The Guardian’s Fund, which falls under the Department of Justice and Constitutional Development (DoJ) and protects funds inherited by minors and people who cannot manage their own financial affairs, does not actively trace beneficiaries, with the result that many beneficiaries will never be found, and most will likely never be paid their fair share.
According to the annual report of the Guardian’s Fund for the year ended March 2022, the Auditor-General states that the fund is not subject to the Public Finance Management Act (PFMA) and so the Auditor-General is not required to consider whether the fund has operated in compliance with the Act.
The Guardian’s Fund is under the supervision of the National Treasury, which is subject to the PFMA, but Personal Finance is still waiting for clarity on why the fund itself does not appear to fall under the Act, particularly as it is holding more than R16 billion on behalf of thousands, if not millions, of untraced people. In the annual report the money is described as being held in “statutory trust”.
According to LegalWise, the Guardian’s Fund was established to protect and manage money on behalf of certain people, such as children, those who are not able to manage their own affairs or, and those who could not be found. The money held in the Guardian’s Fund generally comes from inheritances and deceased estates, which are regulated by the Master of the High Court in accordance with the Administrations of Estates Act.
No active tracing
This Act does not require the Guardian’s Fund to actively trace beneficiaries, unlike the private-sector custodians of billions in unclaimed pension benefits, which are regulated by the Pension Funds Act and which fall under the watchful eye of the Financial Services Conduct Authority (FSCA).
According to the Administration of Estates Act, the six Masters’ offices across the country just have to publish notices of money held by the Guardian’s Fund that is claimable after not less than one year and not more than three years.
The Public Investment Corporation takes care of the Guardian’s Fund’s investments, and according to the Act interest accrues monthly at a rate determined by the Minister of Finance.
The annual report reveals that, during the period under review, the Guardian’s Fund generated more than R776 million in investment income and “was able to pass an additional 25 basis points (above the market interest rate) for the year under review to the beneficiaries. The rate of interest allocated to interest-earning accounts within the Guardian’s Fund was 4.25% per annum for the financial year under review.”
However, interest on an amount held by the fund stops accumulating from the fifth anniversary of the date on which it becomes claimable by the beneficiary, unless someone has lodged a claim before then. And the annual report shows that all the Masters’ offices’ expenses related to the fund are borne by the fund. Administration costs of about R5m a year were deducted from investment income over the last two years.
The Guardian’s Fund distributed and paid interest on beneficiary money of over R5bn in the latest financial year, according to their financial statements. It also shows close to R30m in fraud cases on its books.
Personal Finance came across a copy of a Government Gazette in which the fund had published notices of money that had become claimable within the last three years. It lists the names of a number of beneficiaries of the insolvent estate of Roger Kebble, some of which are large companies that are very easy to find.
Personal Finance asked the DoJ why the trustee of the Kebble estate couldn't find the beneficiaries within two months after he or she was authorised by the Master to make payments to creditors. We also wanted to know whether the creditors were told that the fund was holding money for them. The media team is yet to respond to Personal Finance’s queries.
Impossible task for beneficiaries
While the DoJ publishes these notices in the Government Gazette, which appear on the Guardian’s Fund page on its website, it doesn't seem to have a facility like the FSCA, where you can enter your identity or passport number to find out if there is money due to you.
The fact of the matter is that the fund has no incentive to seek beneficiaries, and for beneficiaries to find the funds themselves seems to be an even more impossible task.
Penny Roberts, Master of the Pretoria High Court, was recently asked in a media interview on how the Masters’ offices were catering to the needs of widows and orphans, especially in disadvantaged and rural communities.
“That is the reason we are here, to create awareness so that people have knowledge,” she said. “I feel so sad when I speak of orphans, because they wouldn’t know where to go. There are social workers and they can inform them. But there is the Office of the Master of the High Court. And I must mention that each and every Magistrate’s Court in the country has a children's court. It's a court that protects the rights of children, so they can go there to ask for more information.”
David Hurford, chief executive of Fairheads, an independent retirement and fiduciary administrator, says his firm is in charge of over 100 000 members' money held in beneficiary accounts. “Between 30 000 and 50 000 calls come through our contact centre every month,” he says. “There is no way the Guardian’s Fund has the capacity to deal with the number of beneficiaries they are supposedly responsible for, in the same way.”
He says it is difficult to compare private beneficiary funds with the Guardian’s Fund, as it is a “very opaque vehicle”, and the private sector is “battling to understand its investment philosophy”. The fund is also not subject to the same strict checks-and-balances protocols as the private sector.
Hurford advises against resorting to the Guardian’s Fund as a safe haven for assets of minors or heirs that lack legal capacity. “In our view, the Guardian’s Fund should be avoided if possible, by having a valid will and nominating a suitable trust to receive these benefits instead.”
PERSONAL FINANCE