Staff Writer
Zimbabwe’s pension industry is increasingly anchoring its asset growth and value preservation strategy on offshore and foreign currency–denominated investments, as funds navigate persistent exchange rate volatility and rising benefit obligations.
According to the Insurance and Pensions Commission (IPEC) report for the quarter ended December 31, 2025, foreign currency–denominated assets rose by 6 percent to US$1.04 billion, up from US$984.89 million in the previous quarter.
These assets now account for 33 percent of the total pension sector asset base, underscoring a growing shift towards hard-currency exposure.
The expansion was largely driven by new acquisitions as well as the reclassification of Zimbabwe Gold (ZWG)-denominated assets into United States dollars.
This transition highlights the sector’s strategic pivot towards currency stability in an environment marked by exchange rate fluctuations.
Investments in foreign currency–generating assets have emerged as a critical buffer, helping pension funds preserve and enhance member value.
IPEC emphasised the need for funds to ensure that income generated from these investments is equitably distributed to members, strengthening benefits and improving long-term savings outcomes.
A notable portion of these assets is held offshore. As at December 31, 2025, 21 percent of foreign currency–denominated assets were invested across multiple jurisdictions.
South Africa dominates as the preferred destination, accounting for 34 percent of total offshore investments, while 90 percent of offshore assets remain concentrated within the African region.
The composition of offshore investments reveals a strong bias towards equities, which constitute 98 percent of total offshore exposure. Of this, 60 percent is in quoted equities, while 38 percent is held in unquoted investments, reflecting a mix of liquid and longer-term strategic holdings.
While offshore investments are supporting value preservation, the sector continues to grapple with structural challenges, particularly contribution arrears.
As at the end of the quarter, arrears stood at US$52.6 million, representing 5 percent of foreign currency–denominated assets. This marks a 4 percent increase from US$50.51 million reported in the previous quarter.
IPEC urged pension fund boards to intensify engagement with sponsoring employers to address the growing backlog and prevent further accumulation, warning that persistent arrears could undermine the sector’s sustainability and members’ retirement security.
On the income side, the sector recorded strong growth in foreign currency inflows. Total foreign currency income for the year surged by 116 percent to US$398 million, up from US$184 million in 2024. Contributions played a significant role, rising 44 percent to US$161.7 million and accounting for 41 percent of total foreign currency income.
However, rising payouts are beginning to weigh on the sector. Foreign currency benefit payments more than doubled to US$64.6 million, a 108 percent increase from US$31 million in the prior year. Benefits accounted for 62.6 percent of total foreign currency expenditure, highlighting the growing burden of obligations to retirees and beneficiaries.
Administrative expenses consumed 26 percent of foreign currency spending, while 11 percent was allocated to investment-related costs, indicating a relatively balanced cost structure despite mounting pressures.
Overall, the IPEC report paints a picture of a pension sector in transition, one that is increasingly leaning on offshore and foreign currency assets to safeguard value, but also facing rising liabilities and operational challenges that require careful management to ensure long-term sustainability.
