According to the Pension Funds Act, an unclaimed benefit is any lump sum or pension benefit that is due to a retirement fund member (or his/her beneficiaries) that has remained unclaimed for a period of time.
The rules of the fund must explain what happens to these unclaimed benefits. If the rules provide that the benefit prescribes, this means that a member will no longer have a claim for an unclaimed benefit. But, if the fund’s rules provide that the member can claim this amount, the fund can pay these unclaimed benefits into a pension or provident fund, and the member can claim his unclaimed benefit. This unclaimed benefit can be claimed by the former member of the fund or any beneficiaries who might have a claim that is unclaimed.
If you were a member of a retirement fund in South Africa - even as far back as 1981 - it could be a good idea to make enquiries, as you may still be entitled to a benefit which hasn’t been paid out because your former fund is unable to contact you.
Retirement fund benefits cannot be forfeited. Benefits that cannot be paid are regarded as “unclaimed benefits”. Recent changes to legislation have made it possible for these benefits to be transferred from the employer fund to an Unclaimed Benefit Fund, such as the Old Mutual Superfund Unclaimed Benefit Pension and Provident Preservation Funds.
In many cases, members may be under the impression that they have received all of their benefit entitlement. A number of events have, however, resulted in additional income for funds. This income has been allocated to members, and in many cases this resulted in more unclaimed benefits as these members had left and are still not aware of the additional allocation.
The following are examples of events which may have resulted in members being entitled to more than what they received when they exited their fund:
- Big life assurance companies such as Old Mutual decided to become public listed companies, and in the process their policyholders received free shares. Pension and provident funds also invested with these companies in policies on behalf of the members of their funds, and when these shares were given to the retirement funds, the funds allocated the proceeds to members.
- The SA Government enacted legislation that compelled retirement funds to distribute surpluses held in retirement funds. As a result, some members who had already left - as far back as 1981 - became entitled to additional benefits.
- Some members did not receive the full returns earned by the fund. This happened because certain retirement fund service providers had negotiated better interest rates with banks but did not give the funds the full benefit of the higher returns.
There are many other reasons, however, why people do not claim benefits that they are entitled to from retirement funds. Despite ongoing attempts by fund trustees and administrators to contact these beneficiaries the problem of unclaimed benefits persists.