New products set to benefit pensioners
THE Insurance and Pension Commission ( IPEC), Zimbabwe’s regulator of pension and insurance industry has issued guidelines on the income drawdown products that will provide pensioners an option of keeping some of their retirement savings in a fund and allow it to grow instead of using all their money to buy an annuity.
I n a circular to members, the Insurance and Pension Commission outlined the guidelines on income drawdown products that came into effect on October 1, 2021.
The Zimbabwean market has been predominantly offering two retirement products — the purchase of an annuity from their pension fund and an insurance company, leaving the retiring population with little option of the income drawdowns.
The need for income drawdowns guideline has been necessitated by the need to mitigate the weaknesses of level guaranteed annuities in the inflationary environment, which has resulted in level annuities not serving the intended purposes.
The framework provides the principles that shall be adhered to by the insurance and pension industry when offering income drawdown arrangements, transitional provisions for the guaranteed annuities, transitional arrangements for insurance companies and pension funds that had since commenced offering income drawdown arrangements to their membership or policyholders and promote understanding of the risks and rewards in annuities and drawdown arrangement.
According to IPEC, any provider of the income drawdowns will ensure that the product is designed in a way that a member can draw down their retirement pot up to a minimum age of 80 years.
It says no provider of income drawdown arrangement will be authorised to offer uncapped drawdowns to reduce the risk of getting people run out of their retirement pots immediately after leaving employment.
The structure of each individual income drawdown shall provide for the frequency of the drawdown, which can be monthly, quarterly, or biannually, IPEC added.
I ndividuals shall withdraw an income from their drawdown fund to a maximum of 15 percent per annum at any given time subject to a function that takes into account various factors affecting the performance of the fund.
According to IPEC, a member will be given an option to convert from income drawdowns to an annuity if the member re- considers earlier decision and this can only be done within three months after signing up for the option or if the provider is winding up and the member is not willing to transfer the balance to another provider.