It’s estimated that there is R88 billion worth of unclaimed assets held by financial institutions. 53% of these are in retirement funds, followed by collective investment schemes and the life insurance sector holding 38% of unclaimed assets.
This is according to the Financial Sector Conduct Authority (FSCA) which launched a discussion paper aiming to come up with a comprehensive solution on how unclaimed assets should be treated.
The FSCA says the objective is to reunite beneficiaries with their unclaimed assets. It says the root cause of the problem of unclaimed assets is inadequate record keeping and asset holders not updating beneficiary details.
Failure to inform beneficiaries of the existence of such assets is another problem. The authority hopes to find ways to identify lost assets and locate beneficiaries as well as minimise the build-up of unclaimed assets.
“For the banking sector, it’s approximately R3.36 billion, CSDP R4.5 billion, life insurers and collective investments that is R33.49 billion and for retirements funds that is for the 2020 period, it’s R47.21 billion,” says FSCA’s Loraine van Deventer.
The FSCA proposes a Central Unclaimed Benefits Fund to manage unclaimed assets. It says this would involve a close engagement of the FSCA as well as the Prudential Authority in the appointment of a board of such a fund.
“I think that what you want there is a combination of skills and experts from an investment point of view and of course you want to also attend to potential conflict of interest of people who are close either to the sector or to other interests, so that’s what we’ll look at. I think that there will be questions around the involvement of government, given that many of the people who will not be traceable, then what they fall back on will be the safety net of government to provide. Government should have an interest in terms of this area but what we are proposing in terms of that fund is what I have just articulated,” says FSCA commissioner Unathi Kamlana.
The public can comment on the discussion papers and the proposed recommendations by the 30th of November.
VIDEO: Problem of unclaimed insurance assets in South Africa