Pension funds under spotlight
Business Reporter
ZIMBABWE’S pension funds will next month gather in the capital Harare for an investment training workshop that is likely to offer sustainable solutions to numerous challenges bedevilling the sector.
Some of the notable speakers at the proposed meeting include Insurance and Pensions Commissioner, Grace Muradzikwa and Integrated Properties chief executive officer Mike Juru.
In the past two years, pension funds have struggled to attain social security protection for its beneficiaries as asset returns fell well below the basic performance benchmark of inflation.
Most pensioners in Zimbabwe get a monthly allowance of less than ZW$250, which is enough to buy a 2 litre bottle of cooking oil.
Ngoni Dzirutwe, the Global Renaissance Investment chief executive officer, said there was an urgent need to restructure the pensions industry and reposition pension funds on a platform of long-term sustainability for future generations of retirees.
“Although Zimbabwe has continued to experience economic mishaps in the past few decades, there are other serious systemic issues within the pension system that also contributed to the wanton destruction of value in members’ pensions,” he said.
“The sober reality is that we have a generation of pensioners who have retired into abject destitution and realistically very little can be done at this stage. The system has totally failed them.”
As things stand, pensioners are already feeling the double whammy of eroded disposable incomes and challenges spawned by the coronavirus pandemic.
Dzirutwe, who will be hosting a Property Investment and Management master class in November, said apart from pension funds being effective vehicles for providing old age income security, the pensions industry was a critical platform for mobilising and generating the nation’s long-term domestic savings.
“A vibrant and well – functioning pensions system deepens capital markets and strengthens the financial system. Pension funds, by virtue of their long-term investment horizon, are critical drivers of infrastructural development the world over.
This is particularly crucial for Zimbabwe where a major policy imperative at this time is around harnessing and mobilising resources for infrastructural development,” he said.
A recent study by Sidewaos Research Consultancy revealed that due to the current economic environment, characterised by high inflation, restrictive investment laws and limited investment products, investments were not yielding high enough returns resulting in actuarial deficits for defined benefit pension schemes.
“The current set of pensions’ industry products, legal framework to protect pensioners as well as the ability to preserve value in the face of hyperinflation, currency erosion and systematic economic risk has not been satisfied.
This is despite a commission of enquiry that set out recommendations to industry, government and regulators alike to revamp the pensions industry to hedge against the value loss that has seemingly occurred for the second time in the last twelve years,” read part of the report.
“In that respect we are of the opinion that pensions are necessary however the current set of pensions products does not respond to the retirement needs for the current crop of economically active individuals in Zimbabwe.
It is thus an opportunity for innovators to satisfy this market’s needs and at the same time provide the market with all the associated benefits of a truly beneficial pension’s system,” the report added.
