Too many regulations choke pensions sector

THE pensions industry says the Insurance and Pensions Commission's (Ipec) massive regulation requirements are burdening them and driving up expenses.

The industry players revealed during discussions at the 48th annual general meeting and conference of the Zimbabwe Association of Pensions Funds in Victoria Falls last week that the regulator has tightened its oversight of the insurance and pensions sector since 2021.

As a result, the industry has received several instructions along with dire warnings for non-compliance.

While the Ipec’s intentions to clean up the industry are admirable, the industry believes the guidelines are proving to be an albatross in terms of costs, particularly in light of the commission's damning report into the conversion of insurance and pension values from Zimbabwean dollars to United States dollars.

Comarton Consultants group managing director Richard Muirimi said the fixed component of Ipec levies went up by approximately 200% in March 2021 and a further 25% last year.

There have also been increased Ipec quarterly reporting requirements for pension funds and service providers.

“There are a number of guidelines and they have their cost implications to the pensions industry and we (as the pensions industry) believe something should be done to save an ailing industry,” Murimi said.

“The guidelines include the currency reforms compensation framework

”— an exercise which may benefit actuaries and fund administrators as they are going to charge for this exercise but members will end up losing further.

“There has been a prescribed asset ratio of 20% of market value of pension fund assets.

“Deadline for submission of annual returns and actuarial financial reviews reduced from June 30 to March 31.”

He also said there have been constant changes to the financial reporting requirements for pension funds.

For instance, he said 2020 saw adoption of International Financial Reporting Standard 13 and International Accounting Standard 29 (IAS 29) – Financial Reporting in Hyperinflationary Economies.

The year 2022 saw abandonment of IAS 29 and adoption of a template with significant additional requirements.

There has been an expense framework which saw the capping of administration fees among others, he said.

While Ipec fees include a portion calculated on the market value of fund assets which is intended to cushion them against inflation, he said the same should not be denied of industry players as if they are operating in a different country.

“It is common knowledge that audit firms prioritise listed entities and hence previously the two-month difference in publishing dates of the audited accounts at the same deadline date with these entities cannot be achieved.”

He said gradual change of deadline to avoid penalising the industry unnecessarily, was not welcome.

Besides the regulatory costs, the industry is also facing a myriad of recurrent challenges including unsound valuations, low expected returns, loss of value, historically low-real interest rates, and other economic pressures.

“To ask the administrators and managers to resolve a problem which is in fact national and over which we have no influence, is asking too much,” Murimi said.

“However, as the industry we must try and avoid being caught again the second time.

“Let’s try to keep our assets in the United States dollar so that they are not subjected to conversions like what has happened in the past.”

However, Ipec pensions director Cuthbert Munjoma said some things which the sector was complaining about were unavoidable and statutory.

“As Ipec, we say we hear you but the challenge is that some funds are too small,” Munjoma said.