Reducing unclaimed benefits: Tracing beneficiaries

Recent legislation allows service providers in the retirement fund industry to set up their own unclaimed benefit funds. This is a welcome development given that unclaimed benefits run into millions of rands and generally belong to those in greatest need.

The core focus of unclaimed benefit funds will be to pay out unclaimed assets to traced beneficiaries. Once registered, an unclaimed benefit fund may open a bank account, transfer unclaimed assets and be managed as a separate entity with its own board of trustees.

Where are the beneficiaries?

The large number of unclaimed benefits raises the question: How did the situation get so dire? There are several reasons. Some beneficiaries are not even aware that a trust or beneficiary fund account has been set up for them. This can happen if the contact details held by the retirement fund are out of date, which highlights the need for stringent database management.

In other instances, administrators lose contact with existing beneficiaries, particularly those living in remote rural areas. This can happen if guardians or beneficiaries change their contact details without notifying the administrator or if they fail to update their details every year. This is now required by most administrators on a so-called certificate of existence.

Another reason is that it is difficult to trace minors, who make up the bulk of beneficiaries. Children do not have bank accounts and thus have no credit record, which is one of the easiest ways to trace adults. Children may also experience a change of guardian. If a child is older than age 14, no court order is needed to appoint a new guardian. This can cause the fund to lose contact.

Stepping up tracing efforts

The extent of the problem is finally being acknowledged and service providers are likely to come under pressure to set up unclaimed benefit funds. But for such funds to be effective, the industry needs to step up efforts in tracing.

While most administrators now outsource the function to tracing agents, certain administrators such as Fairheads Benefit Services, have set up their own in-house tracing system. The success rate at Fairheads has been heartening - within two years, no fewer than 60% of “lost” dependants or beneficiaries have been found across all of Fairheads’ beneficiary funds and umbrella trusts.

A wide range of source data is used

Newspaper advertising was rejected after a disappointing 2% response rate in the first six months. Instead, the approach is now multi-pronged to include:

• phoning post offices if there is a post office address to obtain a physical address;
• contact with the Home Affairs Department to obtain unabridged birth certificates for proof of biological parents, and to speed up the application process for death certificates if a guardian has died and a court order is needed to reinstate a replacement guardian;
• contact with the Education Department for cooperation in tracing beneficiaries of school-going age;
• contact with the relevant consulates to trace beneficiaries in neighbouring countries, particularly with regard to the Mineworkers’ Trust - in some instances, consulate officials have actually visited remote villages to assist us;
• dealing with beneficiaries in their language of choice.

Once beneficiaries are located, there is usually a further challenge of explaining to them why contact was lost and how their trust fund or beneficiary fund operates. The joy and surprise expressed by most beneficiaries makes up for every bit of the hard work that goes into the tracing process.