THE Insurance and Pensions Commission (Ipec) will move to enforce rules on the non- payment of pension contributions by employers, following the promulgation of the new Pensions Act.
This comes as companies have been compromising the future of the country’s pensioners by accumulating significant arrears.
Contribution arrears are contributions which have fallen due to the fund but not yet remitted by the sponsoring employer. When sponsoring employers deduct pension contributions, they are required to remit the same to pension funds. If they are not settled, then the pension package would be annulled.
Pension contribution arrears is the biggest challenge facing the pension sector, with about ZW$47.45 billion in unremitted contributions recorded as at 31 March 2023.
The standard pension plan is an employee benefit that commits the employer to make regular contributions to a pool of money set aside to fund payments made to eligible employees after they retire.
To the extent that sponsoring companies fail to play their part, a pension scheme cannot succeed.
Ipec says the new Pensions Act criminalises the non-payment of contributions by the sponsoring employers, hence will help to curtail the growing contribution arrears.
This comes after many pensioners were left without support at retirement age, as they could not claim their pension benefits because their employers had not paid up their contributions.
The new Pensions Act was promulgated last September, however, the law is yet to be enforced yet as it is awaiting the gazetting of the accompanying regulations.
In a presentation during the Journalism Mentorship Programme in naming and shaming employers who are not paying up their part of the contribution.
“We are actually engaging those employers that are not remitting and we are also naming and shaming in the Press as a way of putting pressure then we are also requiring them to report these unremitted contributions to Ipec,” said the regulator.
Ipec pensions director Cuthbert Munjoma (pictured) said there was mischief of non-remittances, poor communication with members, failure to fund the underfunded Defined benefits schemes and use of fund assets, especially buildings without paying rentals by sponsoring employers, which was costing the fund.
“We are encountering instances where there is non-separation of the employer and the fund, and the fund is losing through sub-optimal rents or non-payment by the sponsoring employer to the fund,” he said.
State-related entities were said to be leading non-remittances of contributions commanding over 70% of the contribution arrears recorded by Ipec.
Defined benefits (DB) are a pension scheme model in which the final benefit is pre- determined using a formula provided for in the rules of the scheme.
Speaking to The NewsHawks in anonymity, a worker from the ministry of Higher and Tertiary Education said she did not have confidence in the solutions but she would give the regulator the chance to prove that they are there to protect the pensioner and not the sponsor.
“Although these solutions do not give me full assurance that I shall be protected from contribution arrears because many companies have gotten away with not paying their part in the pensions package even though they would have deducted it from the salary,” she said.
“However, I do appreciate the solutions that Ipec has come up with; as they are a stepping stone for the fund to show that they are here to safeguard our interests,” she added.
Regarding the use of buildings by employers without paying, Munjoma said the boards were mandating them to ensure that they protect the fund members.
The pensions fund owns 80% of every building in every town and city in Zimbabwe, therefore sponsoring employers are supposed to pay rentals. The rentals are then used to protect fund members.