1 The role of FSB in supporting efforts towards the disbursement of benefits for mineworkers Presentation for Regional Dialogue Financial Services Board By: Carlo da Gama 26 March 2015

Financial Services Board Slide 2 Overview of FSB Established in 1991; Independent institution established by statute to oversee the South African Non-Banking Financial Services Industry in the public interest; Our vision is to promote and maintain a sound financial investment environment in South Africa; Our mission is to promote the: Fair treatment of consumers financial services and products; Financial soundness of financial institutions; Systemic stability of financial services industries; and The integrity of financial markets and institutions.

Financial Services Board Slide 3 Overview of Retirement Fund Industry Administrators: 168 Number of funds: 5,000 Members: 13,4 million Total assets: R1,8 trillion

Financial Services Board Slide 4 What is an unclaimed benefit? Defined in the Pension Funds Act (‘PFA’) as: benefit other than those mentioned below, not paid to a member, former member or beneficiary within 24 months of the date on which it, in terms of the rules of the fund, became legally due & payable; a benefit payable as a pension / annuity to a member, former member or beneficiary within 24 months of – i.the expiry of the guarantee period for pension payments provided for in the rules of the fund; or ii.the date on which any pension / annuity legally due & payable in terms of the rules of the fund became unpaid; surplus benefit payable to former member that cannot be traced - not paid within 24 months after surplus approval; any benefit that remains unclaimed/unpaid to a member, former member or beneficiary when a fund applies for cancellation or registration or where the liquidator is satisfied that benefits remain unclaimed / unpaid, excluding – i.section 14 transfer, where annuity is purchased i.r.o pensioner or otherwise in terms of the PFA; ii.death benefit payable to a beneficiary i.t.o s37C not paid within 24 months from date of death of member.

Financial Services Board Slide 5 How do unclaimed benefits arise? Employer provides inaccurate or incomplete member information; Fund administrator capture errors; Administrator churn; Member education/awareness; Information changes after member leaves fund; Member not registered for tax; Incomplete or no withdrawal documentation received; Migrant labour particularly in mining sector.

Financial Services Board Slide 6 Establishment of Unclaimed Benefit Funds Prior to 2007, retirement funds had provisions in their rules allowed for unclaimed benefits that remained unclaimed to revert back to funds. Prescription Act allowing for benefit not claimed within 3 years to prescribe; In 2007 PF Circular No. 126 issued to all retirement funds: Provided guidelines on treatment on unclaimed benefits; Introduced a definition of an unclaimed benefit. Retirement funds were required to amend their rules to in-line with Circular before 31 December Financial Services Laws General Amendment Act 22 of 2008 inserted a definition of an unclaimed benefit in section 1 of the PFA.

Financial Services Board Slide 7 Establishment of Unclaimed Benefit Funds (continued) The Revenue Laws Amendment Act 60 of 2008 provided for establishment of unclaimed benefits funds – ‘special’ purpose preservation funds. Financial Services Laws General Amendment Act No. 45 of 2013 inserted a definition of an unclaimed benefit fund in section 1 of the PFA to mean: “a fund that is established for the receipt of unclaimed benefits contemplated in the definitions of a pension preservation fund and a provident preservation fund in section 1 of the Income Tax Act, 1962 (Act No. 58 of 1962)”; Since 2009 a number of funds submitted applications in terms of section 4 of PFA to register as unclaimed benefit funds.

Financial Services Board Slide 8 Overview of Unclaimed Benefits Unclaimed benefit funds (50 ‘active’ funds): - R4,6 billion - 792,000 beneficiaries Aggregate unclaimed benefits (including occupational, retail and unclaimed benefits funds): - R20 billion million beneficiaries Mining Sector: - R5,2 billion - 200,000 beneficiaries

Financial Services Board Slide 9 Role of the FSB in relation to unclaimed benefits Complaints in terms of the PFA dealt with by the Office of the Pension Funds Adjudicator; Section 30I (1) of the PFA: “The Adjudicator shall not investigate a complaint if the act or omission to which it relates occurred more than three years before the date on which the complaint is received by him or her in writing.” The PFA only empowers the FSB to make enquiries with administrators, funds and other parties (employers); On this basis, we assist complainants who are unable to lodge a complaint with the Office of the Pension Funds Adjudicator – ‘walk-in’, telephonic (call centre), electronic mail and post.

Financial Services Board Slide 10 Statistics on complaints Following the publication of article in Business Day we received +/-3,000 calls per day (average is 150) up to December Dedicated address in December s to date. Of 847 s only able to assist +/- 15% of members. More than 120 walk-in clients since November 2014 to date.

Financial Services Board Slide 11 Challenges in assisting with unclaimed benefits No central database; Member education/awareness; Information required in order to investigate such as name of pension fund, name of employer, proof of membership (benefit statement) and payslip; Time lapse – adverse impact on data / record keeping; Nature of funds might not have required employer names to be provided to our office therefore not on our records.

Financial Services Board Slide 12 Challenges in assisting with unclaimed benefits (continued) Access and means to complain/enquire with administrator, funds or FSB office; Misinformation leading to exploitation - No regulation of tracing agents and/or 3 rd parties acting on behalf of members; “Red tape” when claiming benefits eg. stamp by employer or originals documents.

Financial Services Board Slide 13 Solutions and Proposals to Other Stakeholders Central database maintained by the registrar (issue PF. Circular to collect information from funds/administrators - preliminary info to assist member); Unclaimed benefits communication project – media and print; Enhancing FSB supervision of unclaimed benefits within occupational, retail and unclaimed benefit funds: Draft PF. Circular for exemptions of transfers of unclaimed benefits; Supervision of tracing agents; Reporting of tracing and payment efforts by funds; Quality audit on member information and additional prescribed minimum information (such as cellphone number)

Financial Services Board Slide 14 Solutions and Proposals to Other Stakeholders (continued) Greater co-ordination between FSB, funds, administrators and organisations representing members; Preparation of information circular to inform members in major labour sending countries (Lesotho, Swaziland, Mozambique and Botswana) of unclaimed benefits; To address POPI concerns, work with industry to draft a proposed code for employee benefits industry which would allow us to collect and subject to appropriate controls share information on unclaimed benefits.

Questions?