BUSINESS NEWS - South Africa's financial system is estimated to hold R88 billion in unclaimed assets belonging to people who may not even know they are owed money.
The assets include forgotten retirement fund benefits, dormant bank accounts, unpaid insurance proceeds and unclaimed investment returns.
In many cases, people become difficult to trace after changing jobs, moving homes, changing surnames or passing away without their beneficiaries being informed of what they were entitled to receive.
National Treasury has now proposed a possible solution: a single, centralised system to help South Africans identify and claim unclaimed assets.
But while centralisation could make the tracing process simpler, the proposal also raises important questions about data, costs, cybersecurity, accountability and the role of government in managing money that ultimately belongs to individuals.
Treasury proposes centralised system
Treasury's discussion paper proposes replacing the current fragmented approach, where individual banks, insurers, retirement funds and investment providers each manage their own tracing processes.
Under the proposed model, a central administrator would maintain a consolidated database, coordinate tracing efforts, operate a public-facing claims portal and process valid claims on behalf of financial institutions.
The unclaimed assets themselves would be transferred into safe custody with the Corporation for Public Deposits, while remaining legally owned by the rightful beneficiaries.
The proposal would initially focus on unclaimed retirement fund benefits, with the possibility of expanding the system to banking, insurance and investment products at a later stage.
Treasury has also raised the possibility of introducing an expiry period for claims. Options outlined in the discussion paper include a 45-year period after an asset becomes payable or an age-based threshold where the owner reaches 110.
The proposals remain at an early stage, and Treasury invited industry stakeholders to respond to eight formal questions as part of the consultation process.
Why are so many assets unclaimed?
Ashendran Padayachee, Head of Legal and Compliance at Momentum Corporate, says unclaimed benefits can result from a combination of poor member data, incomplete employer records and people moving across borders.
The financial services industry also faces challenges in maintaining accurate contact information throughout the life cycle of a product.
“As an industry we talk about serving clients from cradle to grave without necessarily having the data infrastructure to back that ambition up over a product's full lifecycle,” he says.
Padayachee says Treasury's proposal draws on international experience but needs to take into account South Africa's particular circumstances, including incomplete records, informal settlements and a highly mobile population.
He describes the discussion paper as a reasonable starting point, while noting that more detail would be needed before such a complex system could be implemented.
Would centralisation solve the problem?
One of the biggest questions is whether South Africa needs a single central administrator or whether similar results could be achieved by improving standards across the existing system.
Padayachee questions whether centralisation, as currently proposed, is necessarily the only solution.
“A system of common standards applied consistently across existing administrators - effectively levelling the playing field - could offer many of the same benefits with less disruption, lower setup costs, and greater speed to implement,” he says.
He also points to the risks of concentrating large amounts of sensitive information and administrative responsibility in one system.
These could include cybersecurity threats, platform failures and the operational challenges of coordinating information from multiple financial institutions.
Padayachee argues that centralising unclaimed benefits will not necessarily resolve the underlying data problems that cause assets to become unclaimed in the first place.
“Centralising the management of unclaimed benefits – irrespective of what technology you implement – is not going to fix the underlying data quality issues that create unclaimed assets,” he says.
How long should people have to claim their money?
The proposed time limits also raise questions about the relationship between practicality and ownership rights.
Padayachee says an age-based threshold of 110 may be more defensible than applying a blanket 45-year expiry period.
He also questions whether the current 24-month definition of an “unclaimed” benefit under the Pension Funds Act should automatically be applied across different financial products.
“Different financial products have different life cycles,” he says, pointing to the different payout triggers and structures associated with banking, insurance, investment and retirement products.
Who should hold the money?
The proposal also brings another issue into focus: trust and accountability.
If billions of rands are moved into a centralised, government-linked custodial structure, questions will need to be answered about how the administrator will be governed, monitored and held accountable.
The issue is not necessarily whether public or private institutions are inherently more trustworthy. Both sectors face governance, operational and cybersecurity risks and require effective oversight.
The key question is whether centralisation would genuinely improve the tracing of beneficiaries and the quality of financial records - or simply move those risks from multiple institutions into a single, much larger system.
Given the scale of the assets involved, transparency around governance, security, costs and accountability is likely to be central to the debate.
What happens next?
Treasury's discussion paper represents an early stage in the process rather than a final blueprint.
The consultation process will help determine which elements of the proposal are retained, changed or rejected as Treasury considers feedback from the financial services industry and other stakeholders.
Whatever model ultimately emerges, the underlying problem remains: billions of rands are sitting unclaimed while their rightful owners remain unaware that the money exists.
The challenge now is to find a system that can reunite those assets with their owners while addressing the data, governance, security and accountability issues that have contributed to the problem in the first place.
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