AN increase in collapsing companies amid a floundering economy has resulted in a decline in the number of active members of Zimbabwe’s pension funds, a new report has shown.
The outbreak of the Covid-19 pandemic prompted the authorities to impose strict disease containment measures such as national lockdowns which saw many businesses shut their doors to the public.
This, according to labour unions and independent experts, led to massive company closures as many businesses embraced digital transformation, which necessitated cuts in the headcount.
According to the Insurance and Pensions Commission (Ipec) first-quarter report for the pension industry, there was a decrease in the number of active members from 101 339 members as at 31 March 2020 to 99 152 members.
“The decline in active members can be explained by the corresponding increase in deferred pensioners as members who leave employment will have their benefits being deferred pending retirement age. Due to the Covid-19 pandemic, several sponsoring employers have faced viability challenges, which resulted in either closure or downsizing, consequently resulting in members being retrenched,” reads the report for the period ending 31 March.
“There was a 16.52% decline in pensioners, which was mainly attributed to members exiting the funds and being paid full commutations.”
According to the World Bank, nearly 500 000 Zimbabwean households have at least one member who lost her or his job, plunging many households into poverty and worsening the plight of the existing poor.
Official figures show that Zimbabwe’s economy is expected to recover from a projected contraction of 4.5% in 2020 to a growth of 7.4% in 2021 and 5.5% in 2022.
The report further shows that, despite reporting a decrease in active members, total income amounted to ZW$9.45 billion for the period January to March 2021 compared to ZW$3.24 billion during the same period in 2020.
The ZW$8.6 billion is mainly attributed to fair value gains on equities and interest from investment.
“Interest from investments totalling ZW$7.72 billion contributed 81.68% of the total income for the period under review. Insured funds paid ZW$643.00 million in benefits for the 3 months ended 31 March 2020, constituting 81.40% of the sector’s total expenditure,” the report reads.
The sector’s administrative expenses totalled ZW$0.15 billion and were driven by investment management expenses and administration charges, which constituted 59.74% and 31.18% respectively, Ipec noted.
The administrative expenses translated to 21.06% and 1.49% of contributions and total income respectively, as compared to 21.16% and 1.01% for the same period in 2020.
Investment property increased by 152.47% from ZW$6.08 billion as at 31 March 2020 to ZW$15.35 billion while quoted equities increased by 339.40%, from ZW$4.67 billion reported as at 31 March 2020 to ZW$20.52 billion.
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