Struggling employers turn to IPEC for payment plans amid pension contribution defaults

CLOUDINE MATOLA

A growing number of defaulting employers are turning to the Insurance and Pension Commission (IPEC) to negotiate payment plans as they struggle to remit pension contributions, Business Times has learned.

Faced with mounting financial pressures, several companies are failing to transfer pension and social security contributions—even after deducting them from employees’ salaries. In response, IPEC has begun exercising its authority to garnish the accounts of non-compliant employers, a move that is prompting many to seek structured repayment agreements.

Polite Chidumwa, IPEC’s Market Conduct Manager for Pensions and Life Supervision, confirmed that the commission is actively engaging companies to recover outstanding dues through enforceable payment plans.

“Currently, IPEC is engaging defaulting employers who have come up with payment plans, which the Commission is now enforcing. The strategy is effective in recovering outstanding contributions from all the sponsoring employers who are capable of remitting contributions,” Chidumwa said.

He explained that IPEC’s garnishing powers, granted under section 16 of the Pension and Provident Fund Act, have become a powerful enforcement tool.

“IPEC now has powers to garnish the accounts of defaulting employers, provided for under section 16 of the Pension and Provident Fund Act. The provision, however, allows the defaulting employer to make representations to IPEC, explaining the reasons for the non-remittance of contributions. Guided by the representations made, IPEC can direct the sponsoring employer to remit contributions by a specified date, failure of which, will result in IPEC garnishing the defaulting employer’s accounts,” he said.

Chidumwa attributed the wave of defaults to a mix of economic hardship and poor prioritisation by employers, many of whom are diverting funds to other financial obligations.

“There are mainly two reasons why companies default on contributions, which are: viability constraints—the company might be facing viability and cash flow challenges, making it difficult for the entity to remit contributions on time—and prioritising other financial obligations over pension contributions,” he said.

He urged companies to review and adjust their pension contribution rates to more sustainable levels in order to reduce the risk of continued defaults.

“The above challenges can be mitigated by revisiting contribution rates to sustainable levels so that companies do not continue to default. Enforcement of garnishing powers by IPEC and employers’ engagement can also mitigate against non-remittance of pension contributions,” Chidumwa added.

The engagement process with defaulting employers is seen as a practical step to maintain the integrity of Zimbabwe’s pension system, which has come under pressure as contribution arrears mount. IPEC’s assertive stance marks a shift from its traditionally conciliatory approach, signalling its intent to prioritise the financial security of pensioners and hold employers accountable.