Staff Writer
THE pension industry needs to start looking at micro- pensions schemes while addressing the issue of poverty inorder for pensions funds to work again in Zimbabwe in the midst of a myriad propositions, Insurance 24 reports
The propositions are coming at a time the industry has over the decades battling numerous challenges including loss of value, low contributions and loss of confidence among others.
The challenges which have been fueled mostly by economc issues has left the industry battling for survival as membership is also going down.
But all hope is not lost .
Making a presentation on how pensions funds work again in Zimbabwe at the Zimbabwe Association of Pension Funds 50th Annual conference in Victoria Falls yesterday, First Mutual Holdings Limited,Group Chief Actuary
Livingstone Magorimbo said it was time to
start looking at micro-pension schemes.
A Micro-pension fund is a voluntary fund with both savings and retirement benefit entitlements that support small, irregular and sustainable savings by individuals to provide them with a regular stream of pension
annuities or lump sum in old age.
The member contributes personally to obtain benefits based on a defined contribution in the form of pensions or otherwise,
payable on death, retirement or any other occurrence, which entitles a
member to start receiving benefits under the rules of the particular fund.
Magorimbo said these needed to be flexible flexible, low-value contributions and use technology to minimise and optimise costs.
He said there was also need to engage and have conversations with those that lost money.
“Let’s propose a means-tested approach where we address those who are most affected by the loss of money. Order of messaging ensures that pension schemes engage members of one group.So, pension trustees that are here, you need to go through and tell your guys that there’s no money. We lost money. How do we move forward? I mean, we are given the responsibility as a trustee whether it’s good news or bad news, we need to go back and tell our members and that needs to happen,” he said
Magorimbo stressed that the right measure was to address the issue of poverty and ensuring there’s a vision and some propositions that are going around to address that.
He said the fact that any loss of value was to the member’s account was of great concern
“I think it’s important to look beyond the personal benefits that are good to us as retailers and pensions when that happens, and look at the impact of pension funds on the economy and also from a social perspective.The money that we collect through pension fund contribution is key to support economic development, to take the infrastructure projects, and stabilise the macroeconomic environment. And therefore, that’s critical and important. And obviously, from a social perspective, we take away that benefit from government to provide health care, to provide income and sustainability for those who get into retirement,” he added
Again, because of the preservation that has happened with property portfolios, he said, the economy had seen a lot of pension funds sustaining themselves as the currency reforms, the hyperinflation did not affect property sector due to its ability to preserve value.
However, he added, because of the state of the economy, rental yields are quite low.
“Whereas in other jurisdictions, we’re talking about 18, 15%. In the end, we’re coming from a space where we don’t have money. So what are the key lessons from these case studies? Compensation for loss of value.If you look at all these countries that are highlighted, there’s been acceptance that what has been lost has been lost. And you cannot try to collect from the industry or from pension schemes what is not there. So that acceptance was there.I think it’s something that we need to hold on to and say, how do we move forward? Let’s accept the value that we have?How do we rebuild the pensions industry going forward by addressing gaps that were there as far as retirement income was concerned,” he said
Magorimbo added that pension funds needed to ensure that fit and proper
requirements for trustees is something that is very key.
He stressed that it was critical to ensure that the people entrusted to make decisions on behalf of pension schemes are people who are committed enough to be able to do that.
“Introduction of offshore investments, as I mentioned earlier, pension funds, life insurance companies were not allowed to invest offshore. Now we can invest up to 50%.It may be a small proportion, but we can lobby for that to increase, but I think that’s a positive. Prescribed asset status on what used to be deemed alternative investments. 20 years ago, there was a prescribed asset ratio of 45% in fixed income securities issued by the government as a requirement.And when currency reforms and hyperinflation came, that took 45% off balance sheets if we were compliant. But I think of the prescribed assets that have got real value, such as livestock, infrastructure projects, including housing there’s increased exposure to reinvestments,”he said
Magorimbo emphasised that controlling inflation was key to instilling confidence in the sector the sector.
When it comes to infrastructure projects, he said, one challenge was that government wanted to introduce infrastructure projects, but they also want to control it.
“The industry is saying, if we are going to be able to operate and give back to government, we want to have full control of those projects, right? We don’t want to provide our finance and control,” he said
