Government reviews prescribed asset requirements for Insurance and Pensions industry
HARARE, Government has Reviewed Prescribed Asset Requirements for the Insurance and Pension industry In order to improve resource mobilisation to support key national projects.
The current minimum prescribed asset thresholds for the insurance and pension industry were introduced in 2010.
Short-Term (non-life) Insurers and Re-insurers requirements has been reviewed from 5% to 10% while ratio compliance stood at 9.24%as at June 30 2018 and 12,51% respectively.
Life assures will now be required to adhere to 15% adjustments from 7,5% while Funeral Assurance has been moved to 10% from 7,5%.
The requirements have doubled for pension funds to 20% from the current 10%. This comes at a time when most of these companies have been struggling compliance to prescribed assets ratios due to deepening economic crisis.
In his US$8,2 billion 2019 national budget Minister of Finance and Economic Development Mthuli Ncube said the Insurance companies and pension funds are expected to comply by 31 December 2019 while players should provide compliance roadmaps to IPEC by 31 January 2019.
Furthermore, with effect from 1 January 2019, prescribed Asset Status will be conferred to Government related projects only.
“As pronounced in the TSP, IPEC has developed pension reforms, aimed at curtailing industry expenses, promote efficiency in the administration of sector specific pension funds and safeguard pension fund assets.
IPEC continues to observe very high administration expenses in parastatal-related self-administered occupational pension funds and continued growth in contribution arrears,” he said.
The post-dollarisation arrears stood at US$636.05 million as at 30 June 2018 with the high administration expenses and contribution arrears mainly attributed to pension scheme designs that do not suit the current macroeconomic environment.
“To address the above challenges that have adversely impacted on payment of reasonable benefits to pension scheme members, the following measures are being institute, Harmonization of contribution rates for all Parastatals to 12% for employers and 8% for employees (from as high as 25% for employers and 8% for employees), Conversion from defined benefit to defined contribution for Parastatals and local authorities’ pension funds and Mandatory disclosure of administration expenses by all occupational pension funds,” he said..
Meanwhile he said IPEC had noted with concern inefficiencies in the administration of industrial or sector specific pension funds established by way of Collective
bargaining agreements.
“In order to promote efficiencies in the administration of such pension funds, instruments establishing industrial funds will be amended to open up the administration of such pension funds to competition.
Pursuant to the observation by the Justice Smith-led Commission of Inquiry that some pension funds’ assets were, over the years being transferred from the respective pension scheme members to shareholders
of insurance companies, insurance companies will be required to set separate legal units to administer assets owned by pension scheme members. It is further required that this separation be attained by December 2019, to ensure safeguarding of pension scheme assets,” he said.
To avoid unnecessary breaks in pension accumulation, he said relevant legislation will be amended to provide for domestic portability of pension between the public and private sectors.
