Treasury wants R80bn-plus in unclaimed benefits centrally managed, with National Treasury proposing a major overhaul of how dormant and unclaimed financial assets are administered in South Africa.

The proposal could affect more than R80 billion held across dormant bank accounts, unclaimed retirement benefits, unpaid dividends, investments and insurance proceeds.

National Treasury believes these assets should eventually be brought together under a central administrator instead of remaining scattered across different financial institutions.

The proposal is contained in a discussion paper titled A Framework to Centralise Unclaimed Financial Assets in South Africa, which has been released for public comment.

The framework is aimed at addressing what Treasury describes as a fragmented system while improving governance, tracing of beneficiaries and transparency around money that remains legally owned by individuals or their beneficiaries.

National Treasury unclaimed financial assets

The National Treasury unclaimed financial assets proposal seeks to create a more coordinated system for dealing with money that has remained untouched or whose owners cannot currently be located.

At present, unclaimed assets can be held by different banks, retirement funds, insurers, investment companies and other financial institutions.

Treasury argues that this fragmented approach makes it more difficult to trace the rightful owners and beneficiaries of the money.

Under the proposed framework, financial institutions holding qualifying unclaimed assets would gradually transfer those funds to a central administrator.

The administrator would then be responsible for maintaining records, tracing owners and beneficiaries and ensuring that claims can be processed.

Treasury has emphasised that centralisation would not immediately mean that the state becomes the owner of the money.

Instead, ownership would remain with potential claimants until any proposed statutory claims period expires.

Why Treasury wants a central system

The central argument behind the proposal is that South Africa needs a more coordinated approach to dealing with dormant financial assets.

Treasury says the current system requires stronger governance, regulatory oversight, consumer awareness and the use of technology to improve tracing efforts.

A central administrator could potentially create one coordinated system for keeping records and identifying people who are entitled to unclaimed money.

The proposal could also make it easier for beneficiaries who are unaware of assets left by deceased relatives to establish whether money is being held on their behalf.

However, the plan also raises important questions about how such a system would be governed and protected from abuse.

R80 billion unclaimed funds

The estimated R80 billion unclaimed funds represent a substantial pool of money spread across different parts of South Africa’s financial sector.

These assets include dormant bank accounts, unclaimed retirement benefits, unpaid dividends and proceeds from investment and insurance products.

The scale of the funds is one reason Treasury believes a centralised approach deserves consideration.

The proposal suggests that the process could begin incrementally rather than transferring every category of unclaimed asset at once.

Unclaimed retirement fund benefits are proposed as an initial area for centralisation.

This would allow policymakers and regulators to assess how the system operates before potentially expanding it to other types of financial assets.

The government would also need to establish safeguards to ensure accurate records are maintained and rightful beneficiaries can successfully recover their money.

Public trust will be important

Treasury has acknowledged that public trust and transparency will be critical because the amounts involved are substantial and the assets remain the property of owners and beneficiaries.

This means the proposed administrator would have an important responsibility beyond simply holding the money.

It would need to maintain reliable records and establish effective processes for locating people who may be entitled to claim.

Technology could play an increasingly important role in this process.

Improved data matching and tracing systems could potentially help authorities identify beneficiaries who have moved, changed contact details or are unaware that they have a financial interest in an asset.

Corporation for Public Deposits

Under the proposal, the Corporation for Public Deposits (CPD) could play a central role in managing the funds.

The CPD is a subsidiary of the South African Reserve Bank and is responsible for managing public deposits from various government entities.

Treasury proposes that funds transferred to the central administrator could ultimately be invested with the CPD.

The idea would provide a central mechanism for managing the money while claims are being processed and beneficiaries are being traced.

However, the precise structure of the proposed administrator remains open for discussion.

Who could administer the money?

Treasury has presented more than one possibility.

One option is to establish a new entity with responsibilities similar to those performed by the Government Pensions Administration Agency, which administers the Government Employees Pension Fund.

Another possibility is to appoint an existing financial institution that already has the scale, expertise and infrastructure required to manage a large portfolio of unclaimed assets.

The administrator would have to maintain records and undertake tracing activities while operating under clear governance and oversight requirements.

Treasury is also asking the public to comment on whether the administrator should be a new organisation or an existing service provider.

Centralised unclaimed benefits and expiry rules

One of the most significant parts of the proposal concerns how long people should have to claim unclaimed financial assets.

Treasury is considering introducing a statutory period after which an asset would no longer be claimable.

Two options are presented.

The first would presume that beneficiaries have died once they reach the age of 110.

The second would introduce a 45-year period beginning when a policy lapses and first becomes unclaimed.

For example, under the second option, an asset that became unclaimed in 2015 could potentially become non-claimable in 2060.

This could mean that relatives of a beneficiary would eventually be unable to claim the asset after the prescribed period expires.

Treasury argues that a fixed 45-year period could provide greater administrative certainty because institutions would not have to track an individual’s age for decades.

Roodt wants a shorter period

Economist Dawie Roodt supports the broad idea of centralising unclaimed money but disagrees with the proposed timeframes.

Roodt believes periods such as 45 years or an age threshold of 110 are excessively long.

He has called for the expiry period to be reduced to about 10 years.

His argument is that maintaining records for several decades can create significant administrative costs for financial institutions.

A shorter period, however, would also need to balance administrative efficiency against the rights of people who may have legitimate claims to the money.

South Africa financial assets proposal open for comment

The South Africa financial assets framework is not yet a final system.

National Treasury has opened the discussion paper for public comments, with submissions limited to 10 pages and due by 19 September.

Among the questions being posed is whether a new administrator should be created or whether an existing financial institution should take responsibility.

Treasury is also seeking views on how the administrator should fund its operations and whether a uniform minimum standard should apply to tracing, contacting and reporting unclaimed assets across different financial sectors.

The government is also asking whether there should be a statutory deadline for claiming an unclaimed asset.

Another important question is how South Africa can prevent the continued accumulation of unclaimed financial assets in the first place.

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What the proposal could mean for beneficiaries

If implemented, the centralisation of unclaimed benefits could significantly change how South Africans search for and recover dormant financial assets.

A single coordinated system could make it easier to trace retirement benefits, insurance proceeds, investments and other money that has become separated from its rightful owners.

However, strong safeguards would be necessary.

The system would need to ensure that legitimate beneficiaries are not unfairly prevented from claiming their money and that accurate records are preserved for many years.

The proposal also highlights the importance of consumers keeping their financial information and beneficiary details updated.

For now, Treasury is seeking public input before deciding how the framework should proceed.

The debate over Treasury wants R80bn-plus in unclaimed benefits centrally managed is therefore likely to continue, particularly around ownership, governance, tracing, investment of the funds and the proposed expiry periods.

The central question is how South Africa can ensure that billions of rand in unclaimed financial assets are managed efficiently while protecting the rights of the people who ultimately own the money.

References from mainstreasm media