Unclaimed benefits: Doing nothing is not an option

South Africa’s unclaimed benefits system is facing renewed scrutiny following a recent determination that highlights a deeper, systemic issue: the cost of inaction. A case brought before the Office of the Pension Funds Adjudicator revealed that a pension fund administrator failed to take reasonable steps to trace a beneficiary owed just over R1 000. The member was never contacted, no meaningful tracing efforts were undertaken, and the value of the benefit was materially eroded by administrative fees.

The explanation offered was stark: tracing the individual was not considered cost-effective. Deputy Adjudicator Naheem Essop ruled that administrators are required to take “all reasonable steps” to trace members – regardless of the size of the benefit – and ordered that the full value be reinstated with interest.

Read the full details of the case here.

While the outcome delivered justice for the individual, it raises a far more significant question: How many similar cases never come to light? 

Information disclosed by the FSCA shows that there are 4,5 million people with unclaimed pension benefits. 20% of these matters are below R1 000. That’s nearly 1 million citizens in the same boat. 

The Pension Funds Adjudicator (PFA), Mr Lebogang Paul Mogashoa, says: “The size of unclaimed benefits in South Africa, at over R90 billion, highlights just how significant the problem is. Over half of the total value of unclaimed benefits is in retirement funds. In a country like South Africa with high levels of poverty, this money that lies unclaimed for many years could make a difference in people’s lives.

While we acknowledge that small balances present a challenge in terms of the economic feasibility of tracing beneficiaries through traditional tracing methods, we also cannot accept a system where people’s unclaimed life savings are eroded by administration fees over time until they completely disappear. Ethically and morally, we cannot countenance a system where small unclaimed balances are gradually managed into non-existence. That would be poor member outcomes and breach of fiduciary responsibilities to the beneficiaries of these benefits.

Boards of retirement funds need to keep in mind that they have fiduciary responsibilities and these responsibilities do not differentiate based on member account balances. The fiduciary duty owed to a member with a small unclaimed benefit balance is just as demanding as the fiduciary responsibility owed to a member with a large balance. This fiduciary duty demands effective tracing efforts to match the benefits to their rightful beneficiaries. In line with their fiduciary responsibilities, rather than simply accepting the fate of the erosion of small balances ostensibly because traditional tracing is economically unfeasible, trustees should rise up to the challenge of finding alternative proportional, creative and more cost-efficient tracing efforts for small unclaimed benefits. As the Office of the Pension Funds Adjudicator we will deal decisively with complaints that involve erosion of unclaimed benefits by administration fees over time due to the failure of trustees to take reasonable steps to trace the rightful beneficiaries”. 

South Africa’s regulatory framework places clear obligations on funds and administrators to act in the best interests of members. However, in practice, enforcement is often triggered only once a complaint is formally lodged. It creates a reactive system which is inefficient for smaller claims and reliant on beneficiaries even knowing that money is due to them.

For many South Africans, with low-value benefits, the effort required to take legal action to recover funds may outweigh the benefit itself – leaving large portions of the population disadvantaged. Unclaimed benefits in South Africa are estimated to exceed R90 billion, owed to more than 8,5 million of individuals.

These funds are not static. While they remain unpaid, ongoing administration and asset management fees continue to erode the unclaimed benefit values. Based on typical retirement fund industry fee levels, this pool of 4,5 million unclaimed accounts is estimated to have generated between R10 billion and R20 billion in administration fees for institutions over a 10-year period. In some cases, particularly for smaller balances, these costs can result in the benefit being fully depleted before it is ever claimed.

Internationally, regulators are increasingly taking a firm approach to corporate negligence. The Financial Conduct Authority in the UK has recently confirmed a large-scale motor finance redress scheme designed to compensate consumers who were unfairly treated. The anticipated redress is estimated at £7.5 billion, with a further £1.5 billion likely required to implement the solution, making it one of the largest consumer redress exercises undertaken globally. This is more than R150 billion in South African terms.

Read the full FCA statement here.

Importantly, the FCA’s model is centralised, regulator-led, and financially far reaching. It ensures that the outcomes for the consumer are real while sending a firm message to the corporates. The contrast highlights an opportunity for rigorous regulations in South Africa to strengthen the approach to consumer protection.

What is now required is a fundamental shift – from reactive enforcement to proactive intervention, and from case-by-case resolution to systemic, scalable solutions that deliver beneficiary outcomes at scale.

In his 2026 Budget Speech, the Minister of Finance reinforced the urgency of addressing unclaimed benefits, noting the significant value of funds that remain unclaimed across the financial system and the need for more effective mechanisms to distribute these assets to their rightful owners. The Minister signalled government’s intention to implement reforms to centralise the administration and management of unclaimed funds – underscoring that these assets should serve citizens, not remain dormant within corporates.

The recent adjudication by the PFA highlights two critical principles. First, the obligation to trace and pay beneficiaries applies to every benefit, no matter how small. Second, inaction carries a real and measurable cost – funds that remain unpaid continue to generate administration fees, often at the expense of the very individuals they are meant to benefit.