Pensions industry pleads for waiver in payment of levies as Covid 19 takes effect
Staff Reporter
HARARE, The pensions industry is pleading for clemency on statutory requirements with relaxation of deadlines for submission of IPEC returns and a waiver in the payment of IPEC levies on the fore as the industry bows down to the effects of covid 19, Insurance24 can report.
The industry says these are trying times and where pension funds need support from government to defend the economic wellbeing of their members.
The COVID-19 pandemic has economically affected the pensions industry and the Zimbabwean nation at large as businesses temporarily close down.
Outgoing Zimbabwe Association Pension Funds, Reginald Chihota last week told a ZAPF AGM that the default rate was expected to be higher as some employers have lost business and are not able to generate income to pay pension contributions while outstanding contributions were also seen shooting up.
“Taking note of the above issues, the Association requested for the following from IPEC: These are trying times where pension funds need support from Government to defend the economic wellbeing of their members. A review of the formula used to determine the IPEC levy would be welcome to pension funds or a variation to the status quo, given the abnormal environment we are in.
“The current formula is based on subjective asset market values, and not actual income received by the pension funds,” he said.
“Borrowing from what is happening in other jurisdictions during these difficult times, we plead for leniency in statutory requirements and would thus appreciate amongst other requisites, relaxation of deadlines for submission of IPEC returns and a waiver in the payment of IPEC levies.”
Chihota said business closures will lead to the demise of some sponsoring employers, resulting in retrenchments and voluntary early retirements.
Such a situation, he added, will result in high pension withdrawals within a short space of time and immediate reduction in contribution income, which will impact on the liquidity position of pension funds.
Given that the pensions industry controls a significant portion of Zimbabwe’s commercial real estate, Chihota said the impact of the lockdown on tenants’ businesses was set to have an adverse effect on rental income streams and spike the level of voids in properties in the short to medium term.
Already tenants are seeking rent free periods and major rent discounts. Compounded by the general economic slowdown, investment returns are also seen taking a nosedive ultimately affecting the funding level of pension funds.
On the other hand the stock exchange is projected to suffer buoyed by underperformance of listed businesses as returns from money market investments and fixed income securities will lag inflation even more than is obtaining in the market at present.
“.. Valuation of distressed assets will result in actuarial deficits etc. All this will directly and indirectly affect the business continuity of pension funds, compromise payment of member benefits and ultimately threaten them as going concerns. Pension funds will also be incapacitated to participate in infrastructure developments and other projects of national importance, including sufficiently partaking in prescribed assets, as they switch to survival mode: he said.
The Pension Funds and Insurance sector are the majority investors and holders of assets listed on the ZSE to the tune of 70% or more with estimated exposure to this market for the whole industry being between 75% and 90%.
