Defaulting employers, Ipec agree on arrears clearing plans

THE Insurance and Pensions Commission (Ipec) has agreed on payment plans with defaulting employers over pension contribution arrears.

Speaking at the Zimbabwe Association of Pension Funds (ZAPF) 50th annual conference in Victoria Falls on Thursday, Ipec actuarial director Mr Robson Mtangadura said if the defaulting companies do not adhere to the agreed payment plans, the regulator will resort to garnishing their bank accounts.

“We have already started engaging with defaulting employers. At the end of the first quarter, we engaged with the top 50 defaulting employers.

“If you look at those top 50, they constitute about 80 percent of the contribution arrears,” he said.

“The good thing is that some of them have already submitted payment plans, which they have started to adhere to. If they default on those plans, we will move to garnish them.”

Rising contribution arrears are contributing to sustainability concerns in the local pensions industry.

By the end of last year, the local pensions industry’s total membership, excluding beneficiaries, was 977 423.
Official data shows that as at the end of December 2024, pension contribution arrears, including those accumulated from prior years, stood at US$268 million, up from US$64,8 million at the same time the prior year.

“Of these arrears, US$45 million was in relation to deductions being made on salaries being denominated in forex but not remitted by the employers,” the regulator said in its pensions report for the fourth quarter of 2024.

According to the Ipec director of pensions, Mr Cuthbert Munjoma, most of the defaulting employers are parastatals.

The country’s pension funds are facing several significant challenges, including the unresolved loss of value, which has resulted in pensioners losing a significant portion of their savings, poor governance practices, inadequate skills and poor risk management and high contribution arrears as some employers fail to remit pension contributions.

Local pension funds have also struggled to find effective investment strategies, leading to poor returns and further eroding the value of pension savings.

Presenting at the same conference, World Bank lead financial specialist Fiona Stewart highlighted that proper governance of pension funds globally is critical for effective investment portfolio diversification.

Ipec also said pension benefits in the country remained far below expectations and insufficient to make a meaningful impact on beneficiaries.

“Three years ago we introduced a benefits tracker, which tracks pension benefits on a monthly and quarterly basis.

“The benefits are not meeting reasonable expectations. We do understand this is due to a number of factors such as adequacy of contributions and sustainability issues.

“We have instituted a number of reforms, but there is room for holistic reforms,” Mr Munjoma said.

As at the end of last year, Zimbabwe’s pensions industry was composed of 967 registered occupational pension funds.

Of the 967 registered funds, 489 were active, constituting 50,6 percent of the industry’s total funds.

The remaining 478 funds were inactive, with 372 set for dissolution pending finalisation of the pre-2009 compensation.-herald