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Ipec warns of pension time bomb



ZIMBABWE’S pensioners may face a bleak future as it emerged that pension contribution arrears nearly doubled to ZW$1.28 billion as most companies struggled to make the payments due to economic headwinds, a regulator’s report has shown.

The Zimbabwean economy, battling Covid-19, high unemployment, a weakening domestic currency and chronic high inflation, is this year expected to recover on the back of improved agricultural output.

A latest Insurance and Pension Commission (Ipec) third quarter report for the period ending September 2020 has shown that contribution arrears increased to ZW$1.28 billion during the period under review from ZW$0.62 billion as at 30 September 2019.

The insurance sector regulator also noted that while there was a nominal increase in contribution arrears, the proportion of contribution arrears to total assets declined from 6.52% as at 30 September 2019 to 1.18% as at 30 September 2020, indicating the extent to which members are losing value should employers not make good the arrears.

“The Commission is concerned about the increase in absolute values of contribution arrears given the negative impact on the adequacy, sustainability, and security of pension schemes,” Ipec said.

“Trustees are, therefore, being urged to do everything in their capacity to recover the arrears, including imposing liens on assets, seizing and selling assets, initiating bankruptcy procedures, and negotiating Certified Repayment Agreements.

“The Commission urges the industry to be innovative and come up with value-preserving instruments which can be considered for prescribed asset status so that the minimum requirement of 20% can be met. The instruments should be in line with the national developmental thrust as espoused in the National Development Strategy 1 (2021-2025) and the 2021 National Budget Statement. In addition, industry is urged to support Government efforts in mobilising resources for critical developmental projects that will also directly or indirectly benefit pensioners and policyholders.”

Unclaimed benefit liabilities, the report further showed, increased significantly by 522.07% from ZW$32.44 million as at 30 September 2019 to ZW$201.80 million as at 30 September 2020.

“The notable increase was mainly as a result of revaluation gains and previously omitted unclaimed benefits which are now being reported. The Commission calls upon the industry to sanitise their data to improve data integrity. Additionally, the industry is urged to enhance awareness initiatives and come up with measures to track beneficiaries of unclaimed benefits,” the report reads.

“The income for the period under review was mainly driven by fair value gains and interest from investments amounting to ZW$50.92 billion. The fair value gains were mainly due to the revaluation of investment properties and listed equities.”

Total expenditure increased by 541.18% from ZW$0.34 billion for the period ended 30 September 2019 to ZW$2.18 billion for the same period in 2020. The increase was mainly driven by total benefits paid, investment management expenses and administration expenses which accounted for 59.41%, 13.12% and 7.61% respectively, the insurance regulator said.