Eroded investment values weigh down pensions industry


Talkmore Gandiwa

Zimbabwe’s pensions industry has experienced an unprecedented erosion of pension investment values, unresolved loss of value, tumbling coverage in the wake of excessive expenses and high contribution arrears due to poor data integrity.

This comes after Justice Smith commission of enquiry revealed that the sector has been experiencing weak corporate governance while being hamstrung by outdated legislation.

Zimbabwe has experienced hyper-inflationary conditions resulting in increased poor service delivery as contributions, premiums and benefits can no longer keep pace.

The inflation has also eroded the real purchasing power resulting in policyholders terminating some policies after realizing that no benefit would be accrue or the contract was unlikely to perform.

Addressing journalist on a mentorship program, Insurance and Pension Commission Pensions manager Tariro Mateisanwa said the areas of key regulatory focus are going forward.

This, she said, would include increased focus on surveillance and enforcements as well as data integrity and record keeping.

“The IPEC is increasing focus on surveillance to ensure that the company promotes innovation and striking a balance that there is adequate protection for the consumers,” she said.

Mateisanwa said IPEC was also implementing a regulatory risk supervision framework.

“The implementation on targeted Pension, Profit and Funds Bill, once it is passed it will replace the current Pensions, Profit and Funds Act.”

She said the bill will address the regulatory gaps that were laid out by the commission and also to align with the international standards.

To realize maximum benefits from the enacting of the new law, Mateisanwa said IPEC was targeting research on how best to implement the provisions and also to perform the adequate transitional provisions.

She said IPEC said would review the fitness and probate criteria for trustees as well as board of directors

The sector has been heavily affected by the issue of money contributions, as the consumers always complain of losing money like what happened prior to 2009 losses.

“Contributions in United States dollars can be invested in the sector,” she said.

Policyholders have called for another Commission of Inquiry, the second in a decade, because the sector is losing pension values, real investment returns and benefits, in a manner reminiscent of value loss experienced post the hyperinflation period.

There have also been increasing surrenders and lapses due to company closures or loss of jobs on the work of a worsening economic crisis.

This has resulted in pension coverage in Zimbabwe of less than 20 percent, according to the insurance and pension’s regulator.

Companies have also been failing to remit pension contributions to respective pension’s funds as a consequence of worsening economic conditions resulting in contributions becoming more of a book entry because employers stopped submitting employees’ contributions.

Consequently, the pension funds are now grappling with more than $600 million in arrears, a figure which IPEC said was an under estimate.

IPEC said the operating environment was characterized by weak corporate governance practices, high contribution arrears, high administration expenses, outdated legislation and the unresolved loss of value issue.

“The pensions industry is losing value, the second time in a decade in a way reminiscent of the losses suffered in 2009,” Mateisanwa said.

Former President Mugabe’s administration in 2015 instituted an inquiry into the conversion of insurance and pension values from the Zimbabwe dollar to the United States dollar.

The commission produced a report which was gazetted in March 2018.

According to the report, 43 percent of the loss of value suffered by policyholders and pension fund members was caused by the micro-environment which is the government, 21 percent was by regulatory factors and 36 percent by micro or industry players who caused erosion of value.

This means the industry is liable for a maximum of 36 percent of any loss in value while the other contributory factors were beyond the control of the industry players.

The pensions industry also has serious deficiencies with regards to proper record keeping.

The situation has been exacerbated by the fact that the Insurance Act does provide guidance on record keeping issues.

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