IPEC sets 2009 pension loss compensation modalities
The Insurance and Pensions Commission (IPEC) says modalities to start compensating insurance and pension losses suffered prior to 2009 will be concluded before the end of this year.
A Commission of Inquiry led by Retired Judge Justice George Smith was set up in 2015 to probe the process used in converting pensions and insurance benefits following the dollarisation of the economy.
Following recommendations by the Commission of Inquiry, IPEC has established a working group to facilitate the closure on compensation of the policy holders and pensioners for the loss of value suffered due to hyper-inflation in 2007 and 2008 and the country’s adoption of multi-currency system in 2009.
Responding to questions during the 2021 IPEC and National Social Security Authority Journalists Mentorship Programme launch held virtually on Wednesday, IPEC director for actuarial services, Mr Robson Mutangadura, said: “At high level we have come up with the implementation roadmap with clear milestones in terms of activities that need
to be done and the time lines.
“If all goes according to plan, we expect to come to conclusion by the end of this year and hopefully that will see some compensation trickling through early next year.”
The commission of inquiry was set up on the back of wide spread concerns by pensioners that their pensions and insurance benefits were undervalued during the change over from the Zimbabwe dollar to the multi-currency system.
“In terms of major activities, the main hurdle was for us to dissect the Justice Smith Report and then try to come up with standard approach across all insurance companies and pension funds,” he said.
“As you are aware that insurance products are unique and they are different per each insurance company, for us to then come up with a standard approach in terms of how to implement that compensation framework, it’s one of the issues that took a bit of time.”
Commenting on the same issue in relation to losses suffered in 2019 when the Government reverted to the local dollar, IPEC director for pensions, Mr Cuthbert Munjoma, said a guidance paper of currency reforms has been issued.
“Basically, that guidance paper is to ensure that pension scheme members benefit from assets that were matching their liabilities prior to currency conversion,” he said.
“So, we have successfully implemented that guidance paper and there has been an equitable allocation of assets prior and post conversion in 2019. This has resulted in some pension increases and bonus increases, among other things.”
With respect to writing of business in foreign currency, Mr Munjoma said the Government has gazetted Statutory Instrument 28 of 2020, which allows pension funds to receive contributions in forex as well as paying out benefits in hard currency.
“So, there are employers that are paying salaries in foreign currency and as we all appreciate, pension contracts arise from contracts of employment and normally as a percentage of your salary,” he said.
In the Mid-Term Budget Review Statement presented last week, Finance and Economic Development Minister Professor Mthuli Ncube highlighted that IPEC was seized with bringing closure to the pre-2009 compensation.
“A roadmap for the envisaged milestones and timelines for compensation will be published for the benefit of policy holders and pensioners and compensation modalities will be concluded before the end of this year,” he said.
As at March 31,2021, the insurance industry registered a nominal growth of 436 percent to $7,61 billion from $1,42 billion in March last year. In terms of asset base, the industry also registered a nominal growth of 22 percent to $61,4 billion as at March 31,2021 from December 31, 2020 rate of $50,4 billion.
IPEC commissioner general, Dr Grace Muradzikwa, told participants some of challenges facing the insurance industry include product relevance and insurance fraud.
“There is a big issue here, when we were in a hyperinflation environment, it becomes very difficult for an insurance company when you cannot track value in real time and this is where the issue of product relevance is coming in as a result of loss of value,” she said.
“Our penetration rate is still less than three percent.”-erald.c.zw
