Prescribed assets status very low for pension funds

Compliance levels for prescribed assets by pension funds still remain “far” below the prescribed minimum of 20 percent achieving an average ratio of 3,05 percent in the quarter ended March 31, 2022.

The Insurance and Pensions Commission (IPEC) revealed this in a report for the first quarter ended March 31, 2022.

Prescribed assets are bonds or securities issued by the Government, local Government, quasi-government organisations or any other bond that may be accorded the prescribed assets.

Zimbabwe’s insurers and pension funds are required in terms of the law to invest a certain percentage of their total investment funds in prescribed assets.

“Though investment in prescribed assets registered the second biggest jump of 235 percent since March 2021, it is important to note that the compliance ratio is still far below the prescribed minimum of 20 percent,” it said.

Last year, IPEC announced that it was working on a new prescribed assets framework that would ensure institutional investors’ money is hedged against inflationary pressures.

As at March 31, 2022 stand-alone funds had $1,57 billion compared to $0,51 billion in the corresponding period last year.

During the period under review, self-administered funds had $9,71 billion up from $1,66 billion as at March 31, 2021.

The insured had $6,83 billion as at March 31 this year compared to $3,22 billion during the corresponding quarter in 2021.

“Investment property grew by 125 percent to $162,96 billion as at March 31, 2022 from $72,55 billion reported as at March 31, 2021.

“However, its share of the total industry assets decreased by 7,57 percentage points from 40,96 percent as at March 31, 2021.

“The magnitude of investments in property and listed equities means that there is concentration risk because of lack of diversification,” said IPEC.

The commission recommended that the industry needs to look at its investment strategies and align investments to the thresholds in the revised investment guidelines that were issued during the quarter.

In the period under review, seven of the fund administrators were registered life companies and two were insurance brokers which have employee benefit divisions.

The remaining three were employee benefit consultants.

Total administration fees for insured funds, amounting to$130,10 million, were lower than those for self-administered funds, amounting to $153,29, even though the number of members under insured funds and the number of insured funds were lower, showing that the insured fund model had lower administration costs per member.

“Of the self-administered funds, Zimnat Life Assurance, Fidelity life Assurance Company and Minerva Benefits Consulting charged the highest average fee per member of $4,522, $3,459 and $1,489 respectively compared to other administrators.

“Of the insured funds, CBZ Life Assurance charged far more per member on average compared to the other administrators as it charged an average fee of $6,541 per member while the second highest, Old Mutual charged $377,49 per member,” said IPEC.-ebusinessweekly