Emerging trends in pensions sector

Melody Chikono

Principal officers and chairpersons of the country’s’ pension funds recently convened in Nyanga to discuss the emerging trends in the pensions industry and devise possible ways to keep pace with them.

Converging under the banner of the Zimbabwe Association of Pension Funds (ZAPF), the delegates identified key trends that needed immediate attention to secure the future of pension funds, which include making the right investment choices, relooking into pension fund structures as well was coming up with new and innovative products.

The outcome of the convention, held under the theme Emerging Trends in the Pension Industry, was expected to see these executives, who are tasked with the implementation of policies which are now often unpalatable, come up with solutions and adjust to the emerging trends in the pensions industry.

In his opening remarks, ZAPF chairperson Reginald Chihota said the role of trustees and chairpersons of pension funds has now become more prevalent in the midst of emerging trends in the pensions industry, where people are now asking about the viability and relevance of industry.

Chihota said what is confronting the industry is in one way or the other connected to what has been happening in the legislative space, where the country has witnessed statutory instruments that are coming “fast and furious”.

“Notwithstanding the daunting challenges, concerted efforts are being made at industry to ensure preservation of value and growth of assets. In the midst of all these emerging trends, principal officers and chairperson’s role assume an even more critical role and pivotal role,’ he said.

This comes at a time the industry is buffeted by erosion of pension investment values, unresolved loss of value issue and tumbling coverage in the wake of excessive expenses and high contribution arrears topping $600 million. This also comes when the sector is experiencing weak corporate governance and hamstrung by out-dated legislation.

Chihota added chairpersons still have to provide leadership and direction to the pension board in a Vuca (Volatility, Uncertainty, Complexity and Ambiguity) context together with principal officers and CEs for the funds who are responsible for the day to day management and running of their funds in the chaotic environment.

The unrelenting shocks rocking the industry and the economy have resulted in increased product termination of policies as contributions, premiums and benefits can no longer keep pace with the rate of inflation, which is growing at astronomical rates that would not allow investment returns to keep pace.

Making a presentation that the convention, First Mutual Wealth general manager Thomas Muswiti, who spoke about financial blunders, said portfolios ought to be created for purposes of meeting consumptive, risk management and retirement purposes.

He added that consistent portfolio management and re-balancing is a necessity, as pension members progress, through their income life cycle and ordinarily migrate on the risk matrix.

“Wealth accumulation activities should be maximised at reasonably early stages of members’ career paths while value preservation is maintained throughout. Expert and personally managed investments aligned towards retirement funds form total funds; along the way ignorance, risk aversion and opportunity misses culminate regrettable mistakes,” he said.

Muswiti said investment advice and planning are equally relevant across all stages, but the general trend has been a sudden drop of professional advice and services, the day someone walks into retirement.

The move, while being a default for most, Muswiti said it had negative effects, as fund existence persists into post retirement and management of it is still relevant.

In another twist to the convention deliberations, the recently gazetted Marriages Bill came under scrutiny, with a partner in Muvingi and Mugadza legal practitioners, Norbert Phiri, saying the pensions industry could not afford to ignore the bill, as it would take a toll on allocations of pension fund beneficiaries. The proposed new marriage law has courted controversy, with various interpretations of it and questions as to whether it would not undermine the family unit and traditional marriage institution.

However, in July, Cabinet withdrew a clause in the Marriages Amendment Bill that provided for “civil partnership”, saying such a union was alien and not consistent with the country’s cultural and Christian values.

Phiri, who was making a presentation titled Till Pensions Do Us Part: Marriage Bill and the Harmonisation of Marriage Bills, told the convention that the shortcomings of Marriage Act and Customary Act were still not addressed.