Pension’s industry asset quality compromised by arrears: IPEC
Harare- Total assets for the Pensions industry during the quarter ended 31 March 2017 amounted to $3.35 billion, however with a significant proportion of total assets totaling 15.27% of the asset base tied up in contribution and rental arrears.
“These two asset classes amounted to $462.99 million and $49.41 million respectively and the high level of contribution and rental arrears compromises the asset quality, especially when recoverability of the same is doubtful under the existing operating environment,’ IPEC said in its latest report.
During the quarter, 73.99% of the assets base was made up of assets which are suitable to match pension funds liabilities namely investment properties, cash and money market investments, equities, and prescribed assets.
According to the latest Insurance and Pension Commission (IPEC) pensions report, total income for the industry amounted to $112.53 million attributable to contributions, rental income and investments.
Contributions, rentals and investments income totaled $105.65 million and accounted for 94.22% of the total income while total expenditure amounted to $89.13 million resulting in a net surplus of $30.96 million for the quarter under review.
The report shows that the industry had 1,297 registered private occupational pension funds with total membership of 560,528 during the March 2017 quarter.
Total benefits incurred amounted to $59.47 million and accounted for 66.72% of total expenditure while industry reported average expense ratios of 19.35% and 14.75% based on total contributions and total income respectively were attained.
According to the report, the challenge in respect of contribution arrears was mainly prevalent in stand-alone self-administered funds with a total of $407,96 million arrears.
Stand-alone self-administered funds reported total income of $48.23 mln during the quarter and was mainly composed of $29.77 mln contributions and $9.69 million rental income, which accounted for 82% of the total income
Of the $48.23 mln income reported by stand-alone self-administered pension funds, a total of $33.83 mln was used to meet fund expenses.
The remaining $14.40 mln was reserved for future fund expenses and of the $33.83 mln used to meet fund expenses for the quarter; $14.27 mln was incurred for payment of pension benefits, commutations
National Railways of Zimbabwe Pension Fund, Mining Industry Pension Fund and Local Authorities Pension Fund were the largest funds in terms of total assets during the quarter.
Self-Administered Funds had a total income of $$43.36 mln for the quarter mainly composed of pension contributions and rental income which amounted to a total of $34.66 million, and accounted for 79.94% of total income.
The total assets for self-administered pension funds amounted to $1.02 bln as at 31 March 2017 and the asset base for self-administered funds was skewed towards equities and investment properties which totaled $560.41 mln and accounted for a total of 55.03% of the total assets .
Insured schemes during the quarter reported that earnings amounted to $20.53 mln against a total expenditure of $21.16 mln resulting in a deficit position of $0.62 mln
The major income driver for insured schemes was contribution income which amounted to $19.89 mln and accounted for 96.87% of total income for the period under review.
Insured schemes reported total assets amounting to $837.99 mln and the asset base was skewed towards money market investments as well as prescribed assets which amounted to $326.31 million and $275.25 million respectively and accounted for a total of 71.79% of total assets.
Old Mutual Life Assurance Company was dominant in the subsector for insured pension funds in terms of number of total assets, number of funds administered and total fund membership with market shares of 85%, 48% and 57% respectively.