While the FSB prepares for the large influx of Surplus Apportionment Scheme (SAS) submissions and the industry continues to ponder the extent of the surplus that will ultimately be distributed, courtesy of the surplus legislation, Tony Cross, Executive Director of Benefit Recovery Services (BRS) and John Kotze, Manager of Old Mutual Actuaries & Consultants (OMAC), are concerned that a more important issue is being overlooked.
That issue is how much – or rather, how little – trustees are doing to ensure that as many South Africans are involved, and paid, in the process as possible. Cross says that there are still many trustees who believe placing an obscure advert in a national newspaper will result in most, if not all, their former members coming forward. “With high illiteracy levels in South Africa and the number of people living in rural and remote areas, this simply does not work,” added Cross.
Old Mutual and BRS are currently undertaking the largest surplus apportionment payment exercise to date. “Whilst we are exceptionally proud of this achievement, there is clearly much work ahead for all South Africans involved in the retirement industry,” Kotze remarked. Old Mutual and BRS have managed to initiate payment to over 85% of the former members on this fund and thereby proved that is possible. Although the success rate is higher due to the nature and profile of these former members, it is still significant evidence that an active tracing and communication process can deliver results.
BRS and Old Mutual run information sessions continuously across the country, with BRS extending their campaign by educating and building working relationships with champions, opinion leaders and other structures to ensure that as many people as possible are aware of the possible benefits of the exercise.
“Finding people who are owed money is, by nature, an activity carried out by a few to benefit many,” says Cross. “BRS aim to find individuals, families and communities to assist retirement funds in their reimbursement efforts. This is sometimes difficult as people have moved or have forgotten about (or are unaware of) investments they are entitled to.”
BRS works at grass roots levels to educate and inform communities about the situation and which beneficiaries can reclaim their money at no cost. BRS furthermore guarantees the privacy of all personal details submitted to them.
So how can trustees ensure maximum payment rates at low cost? The first step is for trustees to decide on a communication strategy, which will be determined by communication costs in relation to the surplus as well as existing communication channels.
“All possible stakeholders need to be brought into the loop,” says Kotze. In this regard, stakeholders are not necessarily confined to the employer, active members and pensioners. The term could also encompass unions and former employers (where applicable), and extends to the interaction necessary between different service providers. Former members will generally be invited to:
- Register as a stakeholder in the surplus apportionment process;
- Provide updated contact details:
- Register any objection to the proposed SAS before it is submitted; and
- If eligible for payment, confirm account payment details.
From the perspective of inviting former members to register as potential stakeholders, an advert in a national newspaper is an acceptable option. The Sunday newspapers have a wide readership and adverts in these newspapers have led to the most responses. Alternatively, if the company is located in a closed community, an advert in the local newspapers may have a greater impact.
In general, radio has proved mores costly and less effective.
It is critical that trustees capitalise on responses from adverts. It is thus important that trustees have measures in place to record the caller’s contact details, answer basic surplus questions and obtain fund membership confirmation. These tasks are specific, pedantic, continuous and erratic.
Related communication cost may be quite significant, but trustees must remember that legislation’s intention is to allocate surplus to the rightful stakeholders. Where sufficient data is available to determine the minimum benefit, and possible additional share of surplus, due to a former member, the surplus must be allocated to that person. If the fund is unable to communicate with and/or trace that former member, the surplus allocation will become an unclaimed benefit.
The process of tracing former members to whom benefits are due is a separate issue. The tips, and cost saving considerations, for trustees in this regards are as follows:
- A “last known address or telephone number” provides no guarantee that contact will be made with the former member;
- A comprehensive tracing service, which involves making actual contact with the former member, is the minimum lever of delivery that trustees should accept and pay for;
- Trustees should negotiate with tracing service providers for quotes on a “fixed fee per successful contact” basis; and
- There are tracing service providers who will quote on this basis, with costs incorporating the completion of particular forms and capturing of relevant information. Fees range from R 125 to R 175 per successful contact made.
A valuable tip is to never pay anything to anyone to register your details on your behalf. Whilst this may be beneficial in some instances, there is no guarantee of a payout and many people are getting their fingers burnt by paying their hard-earned money over to unscrupulous tracing agents.
Finally, when it comes to making payment, trustees should be aware of the following:
- The documentation exercise associated with making payment to a former member is a process often involving multiple interactions with that member;
- As such, a service provider offering services on a per member basis, rather than on an hourly rate, is preferable;
- For a full range of tracing, payment and query-handling, a fund should expect to pay around R 600 per member;
- Trustees should communicate tax implications at this stage too, both for cash payments as well as transfers to other funds; and
- Trustees should not forget to communicate with non-qualifying former members.
The issues surrounding communication with, tracing and payment for former members are by no means simple. However, trustees of funds where surpluses exist cannot afford to defer action. This article will, hopefully, provide trustees with a succinct introduction on how to manage this task. |
