MORE than 300 pension funds folded last year while nearly half of the active registered ones are currently inactive as companies struggle to meet their obligations due to economic headwinds, a new report by the country’s insurance regulator has shown.
Treasury cut Zimbabwe’s growth target to 4% from an initial prediction of 4.6% due to domestic and external factors such as rising inflation and the impact of Russia’s war on Ukraine. The year-on-year inflation rate slowed down to 243.7% in December 2022, from 280.4% recorded in September 2022.
This year, Zimbabwe is seen registering Gross Domestic Product growth of 3.8% compared to an earlier projection of 5% projected in the county’s economic blueprint.
According to the Insurance and Pension Commission (Ipec)’s 2022 fourth quarter report, a total of 313 funds were under dissolution by the end of the year. The poor performance of the Zimbabwe Stock Exchange, one of the most preferred investment options for pension funds, also had a negative impact on pension funds’ balance sheets.
“There were 981 registered occupational pension funds as at 31 December 2022 compared to 985 funds as at 31 December 2021,” reads the Ipec report.
“The decrease was due to a transfer of self-administered funds to participating employers of already existing umbrella funds as well as dissolutions of other funds. Of these 981 funds, 504 were active, accounting for 51% of the industry’s funds.
“The remaining 477 funds were inactive as they were either paid up or undergoing dissolution. In addition, 41 pension funds were defined benefit schemes whilst the remainder were defined contribution schemes.”
The report further shows that only 14 of the 981 registered funds conduct their own in-house fund administration business. The remainder, which are insured and self-administered funds, outsource the services to fund administrators.
As at 31 December 2022, foreign currency-denominated assets amounted to US$193.31 million constituting 11.73% of industry assets.
The holding of foreign currency-denominated assets helps in cushioning the assets from being eroded by inflation in the current hyperinflationary environment.