Equities market boost Pension industry profitability
Staff Reporter
HARARE, Gains on the equities market drove the Pension industry’s profitability after recording a surplus of $1,16 billion for the half year period ended June 30, 2019 compared to $121,02 million same period prior year.
Ipec, in its second quarter pensions report said fair value gains amounted to $828,74 million largely due to a bull run on the Zimbabwe Stock Exchange during the quarter under review.
“It is, however, important to note that fair value gains may be temporary and vulnerable to movements on the Zimbabwe Stock Exchange,” IPEC said, adding that the fair value gains resulted in the industry achieving a total income of $1,35 billion in the first half.
Total industry expenditure stands at $191.76 million, representing an increase of 14.38% from ZWL$167.65 million recorded in the same period last year. The rise was attributable to member benefits which amounted to ZWL$138.61 million, accounting for 72.28% of the industry’s total expenditure.
Administrative expenses (excluding revaluation losses, transfer to reserves and other provisions) stood at ZWL$50.66 million. The administration expenses resulted in average expense ratios of 23.94% and 3.75% to total contributions and total income respectively, compared to 19.13% and 11.24% respectively for the comparable period in 2018.
“The Commission is investigating expenses related to fund administration and preparing minimum disclosure requirements for expenses, which are meant to manage undesirable levels of administration expenses,” it said.
Arrear pension benefits totalled ZWL$77.77 million as at 30 June 2019, marginally increasing from $74.91 million reported as at 31 March 2019. The arrears were reported by funds with liquidity challenges and high levels of contribution arrears. Unclaimed benefit liabilities increased from $24.94 million as at 31 March 2019 to $33.75 million as at 30 June 2019.
“The Commission is engaging in public awareness campaigns and promulgating data management standards for the industry to reduce unclaimed benefit liabilities in the long-term,” IPEC said.
The industry asset base rose 30.86% from $5.38 billion as at 31 March 2019 to $7.04 billion as at 30 June 2019. The increase, IPEC said, was mainly due to an increase in the values of investment property and listed equities.
Investment property went up from $1.27 billion as at 31 March 2019 to $2.05 billion as at 30 June 2019, while listed equities increased from $2.40 billion as at 31 March 2019 to $3.03 billion as at 30 June 2019.
The increase in investment property was largely on revaluations of property values from US$ values to ZWL$ after the February 2019 Monetary Policy Statement, while equities values increased as a result of a “bull run” on the ZSE during the quarter under review.
The industry’s half year asset base translated to an average capital accumulation of ZWL$8 821 per member.
Contribution arrears continued to be a problem for the industry and amounted to ZWL$655.01 million, accounting for 9.30% of the total asset base for the industry. The contribution arrears increased from $627.02 million reported as at 31 March 2019.
“During the quarter ended 30 June 2019, the Commission requested trustees of funds with the highest levels of contribution arrears to submit turn around strategies for the funds including proposals for reducing the arrears in line with the provisions of Section 19 (1) (a) of the Pension and Provident Funds Act [Chapter 24:09],” IPEC stated.
The prescribed asset ratio for the first six months 7.25% and was lower than the 10% regulatory minimum.
The total membership for registered occupational schemes stood at 798 400, a jump from 793 618 members reported as at March 31, 2019. The increase was mainly a result of new entrants totalling 9 385 members for the quarter.
