Why sorting out your paperwork should be a New Year’s resolution

I often receive emails from people who are trying to locate their pension benefits from an employer several years after they have resigned, and I often wonder how people lose track of their money – that is until this week.

Over the last few years I have neglected a very basic money management principle which is creating a spreadsheet of all my investments and risk cover, including companies and account numbers, so that should something happen to me, my family has one piece of paperwork to show them where everything is.

While pulling out all my files I came across a preservation fund that I had forgotten about. It was a transfer from a provident fund when I left an employer 16 years ago. The last statement I had on record was from 2008 and I realised that I had never notified them of my change of address.

This week I contacted the company and discovered that the balance of R40 000 had grown to R102 000 in the last eight years, which is a compounding rate of 12% per annum.

Firstly, that is a lot of money to have lost track of, and secondly it shows what happens when you just put money away and leave it to grow ‒ and why cashing out your retirement fund ‒ even a small amount like R40 000 ‒ has a significant effect on your future.

That is an extra R100 000 that I can add to my retirement fund. Even if it grows at just 4% above inflation each year for the next 20 years it will be worth R223 000 in today’s value, which will give me an extra R1 200 income each month in retirement.

Fortunately, due to changes in legislation as part of the retirement reform process, I can now transfer this money into my retirement annuity and consolidate it into a single investment which means it is less likely that I will lose track of it in the future – especially if I change address again.

This year make one of your New Year’s resolutions to do some admin ‒ sort out your paperwork! I highly recommend you go through your paperwork and find all those policies and investments, make sure your details are up to date and write up a comprehensive list. Who knows ‒ you may be in for a pleasant surprise!

How to find retirement benefits

If you contributed to a retirement fund you should have some paper trail, either a payslip or a statement. If you have a statement, contact the company that administered the fund on your employer’s behalf. If you only have a payslip, contact the human resources department of your former employer to get more details. Generally, they will put you onto the company that administers the fund.

If your employer no longer exists or you are unable to locate them, you can contact the Financial Services Board (FSB) at pension.queries@fsb.co.za or 012 346 5915.

Be very careful of using the services of people who charge a fee claiming that they can find unclaimed benefits on your behalf. The FSB is concerned about unethical practices where intermediaries offer to locate unclaimed funds for a fee, sometimes up to 20% of the amount of the benefit received by the member. Some of these intermediaries simply send their client’s information to the FSB with a request that it find out if there are benefits due to them. You can do this yourself without incurring any costs.

There are also scams where intermediaries claim that they can obtain a death benefit from a fund even though the member is still alive. They charge the member a couple of hundred rand, then they disappear.

Some funds have employed tracing agents and intermediaries to find members on their behalf; these tracing agents have an agreement with the fund which will also include the manner in which costs will be recovered.