End of the road for Fundisa education fund

Picture: Freepik

Picture: Freepik

Published Feb 21, 2023


Ruan Jooste

The Association for Savings and Investment South Africa (Asisa) has confirmed that the Fundisa education fund will be closed by the end of March. The fund stopped taking new investments at the end of September last year; it has been closed to new investors since February 2018.

Fundisa is a legacy project launched in 2007 by the former Association of Collective Investments (ACI) in partnership with the Department of Higher Education and Training and the National Student Financial Aid Scheme to help fund the tertiary education of learners from lower-income families. When Asisa was formed in October 2008, the association assumed the ACI’s responsibility for Fundisa.

According to Janete Nel, senior policy adviser at Asisa, it is important for existing investors who had been saving on the behalf of learners to speak to an informed financial professional on what to do with the funds accumulated. It is also important, she said, to take the tax consequences of such a decision into consideration.

Investors have alternative options regarding their disposal including:

  • Withdrawing the money;
  • Using the money to start a new unit trust investment; or
  • Switching into a unit trust fund already in the investor’s portfolio.

"While we cannot advise investors to use this money for what it was intended – namely, to fund a learner's education – we hope that people will do the right thing, or get the appropriate advice,” Nel said.

In a press statement last year announcing the closure, the then chief executive of Asisa, Leon Campher, explained that Fundisa was launched at a time when funding options for students from lower-income households were limited.

“To incentivise investors to prioritise investing for a child’s tertiary education, the Fundisa fund was designed to include a unique bonus feature in terms of which investments in the fund were enhanced by a bonus payment of up to 25% each year to a maximum of R600 per beneficiary, calculated on the net annual savings. The fund applied a household income means test of R180 000 for beneficiaries and accepted minimum investments of only R40.

"In 2018, the National Student Financial Aid Scheme, offered by the Department of Higher Education and Training, started phasing in fully subsidised bursaries for disadvantaged students from families with an annual household income of R350 000 or less. Also in 2018, the Ikusasa Student Financial Aid Programme started providing bursaries to students from families with an annual income of R600 000 or less.

"Therefore," said Campher, "there has been no real incentive since 2018 for investors to save for the education of children from low-income households."

At the time of the press release, just under 11 000 investors had money invested in Fundisa on behalf of beneficiaries from low-income households, but Nel said that since then most investors have already opted out of the scheme. The last bonus allocation to each qualifying investor was paid in January 2023.

According to Campher, Fundisa had allocated R48 million in bonus payments to investor accounts since inception. “While the annual bonus payments were never guaranteed, Asisa had made a commitment to continue funding annual bonus payments for as long as investors maintained their contributions to the fund. The bonus payments were made from grant money contributed mainly by Asisa members.”

The Fundisa Fund is a low-risk interest-bearing unit trust fund of funds administered by Stanlib and previously available from Standard Bank, Nedgroup Investments and Absa.

For monies that remain unclaimed following the closure date, Nel said that Asisa members are committed to honouring valid claims on unclaimed policy benefits and investment proceeds, no matter how long it takes to trace the policyholders, beneficiaries, investors or heirs.

According to Nel , Asisa member companies agreed to waive their rights in terms of the Prescription Act, which would normally allow them to cancel an individual’s right to claim an unpaid amount after three years. This commitment is outlined in the Asisa Standard on Unclaimed Assets, which applies to unclaimed assets generally in policies and investment products provided by Asisa member companies. The standard guides member companies on how to treat unclaimed assets and encourages the use of enhanced tracing procedures so as to keep unclaimed assets at a minimum.

Nel pointed out that the first principle of the Asisa Standard on Unclaimed Assets states the following: "A customer’s right to an unclaimed asset remains until the claim is paid or the asset returned, regardless of the time frame. Unclaimed assets should not become the property of the product provider or its shareholders."