Nathalie Burrows, Editor at EBnet

Astrid Ludin, Deputy Commissioner from the FSCA, shared what’s forefront in the Conduct Authority’s mind in her keynote address on Day 2 of the 2026 Pension Lawyers Association Conference. She focused on two key priorities for the coming year – unclaimed benefits and costs/fees.

Unclaimed assets/benefits

It’s not news that South Africa faces a persistent and increasingly urgent problem of unclaimed benefits/assets in the financial sector. The total value due to South Africans is estimated to be around R88 billion – and that was five years ago – with just over half of that sitting in retirement funds. This prompted a proposal in the 2026 Budget to centralise these assets in a new unclaimed benefits fund – but this solution has raised important governance and operational concerns.

Why these benefits remain unclaimed

The Deputy Commissioner pointed to the several structural weaknesses in the retirement system that explain why benefits go unclaimed:

• Inadequate record‑keeping: Historic paper-based records, incomplete beneficiary details and poor capturing of ID numbers mean many funds cannot reliably match members, especially where names are misspelled or changed.
• Changes of administrators: Over time, funds have moved between administrators or merged, and in the process data has been lost, corrupted or duplicated, creating “orphan” records that are hard to reconcile.
• No uniform escalation process: Tracing and escalation practices differ widely between funds and administrators, with no single standard on how long and how intensively to trace before classifying a benefit as unclaimed.
• Fragmented systems: Multiple unclaimed benefit funds, internal databases and third‑party tracing platforms operate in silos, making it difficult for members to know where to look and for regulators to obtain a complete picture.

These weaknesses are compounded by labour migration, members changing jobs frequently and member apathy, which historically resulted in multiple small fund values that were easily forgotten or lost. Plus the compulsory provisions and savings pot withdrawal limitations in the two-pot system may exacerbate the problem.

The 2026 Budget proposal: a central fund

The Deputy Commissioner explained that the proposed central unclaimed benefits fund envisages transferring these assets to a central manager and appointing a central administrator supported by a single database to standardise record‑keeping, tracing, reporting and benefit payments.

The objectives are to ensure that these benefits find their way to the rightful owners rather than financial institutions or the state, to reduce value erosion through fees, and to offer beneficiaries a simpler, more transparent claims process.

Concerns about the central fund

The FSCA has heard the industry’s concerns that centralisation alone will not resolve underlying governance and data problems, specifically:

• Data and migration risk: Moving legacy records from multiple funds and administrators into a single structure is complex and could entrench existing errors if standards and remediation are not clearly defined.
• Governance and accountability: With tens of billions of rands in one pool, questions arise about the robustness of oversight, transparency of investment mandates, and safeguards against political interference or mismanagement.
• Timing and transition: Establishing the legal, regulatory and operational framework may take years, during which the pool of unclaimed benefits will continue to grow and beneficiaries may still struggle to access their money.
• Policy use of “dormant” funds: There is an emerging debate on whether, after exhaustive tracing over a defined period, truly dormant assets should remain in perpetuity in a central fund or be partially redirected for broader social purposes, which raises constitutional and fairness questions.

For trustees, administrators and advisors, the reform underscores the need to prioritise data clean‑ups, comprehensive tracing efforts and consistent escalation processes now, irrespective of how the central fund is ultimately designed.

Ms Ludin advised that Treasury will be issuing a discussion note will be published for public consultation, and that the framework will be rolled out in phases before extending to other categories of unclaimed assets.

Costs/fees in retirement funds

The Deputy Commissioner then turned her attention to fees in retirement funds – noting that value for money is a key regulatory strategy. The FSCA is currently considering fee models around the world to inform their thinking on what would be appropriate in the South African environment. Cue in the value for money model.

A coherent value for money framework (VfM) evaluates whether retirement funds deliver good outcomes over time, rather than focusing narrowly on fees. It forces assessment of a retirement fund to look broader than just costs and fees – at things like long term investment performance and governance outcomes.

The Australian prudential regulator applies an annual performance test that compares each fund’s net investment performance and fees to a benchmark derived from its own asset allocation. Funds that underperform must notify members, and if they fail twice, they are closed to new entrants, which has driven significant consolidation. However, there are concerns that this strict benchmark‑focus can discourage funds from aiming to outperform and may create unintended distortions.

The UK has adopted a broader VfM approach for DC schemes, assessing whether funds deliver good member outcomes, not just low cost. It uses consistent metrics covering investment performance, costs and charges, and quality of service, with a red‑amber‑green rating system. Poorly rated schemes must engage with employers, develop remediation plans, and consider transferring members, with explicit risk‑weighting that places greatest emphasis on performance, then service, and lastly costs.

The FSCA is developing a South African VfM framework drawing on both models. Hear more about their thinking in our interview with Astrid in EBnet’s podcast booth at the PLA Conference, here.

ENDS

Ed’s note: Astrid Ludin’s five year term as Deputy Commissioner comes to an end on 31 May 2026. From the team at EBnet, thank you Astrid for your careful and measured approach, and for always being open to conversations and engagement on the key issues.