Johannesburg - The much-publicised exercise to return R80bn to South African pension fund members is about to be concluded but the big winners have not been workers or qualifying pensioners, as initially intended.
Lawyers, actuaries and tracing agents have been paid millions in fees for their bit in the country's protracted and expensive pension surplus apportionment exercise.
As to exactly how much went to the cost of actuarial valuations and tracing of beneficiaries is not known - the retirement industry is not saying.
The industry regulator, the Financial Services Board (FSB), has no way of knowing. It says its responsibility ends once a surplus scheme is approved. It never even set parameters for fees.
"The Registrar exercises his discretion in each case, however surplus costs are carefully scrutinised and queried where it may be suspected that these are excessive," says FSB spokesperson Russel Michaels.
The entire process, which has thus far lasted eight years, has been mired in controversy. Fund administrators have been accused of hiding or stripping funds of surpluses and some of these matters remain unresolved and in the country's high courts.
It's all turned into a damp squib - the amount of surplus available is nothing like the R80bn initially mentioned.
Process is 'much ado about nothing'
As the FSB says: "We are at the tail-end of the surplus exercise". Only R17bn has been approved, with a fraction of this amount going to workers, mainly retired former pension fund members.
Much of what is due to retired pension fund members remains in reserve funds held by the administrators.
An industry watcher was even moved to wonder whether this whole process was not much ado about nothing. Trade unions blame the retirement industry for how the process has transpired.
Cosatu says that right from the onset the industry tried to frustrate the apportionment of the surplus to workers. It wants full disclosure of the costs of the exercise.
It blames the erosion in the value of the surplus on the retirement industry.
"We are not going to negotiate with them. We want a breakdown of everything, we deserve that information even if it means going to the high court to demand the disclosure," says Cosatu's co-ordinator of retirement funds, Jan Mahlangu.
Mahlangu says the industry, while purporting to act in the best interest of members, sought to thwart the process.
He cites several court challenges by the industry which he says were all intended to frustrate the process.
Erich Kröhnert, manager of actuarial consulting services at Metropolitan Employee Benefits (MetEB), says the process was far longer than initially anticipated and that it had proved to be very costly.
Markets performed poorly
He says it may be another three years before the country knows exactly how much the R17bn benefit would have cost.
He would not dismiss suggestions that these costs may run into a couple of billion rand.
MetEB has finalised 90% of all surplus schemes. About R280m has been approved for distribution. Less than 20% of this amount goes to workers, almost all of whom are pensioners.
Only 25 of the 775 funds on the books of MetEB had a distributable surplus. "This represents about 3% of our schemes," Kröhnert says.
The retirement industry has broadly sought to explain the erosion in the value of the surplus on the passage of time.
The industry argues that during this time markets had turned for the worse and that a more prudent management of retirement funds by the FSB, which included minimising the chance of schemes going into deficit in the future, also saw to the decline in the original estimated amounts.
The FSB says over the period between December 7 2001 to the middle of 2003, the markets performed poorly and that this had a significant impact on the surplus available for apportionment.
"At that stage the majority of funds would not have had implemented hedging strategies or invested in portfolios with less equity exposure," says Michaels.
Francois van Aarde, head of Alexander Forbes administration services, says 133 000 former members of 148 funds under management had been approved for payment.
No deliberate delay
"About 60% of these have been paid out. Overall, 250 funds were approved, some of these being in the process of waiting for trustee approvals," he says.
Van Aarde says the total value of approved surplus for Alexander Forbes pension funds comes to R8.1bn. He says R3.4bn has already been paid out to former members. "We still have to trace former members who are entitled to R3.7bn, while about R1bn is set aside to enhance benefits of existing members."
He says the largest cost would have been in tracing members.
"We are doing our all to reach the people. There is no deliberate delay. Anyway, in our case fees for tracing are payable only upon the successful tracing of beneficiaries."
He feels that overall the process was worthwhile.
It was quite an extensive, if somewhat expensive, process and yes many lessons would have been learnt. Despite the complexities of the process many billions of rand that were sitting in pension funds have now been made available to members and prior members."
Actuarial consultant Donald Molema says pension administrators are not doing enough to trace beneficiaries.
'People have been waiting for years'
He says many are deliberately delaying so as to continue to earn fees on the funds.
"Many are happy to sit on the money so as to continue earning fees. There is clear dereliction of duty and the registrar needs to crack the whip," he says.
Molema says administrators are being disingenuous in blaming the delays on pension fund trustees.
"While trustees may have the legislative power, they have no power of process. Trustees meet once every three months and for the administrators it is part of their daily grind.
"The registrar must just act to ensure compliance. People out there, many of whom are on the margins, have been waiting for the money for years," he says.
Molema says FSB can do more.
"The registrar is not being forthright in saying he is not empowered to act against administrators and trustees who are in dereliction of duty. He is empowered in law to remove them or levy a fine.
"There has never been a single case where the registrar has walked in on an administrator and demanded performance. Administrators are getting away with murder," he says. The FSB says there are quite a few funds still outstanding.
"These are typically problem funds of which the registrar is aware. The chief actuary continues to liaise closely with the major administrators to request assistance in getting funds to comply and finalise the exercise," says Michaels.
- City Press