Zimbabwe’s troubled companies have failed to remit about ZWL$2.25bn to pension funds at the end of March this year, reflecting a 236% increase from ZWL$670m reported in the same month last year, largely due to viability challenges faced by Zimbabwe companies, a new report shows.
Analysts said this is a reflection of the general performance of the Zimbabwe’s fragile economy amid revelations that some companies have been unable to do so for several months.
Consequently, apart from viability challenges faced by pension funds, the failure by sponsoring companies to remit pension contributions could also deprive members and their families of entitlements in the event of retirement, death or other developments.
These benefits can only be paid to beneficiaries whose contributions and premiums are up to date.
The Insurance and Pension Commission (IPEC) said increase in arrears was mainly attributed to the application of interest on arrears as well as the continued non-remittance of contribution arrears by some sponsoring employers.
“While there was an increase in contribution arrears, the proportion of contribution arrears to total assets declined from 2.26% as at 31 March 2020 to 1.27%.
“Of the ZW$2.25 billion, 81.72% (which translates to ZW$1.84 billion) is owed to stand-alone funds. The Local Authorities Pension Fund, the Mining Industry Pension Fund and the Zimbabwe Electricity Industry Pension Fund constituted more than 75% of the industry’s contribution arrears,” IPEC said.
“Notwithstanding the decline in the proportion of contribution arrears to total assets, sponsoring employers are urged to clear these contribution arrears so that pension scheme members do not lose their benefits through this unfunded portion.”
According to the Pensions Regulations (Statutory Instrument 323 of 1991 and 61 of 2014), it is a criminal offence for companies to deduct pension contributions from employees’ salaries and wages but fail to remit them to their respective pension funds within 14 days after the end of each month.
Despite the existence of such a law, many companies in Zimbabwe continue to deduct amounts from salaries or wages of their employees and deliberately fail to pay such amounts to the relevant retirement funds, choosing to fund their cash-flows instead.
Zimbabwe’s pensions sector has 974 registered funds. Out of this, about 622 were active at the end of March.