The Financial Sector Conduct Authority (FSCA) this week launched a seminal discussion paper on the almost R90 billion in unclaimed assets across the financial sector, the bulk of which (about R47bn) are in retirement funds.
The paper builds on work done by the FSCA and National Treasury to reunite unclaimed assets with their rightful owners and to stem the build-up of such assets in the future.
Dealing with unclaimed assets is a complex task, with many types of assets involved. They include retirement fund benefits, bank deposits, assets in collective investment schemes, life and non-life insurance policies, and listed shares.
FSCA Commissioner Unathi Kamlana says work is continuing to establish the true value of unclaimed assets in the sector, given that these assets are held by various financial institutions. He says a big hindrance to disbursing these funds is the lack of a common understanding of what constitutes dormant or unclaimed assets, and the lack of reliable data.
“It is quite clear that we have to improve the outcomes for customers and that’s what this paper is trying to achieve,” says Kamlana.
The FSCA’s discussion paper considered international unclaimed assets frameworks to determine the definitions, management and reporting of unclaimed assets.
The paper also outlines reasons for the nature and extent of the problem of unclaimed assets in South Africa, which vary by sector. The most common reasons are :
- Asset owners’ failure to keep financial institutions updated with their contact details and the personal details of their beneficiaries;
- Asset owners’ failure to inform their beneficiaries of the existence of the assets and the institutions where they are held;
- Inadequate record keeping by financial institutions and intermediaries in the value chain;
- Inconsistency in approach to the identification and treatment of unclaimed assets (including reunification efforts) both within market segments and across the financial sector overall;
- Failure by employers to provide retirement funds/administrators with complete details of the members of the fund; and
- Changes in intermediaries and administrators.
The FSCA proposes 13 recommendations in support of a holistic and consistent approach to the treatment of lost accounts and unclaimed assets within the financial sector. One of the most significant proposals is the establishment of a single Central Unclaimed Assets Fund into which all unclaimed assets, once identified as such, should be transferred and managed on behalf of the sector. Alternatively, such unclaimed assets can be transferred into the National Revenue Fund.