Employers struggling to remit pensions
PENSION contribution arrears by companies have shot up 164% sitting at ZW$3,38 billion (about US$31,2 million) for the third quarter to September 30, 2021 from ZW$1,28 billion (US$11,8 million) of the same period in 2020 as non-remittance grips employers.
According to the Insurance and Pension Commission (Ipec) report for the third quarter of 2021, the increase in pension contribution arrears was a result of viability challenges faced by sponsoring employers as well as interest penalties on contribution arrears as required by the guidance paper.
“The increase is attributed to continued non-remittance of contributions by some sponsoring employers as they faced viability challenges as well as interest penalties on contribution arrears,”
Ipec said.
The proportion of contribution arrears to total assets for the period increased to 1,40% from 1,18% of the same period in 2020.
However, there was a decline in contribution arrears from 1,54% of total assets reported in the second quarter to 1,40% of total assets in the current quarter.
According to Ipec, of the ZWL3,38 billion (US$31,2 million) contribution arrears, 76,41%, which translates to ZW$2,58 billion (US$23,8 million) is owed to stand-alone funds.
The Local Authorities Pension Fund, the Mining Industry Pension Fund and the National Railways of Zimbabwe Pension Fund constituted 79,32% of the industry’s contribution arrears.
“Meanwhile the commission will continue to engage the industry to ensure clearance of such arrears,” Ipec said.
The total amount invested in prescribed assets during the period increased by 22,66% to ZW$10,99 billion (US$101 million) from ZW$8,96 billion (US$82 million) reported during the same period in the prior year.
Notwithstanding the increase in the absolute amount invested by the pensions industry in prescribed assets, the compliance level remains low at 4,55%, which is way below the minimum prescribed ratio of 20%.
Ipec said that compliance with prescribed asset requirements has been on a downward trajectory.
“The industry is urged to regularise the non-compliance position.”
During the period, unclaimed benefit liabilities increased significantly by 1 175% to ZW$2,55 billion (US$23,6 million) from ZW$0.20 billion (US$1,8 million) as at September 30, 2020.
The increase in unclaimed benefits is mainly attributed to revaluation gains on assets supporting such liabilities.
There was also an increase in members with unclaimed benefits of 3,93%, to 161 019 from 154 927 reported in the same period last year.
In terms of performance, the pension industry’s income for the period under review was driven by fair value gains, interest from investments and total contributions amounting to ZW$77,48 billion (US$717,4 million).
These three income streams constituted 50%, 25% and 13%, of the industry’s total income respectively.
Total expenditure increased by 317,89% to ZW$9,11 billion (US$84,3 million) from ZW$2,18 billion (US$20,1 million) in the same period last year.
According to Ipec, the increase was driven by total benefits paid, administrator expenses and investment management expenses, which accounted for 64,76%, 8,41% and 7,37%, respectively.
Expenses to contributions ratio was 23,54%, while the expenses to total income ratio was 3,10% for the period under review.
The Ipec report states that expenses to realisable income also increased to 7,34% from 3,11% reported during the same period in the previous year.
“The commission is concerned with the general increase in expense ratios as they negatively impact on the amount that is available for investment, ultimately reducing the retirement benefit for members,” Ipec said.