grievance is with the role of the FSB, which should protect savers from abuse by institutions.
Her argument is that the FSB acted illegally in closing the funds between 2007 and 2013 without making the necessary efforts to trace the beneficiaries. Although the money from the closed funds has been transferred to unclaimed benefit funds managed by the same financial institutions, this is often to the detriment of the possible claimants as funds are typically depleted by the fees charged for administration.
In her affidavit, lodged with the High Court in Pretoria last month, Ms Hunter argues that pension fund administrators colluded with the FSB in the "cancellations project", and that the project was designed to "advance the interests of the administrators".
The FSB had abandoned its responsibility to protect savers in order to allow the financial institutions to behave with impunity.
The funds in question — about 4,500 — are "orphan funds" without boards of trustees, which collapsed or became defunct when employers consolidated standalone funds into umbrella funds after a 1998 change in the Pensions Fund Act.
The missing beneficiaries are people who are difficult to trace, mainly poor families in rural areas and neighbouring states.
While some funds had no assets or liabilities by 2007 and could be closed, others had both. In these cases, the FSB usually assigned a single individual — usually from a large financial institution — to act in place of the absent boards. This, says Ms Hunter, was beyond the powers of the FSB.
While fund administrators cannot deduct fees from a pension that no longer receives contributions unless the rules explicitly say so, once the unclaimed monies are placed in an unclaimed benefit fund, fees can be deducted. Administrators can also benefit from commissions earned from the asset managers with whom they place the funds.
Neither company answered questions from Business Day on whether they had taken independent legal advice on whether the FSB-initiated process was legally compliant or whether their own efforts in tracing beneficiaries were sufficient. Both said they had complied with the FSB’s processes.
Neither Liberty nor Alexander Forbes would answer questions on what portion of the unclaimed benefits had been invested with their own asset managers.
Alexander Forbes CE Deon Viljoen said on Wednesday that the company was "in ongoing discussions with the FSB to agree the most suitable and appropriate mechanism to deal with these funds".



Some surprising facts about debt

Using credit and being in debt is common for most South Africans (about 55m people). According to official statistics, about 23m of us are using or have used credit. Despite credit and debt being so widely used, there are facts about debt that many people don’t know.
. According to the National Credit Regulator, of the 23m credit-active consumers, almost 10m are in arrears with one or more of their accounts. If you’re struggling to keep up with your debt repayments, don’t feel alone.
. Consumers in South Africa have laws (such as the National Credit Act) that protect them from being exploited. Credit cannot be granted recklessly, for instance to people who cannot afford to pay it back, and interest rates are capped. Even first-world countries such as the United Kingdom don’t have this kind of legal protection.
. South Africa has more than one credit bureau. The major ones are ITC (also known as TransUnion), Experian and Compu-Scan. Consumers are entitled to one free credit report from each of them every year, so that you can check your blacklisting status.
. The Law of Prescription also protects consumers from being harassed to make payments for debts which have been dormant for more than three years, when the consumer hasn’t acknowledged the debt and the creditor hasn’t taken legal action. Consumers cannot be held responsible for payment of these debts - they must be written off.
. The National Credit Act protects consumers whose accounts are in arrears by limiting the amount of interest and fees that can be added by a creditor. This means that a creditor can’t claim that the R5000 you owed them three years ago has now grown to more than R10 000 because of interest and penalty fees.
. The National Credit Act also protects consumers who are over-indebted (meaning those who cannot afford their monthly debt repayments), by allowing them to see a debt counsellor and apply for debt review.
. When over-indebted consumers apply for debt review, it doesn’t matter how much they owe - the creditor has to negotiate with the debt counsellor to reduce repayment instalments.
. Although our credit protection is among the best in the world, be warned: Over-indebted consumers can’t hide from creditors by ignoring them. It doesn’t matter if you don’t open your statements or collect your registered mail. The law says that creditors only have to be able to show that they’ve sent you correspondence, not that you’ve fetched or read it.
. Consumers are protected from legal action as soon as they apply for debt review. It doesn’t matter if a debt collector has already threatened to collect your car or furniture or auction your house - as long as the creditor hasn’t actually already gone to court in a legal action against you, you can still apply for debt review and receive this legal protection.
. Once a consumer is under debt review, most creditors will also accept a proposal for lower interest rates from the debt counsellor. This is just one of the advantages of debt review over administration.
. Consumers who use debt review are not blacklisted forever. Once their debts have been settled, the debt counsellor sends a certificate to the credit bureaus so that their credit record is cleared.
South Africa’s credit protection legislation is a benchmark internationally, which means that we as consumers are among the best-protected in the world. We will always encounter hurdles in life, but the good news is that there are qualified experts to help you overcome them.



Inoxico looks to boost African footprint

Armed with a €500 000 (R8.9 million) cash injection it recently received from DEG – one of the largest European development finance institutions – South African credit bureau and software firm Inoxico is looking to increase its footprint on the African front.
DEG finances investments of small and medium enterprises that intend to scale up innovative business models with high developmental impact.
The cash injection came as an interest-free loan, and Paul Ammer, Inoxico's spokesperson, says the loan was approved based on a mix of criteria.
"Most importantly, DEG requires Inoxico to demonstrate a positive developmental impact on its socio-political environment of Sub-Sahara, and hence a part of the financing is tied to an expansion into another African country," Ammer says.
Inoxico is looking to boost its marketing, technology and data sourcing capabilities in SA and is expanding its footprint on the continent, he adds.

"As the economic outlook for Africa in general and for South Africa in particular dampens, we are seeing a higher incidence of fraud, waste and abuse as debtors and suppliers try to cut corners. In this environment, investing in solid governance procedures and data to monitor risks serves to protect the bottom line," Ammer points out.
"Our philosophy remains to build our market share consistently and organically from our existing client base. That said, we will be sharing more insights into current topics, trends and best practices to educate the market and show our thought leadership in the sphere of counterparty risk management in Africa."
"As one of Europe's largest development finance institutions, we promote private entrepreneurs and businesses to contribute to sustainable economic growth and improved living conditions. We see Inoxico as a great opportunity to promote an exciting business whilst having a positive impact on the commercial corporate governance environment and transparency in Africa," says Thomas Koch, director of strategic projects at DEG.
Andre Stürmer, CEO of Inoxico, says: "The support of DEG allows us to fast-track our Africa expansion – further enabling clients to reduce fraud, waste and abuse in their supply chains across the continent. We are greatly looking forward to a successful cooperation in 2016 and beyond."