Policy arrears weigh pension industry

ZIMBABWE'S pension industry is plagued by persistent and growing contribution arrears, a sign that companies and individuals are struggling to maintain life and income cover, weighed down by a harsh economic environment.

Contribution arrears grew to $ 636,36 million as at 30 June, 2018 from $618,88 million as at March 31 2018, about 14,51% of the industry's asset base, posing serious liquidity risk according to the Insurance and Pension Commission (Ipec) half-year report on the period to June 30, 2018.

The report revealed that five pension funds accounted for about 89,14% of the total contribution arrears for the sector at $447,94 million.

Stand alone pension funds reported the highest contributions arrears at $502,53 million, about 78,97% of the industry's total contribution arrears.

Self-administered pension funds also reported that arrears had increased by 2,91% to $87,08 million, as at 30 June 2018 from $84,60 reported as at 31 March 2018.

"It is of concern that the arrears are on an upward trend. The high level of contribution arrears reduces the level of investible assets for funds and heightens the liquidity risk in industry. The commission continues to be attentive to developments on the matter. The contribution arrears have caused liquidity challenges for the affected pension funds. The liquidity challenges were further increased by rental arrears totalling $44,10 million for stand-alone funds as at 30 June 2018," in the report Ipec said.

"The contribution arrears were mainly concentrated in five pension funds, that contributed $447,94 million, equivalent to 89,14% of the total contribution arrears for the sector. It is also of concern that $450,50 million, attributable to 89,65% of the contribution arrears for stand alone pension funds as at 30 June 2018 were aged more than 180 days."

The pensions industry had an asset base of $4,38 billion as at June 30 2018, reflecting a 5,29% increase from the $4,16 billion reported as at 31 March 2018.

The growth in the asset base was mainly a result of an increase in the value of quoted equities to $1,60 billion as at 30 June 2018 from $1,38 billion as at March 31 2018.

The total assets translated to an industry average capital accumulation per member of $7 487 as at June 30 2018.

The average capital accumulation per member was 5,73% higher than the $7,081 per member reported as at March 31 2018. The increase in the average capital accumulation was mainly due to the increase in total assets.

Prescribed assets amounted to $323,13 million as at June 30 2018 from $306,93 million reported as at March 31 2018, about 7.37% of total assets. This ratio was below the minimum regulatory requirement of 10%.

"The commission noted, however, that self-administered pension funds were compliant with the 10% regulatory threshold. Stand-alone and insured pension funds are encouraged to comply with the regulatory requirements,"

The industry's total liabilities totalled $4,61 billion as at 30 June 2018, indicating a deficit of $221,46 million. The deficit was mainly a result of defined benefit liabilities which were not being supported by the requisite investment returns and sponsoring employer funding.

The industry reported unclaimed benefit liabilities totalling $28,73 million as at June 30 2018.