THE National Social Security Authority (Nssa) is now required to increase its prescribed asset ratio to 35%. Critics say the move is another desperate decision by government to widen its revenue
base to fund its excessive expenditure at the expense of Zimbabwean pensioners.
This means lower returns for the pension fund and will adversely affect the lives of pensioners.
Currently Nssa’s investments in prescribed assets is below 15%.
Economic analysts say the imposition of prescribed asset ratios on pension funds is unfair.
They say instead of investing the money where there is a higher interest return, pension funds are obliged to tender for government bonds with zero return.
“The government borrows money not for investment but to finance its recurrent expenditure and they end up borrowing again to pay up the debts,” economic analyst John Robertson said.
He said pension funds have become victims of massive redistribution of wealth and pensioners are failing to retain their lifestyles.
Pension fund managers have also highlighted that they are being robbed by requiring them to buy unattractive bonds as prescribed assets.
They argue that the 35% requirement at sub-optimal rates of return mean that the Zimbabwean pensioner would ultimately be very poor yet the manager is supposed to invest where real returns would be realised for the client.
As long as pension funds comply with the prescribed asset ratios they will not subscribe to new issues or buy treasury bills, which will be above inflation.
“Consistent with the requirement of the pension industry, the National Social Security Authority is now also required to comply with the 35% prescribed asset ratio at market value,” the Minister of Finance Herbert Murerwa said.
Murerwa added that Nssa would also be required to submit monthly investment portfolio returns to the Commissioner of Insurance and Pension Funds with effect from the end of October this year.
He said that the prescribed asset ratios would remain unchanged at 25% for short-term insurance, 30% for long-term insurance and 35% for pension funds.
The finance minister also reviewed the minimum equity capital of insurers.
For reinsurance business, the minimum equity capital was increased from $2 billion to $30 billion, from $800 million to $30 billion for reinsurance business, $800 million to $10 billion for non-life insurance business and from $750 million to $15 billion in the case of funeral assurance.
In the case of life and non-life insurance business, the capital was increased from $1,6 billion to $30 billion while it was reviewed from $250 million to $5 billion for insurance brokers.
Nssa is a corporate entity constituted in terms of the National Social Security Authority Chapter 17:04.
Section 5 of the Act establishes the board, which has the responsibility of controlling the operations of the Authority.
The board of directors is appointed by the Minister of Public Service, Labour and Social Welfare and its composition in terms of section 6 of the Act, should comprise three members representing government, three representing employers, three representing employees and the general manager who is an ex-officio member.
However, Nssa has been without a substantive general manager since the year 2000.
The board is supposed to meet every two months and is responsible for the authority’s strategy and putting in place policies for directing, conrolling and monitoring the afffairs of the authority.
Nssa last published its financial results in 2003.