Fedgroup driving industry reform in unclaimed benefits sector

South Africa's leading independent financial services provider, Fedgroup, was recently awarded a tender issued by ARGEN Actuarial Solutions to administer four liquidated unclaimed funds, totalling R180 million.
ARGEN is an expert in the liquidation of retirement funds and it went through a selection exercise to select an ideal unclaimed benefit fund to house the benefits of untraced members in four of the retirement funds it recently liquidated.
The funds are IF Umbrella Pension and Provident Funds, and Dynam-ique SA Umbrella Pension and Provident Funds. Individuals who were members of those funds are encouraged to contact Fedgroup should they feel benefits may be owed to them.
Fedgroup was invited to tender against many of the large industry incumbents and won based on its proven record and value proposition.

As a specialist operator in the field, with significant experience, expertise and a proven track record in the administration of beneficiary funds, which fulfil a similar mandate to unclaimed funds, Fedgroup is emerging as a prolific driver of much-needed industry reform.
Unravelling the backlog requires specialised skills
Providing these administrative services also requires a mindset that is vastly different to retirement fund administration. "At Fedgroup, we understand that beneficiary and unclaimed fund administration should focus on a different need-state and an ethic of care. Both also require a strategy vastly different to retirement fund administration," says Walter van der Merwe, CEO of Fedgroup Life.
Within the broader retirement fund industry, the Financial Sector Conduct Authority (FSCA) continues to grapple with legacy issues surrounding a lack of industry best practices and good corporate governance of unclaimed benefits.
The issue was recently thrust back into the popular discourse when activist and former deputy registrar of retirement funds at the Financial Services Board (FSB), Rosemary Hunter lost a Constitutional Court appeal against a high court ruling. The appeal sought to compel the FSCA to take action against various private and public sector funds that are sitting on R42 billion in unclaimed benefits in South Africa.
Ethical considerations
Concerns have also been raised regarding a perverse industry incentive to keep benefits in the unclaimed fund for as long as possible to incur more admin and investment fees. As such, the likes of Hunter and other responsible corporate citizens within the financial services sector have sought to find ways to drive a paradigm shift that will improve compliance throughout the industry.
While the main purpose of an unclaimed fund is to provide a vehicle to safeguard benefits and to trace members or beneficiaries in an effective and efficient manner, a major challenge is a lack of incentive on the part of insurers and administrators. The process to adequately and comprehensively trace beneficiaries and dependants and pay out unclaimed benefits can be administratively onerous, time-consuming and costly.
Moreover, many unclaimed benefits comprise small amounts, under R5 000, and the process of finding someone is intensive and success is not guaranteed. Extremely tight margins in the administration of unclaimed funds also makes providing these services a highly specialised endeavour.
Outsourcing administration eases the burden
"We are, however, able to realise efficiencies from the economies of scale offered by greater volume, through expert and experienced staff, and the application of the appropriate technology. This is driving a shift towards to the outsourcing of administrative services among actuaries, auditors and fund liquidators," explains Van der Merwe.
He adds Fedgroup is ideally positioned and equipped to address the industry's unique challenges, thanks to the company's extensive industry experience, its passionate staff, who are committed to providing beneficiary care of the highest order, and its administration system. Fedgroup's technology was developed from the ground up as an efficient, streamlined and intelligent bespoke industry solution. The functionality and capabilities of the system offer this relatively small financial services provider a key strategic advantage and differentiate it from the incumbent providers.
"Combining these elements with our track record in beneficiary care has helped to elevate our offering within the unclaimed fund space, as our value proposition increasingly resonates with industry stakeholders that want to change the status quo and ensure these funds have their intended impact," believes Van der Merwe.
"We believe the ARGEN business is an example of how the broader industry now regards Fedgroup as a specialist operator in this field, thanks to our technological capabilities, administrative excellence, and the pioneering role we are taking in providing fund administration as a service. We hope that it will create even greater opportunities to get more of that R42 billion to people who need it most," concludes Van der Merwe.



Justice still needed for poverty-stricken pensioners after deregistration blunder

