IPEC to crack down on non-compliant pension funds

Insurance and Pensions Commission (IPEC) boss, Commissioner Dr Grace Muradzikwa, has vowed to leave no stone unturned in ensuring that pension funds comply with Statutory Instrument (SI) 162 of 2023.

The SI outlines the framework for compensating pensioners affected by the 2009 economic crisis and it has presented significant challenges for the industry. Despite over 1,200 funds being assessed, only one has so far met the stringent requirements.

In an interview on Capitalk FM’s Business Focus programme Dr Muradzikwa revealed that about 50 pension schemes have completely ignored the regulations, prompting legal action.

“We have about 50 schemes which did not even make any submissions at all and we are now taking them to court. The main issue is lack of granular data as required by the SI which our industry, again lacks,” Dr Muradzikwa explained.

“They do not have the data that is required for them to comply with S.I. 162, so what they presented to the commission were very highly summarised reports.”

The commissioner expressed frustration over the lack of transparency in the submitted data, stating, “It is like being asked to mark something yet you are not given the information to refer from whatever has been presented to you.”

Another stumbling block has been the failure by insurance companies to demonstrate asset separation before 2009.

“Life insurance companies were expected to separate assets belonging to policyholders and assets belonging to shareholders as they receive membership contributions,” Dr Muradzikwa said.

“It becomes very difficult for us to be able to build up and compensate policyholders if you do not have this asset separation.”

Despite the daunting task ahead, Dr Muradzikwa remains optimistic about the eventual compensation of pensioners.

“I have a workforce of men and women here at the commission, who have committed themselves to making sure that this happens,” she said.

“The fact that we have one scheme that has been able to comply with the SI means it can be done and we cannot have excuses.”

Addressing concerns about the industry’s willingness to compensate pensioners, Dr Muradzikwa said, “I feel there is a willingness to close this long outstanding issue and bring back confidence in retirement savings.”

“We will use all instruments at our disposal to cause compliance with the SI. What we are just calling for is support from all stakeholders including the parent ministry, management and shareholders of life companies.

“It is in our best interest to close this legacy matter, otherwise there is no future for the industry and I wish everybody could see it this way,” she said.

Dr Muradzikwa said bringing closure to this long outstanding issue will bring back confidence to the sector.

However, she acknowledged that the industry’s capacity to pay remains a question.

To bridge the funding gap, the Commissioner outlined several strategies, including utilising surviving assets, correcting value transfers between members and between policyholders and shareholders and leveraging the Government’s pledged US$175 million.

On the adequacy of the compensation law, Dr Muradzikwa expressed confidence, stating; “We spent a lot of time working on this law and the reason why we actually wanted this statutory instrument was because we wanted the powers being used to enforce it.” She, however, expressed dismay at some industry players who want to challenge a regulator’s directive.

“We have been talking about this thing, we have been consulting, we have been engaging. We cannot go for 10 years talking about this issue. Pensioners must be paid their money, we cannot continue to engage, engage on what?

“We are ready to enforce and we have a lot of instruments which are available to us and thats exactly what we are doing,” said Dr Muradzikwa.

She said the regulator is ready to meet in the courts with some of the players who are not complying.

Recognising the plight of pensioners IPEC has introduced measures such as the Bread Index to monitor the purchasing power of pensions and the expensive framework to curb service provider costs.

Additionally, the commission has enhanced trustee qualifications and allowed pension funds to invest offshore.

Dr Muradzikwa emphasised the need for collaboration among all stakeholders, including Government, industry players and pensioners, to ensure the successful implementation of the compensation process and the improvement of pension benefits.-ebusinessweekly