Liberty in shock admission it erred in deregistering 130 funds
Liberty’s admission that 130 pension and provident funds must be reinstated years after industry-wide cancellations of thousands of dormant funds could bolster a case before the Constitutional Court.
Speaking at Liberty’s interim results for the six months to June on Thursday, CEO David Munro said it had erred in deregistering 130 funds with about R100m in assets when it cancelled around 4,600 dormant funds about a decade ago.
This could affect up to 3,000 beneficiaries, said Tiaan Kotze, CEO of Liberty Corporate.
It had successfully reinstated 25 of these through a high court process and had recommenced payments. Liberty would look for ways to reinstate the remaining 105 funds more expeditiously, Munro said.
"There’s a lot of noise around this matter and we want to be clear that we take it very seriously. We are prepared to go back and look at our actions, and where we’ve made mistakes, to rectify them," Munro said.
Liberty, which found that funds needed to be reinstated following its own investigation, is the first retirement fund administrator to admit as much.
"I congratulate Liberty on making these disclosures and wish other fund managers would do the same," Rosemary Hunter, the previous deputy registrar for pension funds at the Financial Sector Conduct Authority, said.
She has argued that the cancellations project, in which the regulator approved the cancellation of nearly 7,000 pension funds from 2007 to 2013 on the grounds that they had ceased to exist because they no longer had properly constituted boards, was illegal.
After two high court rulings and the Supreme Court of Appeal dismissing her case against the regulator, Hunter approached the Constitutional Court. She is seeking an order that all the funds be investigated and is now awaiting judgment.
For Liberty, reinstating these funds represents an administrative expense at a time when the embattled insurer is trying to cut costs as part of a turnaround.
Separately, Liberty disclosed an amount of R2.2bn in unclaimed benefits, saying it was actively locating 75,000 of the 100,000 beneficiaries to whom this money was due.
Whatever resources were required to trace beneficiaries and reinstate wrongly cancelled funds would be made available, Munro said. Liberty had made "meaningful progress" on its turnaround, which involved simplifying its product set and internal structure.
For the six months to June, normalised operating earnings jumped 18% to R958m. While a considerable improvement on the six months to June 2017, this is still behind the R1.1bn posted for the six months to June 2016, signalling it still has some way to go to return to what chairman Jacko Maree has previously described as its "former glory".
It would be critical to better integrate with parent Standard Bank for distribution and customer data, as had been done with the short-term insurance joint venture, said Avior Capital Markets analyst Warwick Bam.
"As long as its core affluent consumer remains moribund and the competitive environment remains unrelenting, Liberty’s pursuit of sustainable growth will be a bit like trying to boil the ocean," said Justin Floor, a portfolio manager at Kagiso Asset Management.