Issue: April/June 2010
Why you should make every effort to...
...TRACE THOSE ‘LOST’ BENEFICIARIES
It’s the right thing to do and, with the right effort, it can be done.
by Giselle Gould, marketing director of Fairheads Benefit Services
Its the right thing to do and, with the right effort, it can be done.
When the member of a retirement fund dies, trustees know the challenges that can arise in tracing his or her dependants and potential beneficiaries. Unclaimed benefits are a huge problem in the employee benefits industry, not least because the money belongs to people often in greatest need. There are no official statistics on the extent of unclaimed benefits, but they are probably many millions of rand.
How does it happen?
Some beneficiaries are not even aware that a trust or beneficiary fund account has been set up for them. This can happen if the contact details held by the retirement fund are out of date (which highlights the need for stringent database management). In other instances, administrators lose contact with existing beneficiaries, particularly those living in remote rural areas. This can happen if guardians or beneficiaries change their contact details without notifying the administrator or if they fail to update their details every year (now required by most administrators on a so-called certificate of existence).
Children may experience a change of guardian. If a child is older than age 14, no court order is needed to appoint a new guardian. This can cause the fund to lose contact.
Compounding the problem, most beneficiaries are minors. So they have no credit record that can be picked up by the databases that tracing agents use.
What is being done?
While most administrators now outsource the function to tracing agents, Fairheads Benefit Services has gone further. It has set up its own in-house tracing system. The success rate has been heartening. Within two years, no fewer than a 60% of lost dependants or beneficiaries have been found across all of Fairheads beneficiary funds and umbrella trusts.
A wide range of source data is used. The process starts with a daily brainstorm where members of the Fairheads team are encouraged to think laterally and follow up every possible lead. Newspaper advertising was rejected after a disappointing 2% response rate in the first six months. Instead, the approach is now multi-pronged to include:
Once beneficiaries are located, there is usually a further challenge of explaining to them why contact was lost and how beneficiary funds operate. According to Natasha de Nett, the Fairheads tracing leader, the joy and surprise expressed by most beneficiaries makes up for every bit of the hard work that goes into the tracing process.
What should trustees do?
Exercise your fiduciary duty. Find out the extent of unclaimed benefits in your fund. Then ask the administrator for its approach to unclaimed benefits. This should be included in a documented policy, transparent and capable of regular monitoring for implementation.
Consider this case study
A trust was set up in May 2004 for the minor dependant of a deceased retirement fund member. But all correspondence sent to the postal address received at inception of the trust was returned to Fairheads offices. This meant that the guardian was oblivious to the fact that a trust fund had been set up for the minor beneficiary.
When the Fairheads tracing team was tasked to establish contact with all beneficiaries who had not returned their certificates of existence for 2008 and prior years, this particular case stood out as there had been no contact since inception of the trust in 2004. With only a last-known address for the guardian it was rather difficult to trace the beneficiary. Fairheads contacted the municipality which confirmed that the guardian had been an occupant at the address; the identity number the municipality had on record matched that of the guardian, but the surname differed. Fairheads then phoned Home Affairs to verify this information against the Population Register. Home Affairs confirmed that the guardian had remarried and had taken a new surname. They provided Fairheads with an address that the guardian had submitted when applying for new ID document, to reflect her new surname. There was no telephone number available and so Fairheads arranged for someone to go in person to the address with a message asking the guardian to contact its offices urgently.
The guardian did so and was overjoyed to hear that a trust fund had been established for her son. Things had evidently been exceedingly difficult for her financially since her husbands death. Fairheads explained the primary purpose of the trust and the guardian asked for assistance with school fees and other basic necessities for her son. Fairheads requested the documents needed for it to start paying a monthly amount to the guardian.
The trust will certainly make a difference to the life of the minor beneficiary.
For further assistance, youre welcome to contact Giselle on 011 883 9755.