“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.
The administration of pension and provident funds is are a crucial area for strong regulatory oversight and intervention. For many workers, contributing to a pension fund is compulsory, in line with their sectoral determination.
On April 1 2018, the FSB took up its new mandate as the FSCA, promising stronger oversight of the financial sector and more proactive and intrusive regulation to protect SA consumers.
Why then have funds that were wrongfully deregistered during the cancellations project still not been reinstated in court? Until this happens the beneficiaries of these funds remain unable to access their pensions. A first step towards the FSCA fulfilling its promises is to ensure these funds are lawfully reinstated and paid to beneficiaries as a matter of urgency. 
The administration of pension and provident funds is  a crucial area for strong regulatory oversight and intervention. For many workers, contributing to a pension fund is compulsory, in line with their sectoral determination.
Despite being important vehicles of income security for the poor, pension funds are often administered by private companies such as Liberty Corporate and Alexander Forbes. This is particularly concerning because these companies are able to profit from this role through charging administrative fees that are often based on total asset value. This creates a clear disincentive for fund administrators to actively find and pay beneficiaries in the context of unclaimed benefits funds.
Many of the decisions to deregister funds during the cancellation project were based on information provided by private fund administrators that turned out to be incorrect (by their own admission).
Liberty was responsible for administering 80% of the funds deregistered during the cancellations project. In 2017, it approached the high court to review the cancellation of 25 funds, presumably pressured by FSB whistle-blower Rosemary Hunter’s court case, which was ongoing at the time. These 25 funds, which owed R90m to over 300 beneficiaries, were successfully reinstated by the court, and Liberty proclaimed its intention to apply for judicial review of a further 105 funds it believes were unlawfully cancelled.
Since the Constitutional Court’s dismissal of Hunter’s case, Liberty has gone quiet. Open Secrets contacted Liberty to determine the status of the review application. Liberty’s response indicates that it is backtracking on its decision to apply to court to reinstate funds and will instead pursue "internal processes" with the FSCA.
This is alarming, as there is no clear legal reason to abandon the strategy of approaching the courts to urgently reinstate the funds’ registrations. More than a decade has passed since the cancellations project began and it is urgent that the relevant administrators reinstate erroneously cancelled funds through judicial review in terms of the Promotion of Administrative Justice Act.  
Open Secrets has written to the FSCA urging it to issue a directive to Liberty and other administrators to review potentially unlawful cancellations in court, so that beneficiaries may receive their pensions as soon as possible. An internal process is no longer appropriate, nor is it lawful. The scale of likely financial prejudice in the cancellations project demands the transparency of a court process where the conduct of both the companies and the regulator can be publicly examined.
Issuing this directive would be a step towards rectifying the regulator’s neglect of unpaid pensioners and so many other South Africans who bear the brunt of an often unchecked financial sector. We urge the FSCA to act and live up to its promises.
• Khan is with Open Secrets, a nonprofit organisation that pursues accountability for private sector economic crimes through investigations, advocacy and the law.



Labour impressed by number of Ex-mineworkers registered for unclaimed benefits in Namakwa district

The Department of Labour, Northern Cape appreciate the overwhelming turn-out of ex-mineworkers in the Namakwa District, who heeded the call to come and make applications for unclaimed benefits. The four days registration campaign managed to net 807 applications.
“As the Department we appreciate the overwhelming turn-out we experienced in the Namakwa District so far from potential applicants for ex-mineworkers unclaimed benefits. The new strategy deployed by our team to issue Bank forms during mobilization has also been fruitful in areas like Garies, Komaggas, Nababeep, Kleinsee and Steinkopf where there are no banking facilities. Labour reiterates its call for calm as we plan to cover the length and breadth of Namakwa District and serve all applicants. We also acknowledge the gallant effort made by our team to ensure that thousands of potential applicants are assisted during that extended period,” said Zolile Albanie, Chief Director: Provincial Operations.
The campaign, which is aimed at ex-mineworkers who left employment in the mines prior to 01 April 2002, has been successfully rolled out in the Namakwa District from 19 – 22 November 2018 targeting areas in the Namakwa District (Pofadder 19/11/2018, Garies and Komaggas 20/11/2018, Okiep and Steinkopf 21/11/2018 and finally Port Nolloth 22/11/2018.
The Department of Labour as the agent charged with responsibility of tracing and paying these ex-mineworkers urges all potential applicants to bring along any or all of the following documents for verification:
·          Identity document
·          Access card (from previous mine employer)
·          IRP 5 (from the previous mine employer)
·          Old Blue card
·          Previous salary advice
·          Or any proof of mine employment (including “Makhulu’s kop” card, Dompas or TEBA record)
This registration is done in line with the Peoples’ Assembly which was held in Mbhizana, Eastern Cape. A motion was tabled in the National Assembly on 19 September 2007 for Parliament to establish a committee that will look at issues of ex-mineworkers. The campaign spotlight will soon be focusing on the ZF Mgcawu District, dates and areas to be targeted will also be publicised soon.
“To date the Unemployment Insurance Fund has already made pay-outs of benefits in excess of R2.8 million in the Northern Cape province since the launch of the registration campaign in Frances Baard, John Taolo Gaetsewe and some parts of Pixley Ka Seme Districts,” concluded Albanie
The Department further remind ex-mineworkers and potential applicants who missed the opportunity during the campaign to visit the Springbok Labour Centre for their applications. The Department of Labour reiterate that the above mentioned services are rendered free of charge and potential applicants and the general public must be wary of any information and always verify it by calling this number 0800 843 843.