Pensions sector shrinks by 50%: Ipec

Highlights on growth trends show that since 2020, the pension industry assets have been declining together with a number of active pension schemes.
ZIMBABWE’S pensions industry is shrinking amid indications that 50% of the country’s 965 pension funds are inactive, the Insurance and Pensions Commission (Ipec) has said.

Highlights on growth trends show that since 2020, the pension industry assets have been declining together with a number of active pension schemes.

“We are saying we have 965 pension funds. Our worry is, out of those, 50% are inactive. What does it mean by being inactive? There are no contributions coming,” Ipec director pensions and life Cuthbert Munjoma said at the Zimbabwe Association of Pension Funds 49th annual conference in Victoria Falls last week.

“People have simply said, ‘we have a fund, preserve our benefits up to retirement.’ So, that is a sign that things are not well because new money should actually be coming, some more retiring and this thing is self-perpetuating.”

Munjoma said the industry had also witnessed a fall in contributions from a peak of US$220 million to US$125 million as well as partial withdrawals due to increased job switching which affected accumulation.

He further explained the crisis facing the pensions industry saying: “You profile the assets in dollar terms, they are hovering between US$1,6 to US$2 billion. We had a presentation by an actuary that showed figures more than these. From 2012 to date, if you just edit the contributions they are way more than the US$2 billion worth of assets we have today.

“So, it means something in terms of asset creation and the value of new assets being bought. These are old stocks. If you meet the old men, old women they point out these things were done during our time.

“Where is the new money going? We cannot argue it’s going to pay, it is paying them out. So again from an asset trend, we are worried. From a membership, we are also worried with under a million for our industry.”

The industry has also experienced low consumer confidence, with the industry growth constrained due to legacy issues that have remained unresolved.

“You can actually tell that a lot of people are uncovered. If you then, as a percentage of informal employment, you can tell that this industry is not reaching out to a lot more people. In line with the national aspirations of financial inclusion, you would expect more people to have pension arrangements,” he added.-newsda