Pensions funds battle liquidity crisis
PHILLIMON MHLANGA
Zimbabwe’s pension funds are battling to overcome a dire liquidity crisis which is increasingly making it difficult for them to meet beneficiaries’ benefits obligations as they fall due, Business Times can report.
There are 985 registered pension funds in Zimbabwe, according to official figures obtained from the sector regulator, the Insurance and Pensions Commission (IPEC).
Of these 606 were active, representing 61.52% of the industry funds. Most of the remaining 38.48% are undergoing dissolution.
Pension funds controlled over ZWL$318.96bn in total assets as at December 31, 2021, a 189% increase from ZWL$110.24bn in 2020. The growth in asset base was largely driven by revaluation of assets.
And more than ZWL$150bn is invested in real estate, which is one of the largest asset classes alongside equities.
The real estate portfolio, however, does not provide liquidity that allows pension funds to be nimble in controlling risks. Selling a property is relatively slow to provide the much needed liquidity.
This week, investment experts confirmed a severe liquidity crisis was giving the pension funds a serious headache.
To mitigate the liquidity squeeze, the Zimbabwe Stock Exchange head of markets, Anymore Taruvinga suggested pension funds should invest in Real Estate Investment Trusts (REITs) to improve their liquidity.
“Pension funds facing liquidity issues in meeting obligations to beneficiaries should seriously consider investing in REITS, which bring increased liquidity for existing and new properties. Listed units can be traded in the secondary market bringing liquidity benefits,” Taruvinga said .
Another investment expert, Welcome Mavingire, who is the managing consultant of investment advisory firm, Intellego Investment Consultants said:
“Pension funds are exposed to the property sector. They are hamstrung with liquidity issues.”
In its latest report, IPEC noted with concern pension funds’ failure to pay obligations when they fall due and late payments of benefits.
“Non-payment of benefit accounted for 24% of the complaints received in the quarter (to December 31,2021), while late payment of benefits, accounting for 15% in the last quarter of 2021.
“Also, about 53% of the complaints related to low pension values occasioned by the currency conversion of 2009 with most pensioners following up on the Commission of Inquiry recommendations.
“Therefore, the Commission is seized with putting in place various measures to improve benefits. These include regulation of administration and investment management expenses, enhancing governance of pension funds and allowing offshore investments to diversify sovereign risk, among others.
Unremitted contributions complaints is another category of complaints, which constituted 8% of the complaints received in the period under review. The Commission continues to encourage pension funds to follow up on payment plans agreed with sponsoring employers who have outstanding contributions,” reads part of the IPEC report.
Contacted for a comment on the matter, the Zimbabwe Association of Pension Funds director general, Sandra Musevenzo, requested for written questions.
The enquiries were sent on Tuesday. But, she had not responded by the time of going to print.
