IPEC finalises compensation framework

LIVINGSTONE MARUFU

The Insurance and Pensions Commission (IPEC) is finalising the compensation framework for policyholders and pensioners which will pave the way for them to be paid for lost value when the economy dollarised in 2009, Business Times can report.

IPEC commissioner, Grace Muradzikwa (pictured), said the framework  will be released this  quarter. The latest development comes after IPEC had initially set December 31 2021 as the deadline for the completion of the compensation framework.

“Work on the compensation framework is progressing well and we expect finalisation of the exercise and implementation of the compensation during the first quarter of this year in line with the approved road map,” Muradzikwa told Business Times.

She said a lot of engagements with stakeholders have been done to iron out any difficulties that may have been experienced given the complexity of the exercise.

The focus is to ensure smooth implementation with minimum disruptions, Muradzikwa said.

“We are addressing all the key issues that relate to compensation in this exercise and these will be communicated upon finalisation of the framework,” she said.

In August 2015, then President Robert Mugabe set up the Justice George Smith-led Commission of Inquiry  to establish the extent of prejudice  to policyholders and pensioners  and recommend compensation where prejudice has been established.

Many Zimbabweans, according to the Smith Commission report,  lost more than US$3bn during the process of conversion of balances  from Zimbabwe dollar to the greenback.

This resulted in huge pension investments suddenly turning into a few dollars.

Recent submissions made by Zimbabwe Pensions and Insurance Rights Trust (ZimPIRT) — an independent organisation which represents some aggrieved members of the schemes — said that pensioners, pension fund members in general and insurance policyholders were credited with less than their full rightful benefits as a result of flawed calculation methods.

ZimPIRT  said  there were also several irregularities in the management and regulation of pension and insurance contracts.

The ZimPIRT general manager Martin Tarusenga said the value of the US-dollar assets, especially after the conversion process, was calculated from the implied value of the Zimbabwe dollar at the time but the Zimbabwe dollar, as opposed to other asset holdings, was the asset that suffered the most as a result of the hyperinflation.

He said that entitlements (money credited to policyholders) were markedly discounted.

ZimPIRT argues that before hyperinflation peaked in 2008 most assets were immovable properties such as land and buildings which could not depreciate with inflation.

There is long-standing suspicion that pension and insurance companies short-changed clients, especially during the hyper-inflationary era, by claiming pension values have been totally eroded.

“ZimPIRT proved to IPEC categorically that the Guidance paper is wrong and unlawful. IPEC’s insistence is merely because insurance companies want to maintain the pensioner prejudice by winding up everyone including the Finance minister,” Tarusenga said.

ZimPIRT argued that some pension funds lost their monetary value during the 2008 era but people should bear in mind that most assets  that are  in town  are a result of the pension funds invested during the Zimbabwean dollar era and their value haven’t been eroded up to now.

In addition, most of the business people in town bought some companies without realising that the pension fund is a separate entity from the company and should be left to run things on its own.

This resulted in prejudice of the pension funds as new owners wiped away all benefits at the expense of beneficiaries, according to ZimPIRT’s submissions.

Tarusenga argued that inconsistencies are observed in conversion of policies, especially for contracts signed before 2006, as the Zimbabwe dollar was rebased in July 2006, August 2008 and January 2009.