Pensions sector asset base increase to $372 billion

Pensions sector asset base increase to $6,42 billion

Staff Reporter

HARARE, The Pensions sector’s asset base increased by 479,44% in nominal terms to ZW$372 billion from ZW$6.42 billion reported at 31 December 2019 driven by revaluation of investment property and quoted equities which amounted to ZW$12.53 billion and ZW$17.28 billion, respectively.

The Insurance and Pension Commission fourth quarter pension report notes that   equities investments and investment property had a combined value of ZWL29.8 billion and accounted for 80.11% of the total asset base.

The quantum of investment in these two asset classes reflected concentration of assets in classes that preserve value.

Investments in prescribed assets stood at 8.98%, which is a slight increase from 8.74% as at 31 December 2019.
The ratio, according to Ipec is still far below the required minimum regulatory threshold of 20%.

“It is important for pension funds to note that the Commission reviewed the framework for prescribed assets to include other financial instruments such as private equity and to generally widen the scope to include any projects in support of the national developmental agenda that can be conferred prescribed asset status.

“As such, pension funds are encouraged to come up with such instruments
and apply for prescribed assets,” Ipec said.

During the period contribution arrears increased by 392.42% from ZW$44.08 million as at 31 December 2019 to ZW$217.06 million prior period.

The increase was owing to two main factors, namely the treatment of arrears in line with requirements of the Guidance Paper and failure by employers to remit pensions contributions on time.

The ratio of contribution arrears to total assets for the sector slightly declined from 0.69% as at 31 December 2019 to 0.58%.

“The situation was exacerbated by the impact of Covid 19 lockdown which resulted in many employers failing to meet obligations to pension funds,” noted Ipec.

Meanwhile the value of prescribed assets increased in nominal terms by 880.56% to ZW$ 7.06 billion from ZW$0.72 billion reported as at 31 December 2019.

Whilst there was an increase in the nominal value of prescribed assets investments, compliance was still low at 6.41% against the regulatory minimum of 20%.

Total income for the industry for the year 2020 was ZW$79.21 billion compared to ZW$22.27 billion reported in 2019 driven by fair value gains, interest on investments, profit on disposal investments and contributions which constituted a combined proportion of 93.88%.

Total industry expenditures for the period under review amounted to ZW$5 billion, of which ZW$3.28 billion went towards benefit payments while total  administrative expenditures for the period January to December 2020 amounted to ZW$1.72 billion compared to ZW$0.83 billion for the same period in 2019.