US$150 million compensation for pensioners and depositors

Government is set to make a US$150 million equivalent compensation to small and vulnerable depositors as well as pensioners for losses incurred during currency reform process.

Staff reporter

As part of a broader reform process under the TSP, Government through the Central Bank introduced market determined exchange rate through the Monetary Policy of (SI 33 of 2019) on 20 February 2019.

This entailed transition from exchange rate of US$1: RTGS$1, initially to US$1: RTGS$2.5 and thereafter determined by the interbank market activities.

For pensioners, the compensation will be outside the recommended compensation under the Smith Report.
In his 20201 budget presentation yesterday, minister of finance Mthuli Ncube said the Deposit Protection Corporation (DPC) will administer compensation for small and vulnerable depositors while Insurance and

Pensions Commission (Ipec) will handle the pensioner’s compensation.

“This transition resulted in currency losses to small and vulnerable households with deposits less than US$1 000 in the bank. The movement in the exchange rate from US$1:RTGS$1 to US$1:RTGS$2.5 resulted in a
loss for such depositors.

Therefore, Government has made a decision to compensate the small and vulnerable depositors who had US$1000 and below, for the exchange rate movement loss from US$1:RTGS$1 to US$1:RTGS$2.5, with resources with resources equivalent to US$75 million,” he said

“Similarly, the above development affected pensioners, with the transition causing losses for pensioners as at 20 February 2019. They too will be compensated with resources equivalent to US$75 million, which will be co-managed by Government and the Insurance Pension Commission (IPEC). This arrangement excludes recommended compensation under the Smith Report.”

On another note Ncube said the implementation of the Commission of Inquiry’s recommended compensation framework for loss of value suffered during the pre-2009 period was slowed down by the 2019
currency reforms.

However, he said the Insurance and Pension Commission (IPEC) has registered significant progress on implementation of the compensation schemes in response to 2019 currency reforms through ensuring an
equitable allocation of revaluation gains arising from currency reforms.

“In line with legal reforms recommended by the Justice Smith-led Inquiry, three Bills namely the IPEC Bill, the Pensions and Provident Funds Bill and the Insurance Bill are at different stages of approval. The Pension and Provident Funds Bill is now awaiting presentation in Parliament whilst the Attorney General’s Office has finalised drafting of the Insurance and Pensions Commission Bill and the Insurance Bill, both of which are set for approval by Cabinet to facilitate introduction in Parliament.” he said.