Government abandons Pay-As-You-Go pension arrangement
HARARE, Government as part of wage bill containment will do away from an unfunded Pay-As-You-Go pension arrangement by adopting a funded Defined Benefit Pension Scheme or Defined Contribution Scheme arrangement in line with best practice in other jurisdictions.
This is contained in a Transitional Stabilisation Programme (TSP) report by government through the Finance Ministry. The TSP which is aimed at addressing fiscal imbalances and driving Zimbabwe’s development agenda runs over the period October 2018 to December 2020.
The report notes that Zimbabwe’s insurance penetration rate, which reached a high of 10 percent in the early 1990s, has been declining over the last two decades, with official figures showing that it dropped to a low of 1.5 percent in 2015.
“This had since improved to current levels of about 5 percent, with perceptions of insurance as a luxury and unaffordable to many due to subdued disposable incomes still in place. Some of the reasons Zimbabweans have been shunning insurance include lack of trust due to policy value lost due to hyper-inflation, and poor education on the matter,” read part of the report.
The Transitional Stabilization Programme is targeting insurance penetration to reach 20 percent, with various affordable micro-insurance products via the mobile phone targeted to emerge as the leading drivers of insurance penetration.
Additionally, government is looking to strengthening the Insurance and Pensions Commission (IPEC) Supervision and Surveillance of the US$8 billion Insurance and Pension Industry, comprising of agencies, brokers, insurance and reinsurance companies, and retro-cessioners.
As a result, in order to fulfil its mandate of ensuring improved social security for policy-holders and pension fund members, contribution to improved financial stability and ensuring a vibrant insurance and pensions industry, IPEC has instituted several measures to enhance its supervisory capacity in response to the demands of the sector.
