TREASURY has undertaken to pay a US$400 000 dividend in compensation to pensioners who lost value after the government embarked on currency reforms which came after the local currency plunged.
Two years ago, the government removed the 1:1 parity which had been ushered in following the introduction of bond notes, a fiat currency introduced in 2016. Finance minister Mthuli Ncube told lawmakers that plans were underway to pay compensation in the coming year.
“Players in the insurance and pensions sector are now in the process of equitably distributing revaluation gains on assets attributable to currency reforms undertaken in 2019 in line with the Guideline on Adjusting Insurance and Pension Values provided by Ipec (Insurance and Pensions Commission),” Ncube said during the presentation of the 2022 National Budget.
“In addition, pursuant to an allocation of US$75 million investment asset by government to Ipec, as part of compensation measures for lost value by pensioners, a dividend of US$400 000 was declared and is being disbursed to targeted beneficiaries. Subsequent disbursements will be made in 2022 and beyond, leveraging on this investment.”
The finance minister further proposed to compensate policyholders who lost value after Zimbabwe experienced an unprecedented economic meltdown in 2008.
The country ditched its local unit for the United States dollar in 2009 after inflation officially reached 231 million percent, wiping out savings and pensions. After the introduction of the greenback, the government in 2017 commissioned a special inquiry to investigate the impact of the currency reform on both policyholders and the economy.
The inquiry was led by retired High Court judge Justice George Smith.
“Government, in consultation with industry representatives, has been working on bringing closure to the pre-2009 compensation,” Ncube said.
“To this end, government is finalising the 2009 compensation framework that will provide guiding principles on the criteria for assessing and quantifying prejudice in relation to the insurance and pensions contracts, as highlighted in the Smith Commission of Inquiry on Conversion of Insurance and Pensions Values from Zimbabwe dollar to US dollar Report.
“It is envisaged that the compensation modalities will be concluded before the end of 2021, with pensioners starting to get payments in 2022.”
During the inquiry, the commission received many complaints from individual members of the public, as well as from insurance and pension representative organisations. The main concerns related to the loss of value arising from pension contribution arrears, value lost during hyper-inflation, inter-generational transfer of benefits, value lost through conversions on dollarisation, forced commutations of the full pension, loss arising from de-mutualisation of Old Mutual and First Mutual and conversion of pension schemes from defined benefit funds to defined contribution funds.
The inquiry revealed complaints against the Government Pension Scheme included the absence of a funded pension scheme, outstanding one-third lumpsums for pensioners who retired just before dollarisation, delayed processing of lumpsum pension benefits, delays in payment of monthly pension payouts, surviving spouses and dependants failing to access benefits, as well as the failure to access pensions by retirees of church-related hospitals and mission schools, who were not covered by the government as grant-aided workers.
Complaints relating to the National Social Security Authority (Nssa) centred on the problem of uniform and arbitrary benefit calculations, Nssa’s time limits for claiming pension benefits, the failure to access a Nssa pension by government workers on early retirement, such as former members of the police and army, lack of insurance cover for students on industrial attachment and poor record keeping.