The ‘two-pot’ system and unclaimed benefits are equally powerful in what they could contribute to the South African economy.
Unlocking unclaimed benefits has the potential to release R90 billion back into the South African economy while the two-pot system, according to a Special Occasional Bulletin of Economic Notes published by South African Reserve Bank (SARB), is moderately expected to boost the economy by R31.5 billion in the 4th quarter of 2024 and R16 billion in each of the following two years. The flow of additional funds will also significantly increase the tax revenue collected by SARS and in SARB’s moderate scenario will 0.1 and 0.3 percentage points respectively to GDP growth in 2024 and 2025.
Pension Funds rely heavily on Administrators to oversee and manage pension money on behalf of the members. The introduction of the two-pot system has increased the workload for administrators in the short term who typically only payout members when they are exiting a fund, but with these new changes, it is expected that the number of payouts will increase by possibly four or five times the normal amount. Most administrators are charging a flat fee regardless of the amount being withdrawn by members wishing to make use of the Saving Component Withdrawals
The role of an Administrator extends to managing benefits which have become unclaimed and tracing beneficiaries who are due these funds. Whether tasked with reconnecting beneficiaries and their unclaimed assets or processing payouts under the ‘two-pot’ system, a fee is involved.
By prioritising unclaimed benefits, fund administrators could become heroes to many South Africans. Solving this societal problem would strengthen trust in corporate institutions, and returning these funds first would ease some of the immediate financial strain on citizens without diminishing their existing retirement savings.
Unclaimed pension benefits are estimated at R48 billion, owed to over 4.5 million South Africans. Of these matters, 20% are owed amounts less than R1 000, which are generally considered uneconomical to resolve. Tracing, verifying, and completing administrative processes with beneficiaries has traditionally been a slow, manual process, making it an unviable business model for tracing beneficiaries who are owed small balances.
“Robin Hood, in partnership with Standard Bank’s OneHub, is a digital platform created by a group of entrepreneurs, business leaders, and industry experts to transform the process of reconnecting unclaimed assets with their rightful owners. By teaming up with corporate institutions and administrators, Robin Hood efficiently and cost-effectively traces, verifies, and distributes assets to beneficiaries. Through technology and scale, Robin Hood has made it possible for even the smallest benefits to be reunited with a beneficiary” says Rowan Gordon, CEO of Robin Hood.
Liberty is one of the early adopters, currently piloting this innovative solution to address their unclaimed pension benefits.
Returning unclaimed assets could reduce the need for members to withdraw from their current pension savings, potentially leaving them in a stronger financial position for retirement.
