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Pension funds face shake-up

A SHAKE-UP is looming in the pension fund industry after the Insurance and Pension Commission (Ipec) instituted a raft of reforms that could claim up to six standalone funds.

By Melody Chikono

Well-placed sources told businessdigest this week that at least six pension funds will fold if they fail to meet the prescribed conditions under the newly proposed pension fund reforms that are meant to govern the industry.
The planned reforms mooted by the Insurance and Pension Commission (Ipec) seek to improve sustainability, affordability, adequacy and the coverage of pensions as well as improve the welfare of pensioners.

Among other objectives, the reforms are meant to harness long-term domestic savings for economic development, improve the legal and regulatory framework for pensions, as well as strengthen governance, management and efficient delivery of pension services.

However, the regulator has been blamed by some pension funds (standalone) which have expressed fear that there will be loss of jobs and a serious decline in premium contributions if the reforms are instituted.
Clothing Industry Pension Fund board member Jane Mutasa said having Ipec manage the funds would result in a scandal similar to that which saw hyperinflation wiping out the value of contributions.

While she was not against the reforms, Mutasa said Ipec should have consulted with administrators before coming up with the proposals.

Mutasa said the six funds that might be affected could include the Mining Industry Pension Fund, Clothing Industry Pension Fund, Catering Industry Pension Fund and the Construction Pension Fund.
“I’m not sure of the others, but make them six. We feel that Ipec should be on the forefront addressing the workers and the unions to tell them where their money will be going. A lot of people will lose their jobs. Contributors will need answers. We cannot have Ipec continuously putting reforms without sitting down with us first like they did with the 2017 policy. We lost a lot of money in an investment company some pension funds in the hyperinflation era. If the pension regulator becomes responsible for the management of funds, what guarantee do we have that it will not happen again as in the hyperinflation days?” she asked.
Mutasa said pension funds would put their money into the respected pool and their investments were made under the umbrella of the fund.
“This company pension funds invested our money in buildings. When inflation came, no-one knows what happened to our money. There is no one building in the name of the Clothing Industry Pension Fund, or Catering Pension Fund or Mining Pension Fund. Some of us have since pulled out of this company. But the fact remains that we lost our money. It must be known that we were defrauded,” she said.
Under the proposed reforms, in the event that a self-administered fund — standalone or administered — is unable to reduce its expenses in line with the proposed caps, it should be compelled to join an umbrella fund or become an insured scheme.
This should be done in a transparent manner in consultation with the fund members to enable the creation of a larger fund and, if they are managed efficiently, will result in economies of scale that will push down the expense of running the funds.
No fund should be registered as a self-administered fund unless it is able to demonstrate that it can contain its cost within the proposed thresholds.
All funds that have high expense ratios should therefore be either insured funds or be part of an umbrella fund rather than self-administered funds.
Mutasa said it was wrong for Ipec to manage those funds.
Zimbabwe Association of Pension Funds (ZAPF) chairperson Reginald Chihota said the organisation’s perspective was that it is early days yet, but further conversations needed to be conducted with all the stakeholders involved, led by Ipec as the regulator.

Construction Industry Pension Fund official Elisha Ngunga referred all questions to ZAPF.
“I am of the view that at this stage the best to response to this will be Zimbabwe Association of Pension Funds, since they represent all of us as players,” he said .

Ipec head of Pensions Josphat Kakwere said they are still making consultations with the key stakeholders on the reforms and would not be to comment further.

“On the 14th of September we called on the pension funds’ stakeholders, which are the pension funds, and pension funds were given the opportunity to come, including the standalone, or to be represented and it’s ongoing and we have requested them to give their comment either under the pension fund or as individuals up to the 30th of September as we value their input into their final product,” he said.

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