ZIMBABWE’S pension funds have whittled down their exposure in equities to US$150 million from US$171 million while property portfolio registered strong growth on the back of a faltering economy, a sector’s report has shown.
This comes after the insurance regulator has raised the red flag over a sharp rise in arrears accrued by self-administered funds and the low uptake of government paper by insurance companies as the economy falters.
An unprecedented wave of company closures and subsequent job cuts in the first half of the year saw most companies and employers defaulting on their pension contributions.
According to the latest Insurance and Pension Commission (IPEC) report for the six months ending June arrears contributed three quarters of contributions, reflecting biting liquidity constraints besetting the economy.
The report is centered on 14 standalone funds, four fund administrators, and three life assurers for the current review period.
Chronic liquidity constraints on the back of continued economic implosion saw the Zimbabwe Stock Exchange turnover for October at US$12,8 million, reaching the lowest figure in six years.
“As at 30 June 2015, standalone funds invested US$601 million or 47% in properties(June 2014:US$578million or 48%), US$150 million or 12%in capital market securities (June 2014: US$171 million or 14%), US$34 million or 3% in money market investments(June 2014:US$54 million or 4%),US$451 million or 36% in other securities (June 2014:$386million or 32%)whilst prescribed assets increased from 1% in the same period last year to 3%,” reads the report.
The underperformance of the local bourse — a key economic performance barometer — continues to reflect a slowdown in economic growth after total market capitalisation eased by 0,8% to US$3,6 billion from US$3,63 billion, marking a persistent bearish run for eight consecutive months.
“For the quarter ended 30 June 2015, self-administered funds realised contributions amounting to US$403 million yet US$299 million or 74% were in arrears (June 2014:$215million or 64%). IPEC continues to engage key stakeholders in an effort to arrest the arrear contributions challenge. Further, another major challenge was high expense ratios,” the report reads.
“The average expense to contribution ratio was 3 2%. In a bid to protect member interest; individual players have been summoned to justify their cost structures. The industry highlighted that the high expense ratios were gross of investment losses rather than pure administration expenditure. The total asset base for the self- administered funds remained in the region of $2bn from the last reporting period.”
Short-term insurance companies are required to invest 5% of their funds in prescribed assets while life assurance companies and pension funds are required to put up 7,5% and 10%, respectively.
“However prescribed assets uptake rate grew to 3% partly due to supply side improvements in approved instruments. In line with Ministry Of Finance and Economic Development’s directive, players are required to continue to up their prescribed assets to prescribed regulations by 30 December 2015,” the report reads.
The report further states that fund membership was composed of 208 000 actives or 56 %( June 2014:184 000 or 62%), 124 000 or 33% -deferred members (June 2014:68 000 or 23%), 22000 or 6% being pensioners (June 2014:21000 or 7%) and 20000 or 5% were beneficiaries (June 2014: 22 000 or 7%).
Exits according to IPEC declined by 9% from 3000 to 2900 while total fund membership increased to 371 000 from 295 000 reported in the same period last year owing to the submission of returns by most of the funds during the period under review.
During the period under review employer contributions amounted to US$29 million or 11% of total contributions (June 2014:13%or US$29 million) while member contributions were US$20 million or 7% compared to US$19 million or 8% in June last year.
“However, US$220 million or 82% of total contributions were in arrears (June 2014:79%or US$172 million). The Commission continues to monitor repayment efforts by sponsoring employers,” IPEC said.-Staff Writer