Life after retirement looks so grim for many Zimbabweans pension assets valued at just US$1.35 billion

  • Total assets have fallen from above US$9bn before currency changes to just US$1.35bn
  • Compliance still low at 6.41% against the regulatory minimum of 20%
  • Relevance of pensions as a cushion for retirement is fading

HARARE – Total membership in the pensions sector, excluding beneficiaries increased by 8.99% to 881 330 in the fourth quarter ended 31 December 2020 from 808 635 as of 31 December 2019 largely attributable to new entrants mainly from life companies’ administered funds, the Insurance and Pensions Commission (IPEC) said in its report.

There was, however, a decrease in the number of active members from 310,662 as of 31 December 2019 to 316,570 as of 31 December 2020.

“The decline was attributable to some members who exited employment given the prevailing viability challenges sponsoring employers are facing,” said IPEC.

Breakdown in membership. Source: IPEC

Meantime, the industry’s asset base remains subdued in US dollar terms despite recording a surge in local currency terms, where revaluations of property is an occurrence in line with inflation and exchange rate dynamics.

According to the report, the pension assets registered an astronomical surge in local currency terms to ZWL110.24 billion as of the end of Q4’2020, representing an increase of 273.6% from ZWL29.55 billion a year earlier.

Using the exchange rate for the close of December 2020 (US$1: ZWL81.7866), the assets are worth just US$1.35 billion.

IPEC attributed the increase in the asset base to the revaluation of investment property and quoted equities, which increased by 308.14% and 667.14%, respectively.

“These two major asset classes constituted 81.14% of total industry assets,” said IPEC.

By the same period in 2018, before the currency changes, the industry’s asset base was valued above US$9 billion. The local currency has greatly lost value since its reintroduction in June 2019 (Statutory Instrument 142 of 2019) and several policy shifts thereafter.

These are worrying numbers particularly given the structure of the sector’s assets, which are mostly property.

The relationship between the total membership and total asset base show that at present, each member has an average US$1,475 worth of assets available as a pay-out which is significantly too low in view of the expectations of pensioners.

The value of prescribed assets increased in nominal terms by 880.56% to ZWL7.06 billion from ZWL0.72 billion reported as of 31 December 2019.

However, compliance was still low at 6.41% against the regulatory minimum of 20%.

Meanwhile, total income for the industry for the year 2020 was ZW$79.21 billion compared to ZW$22.27 billion reported in 2019 mainly driven by fair value gains, interest on investments, profit on disposal investments and contributions which constituted a combined proportion of 93.88%.

The Insurance and Pensions Commission is a statutory body that was created through an Act of Parliament – the Insurance and Pensions Commission Act [Chapter 24:21] to regulate the insurance and pensions industry in Zimbabwe. The Commission’s principal function is to protect the interests, rights and benefits of insurance and pension consumers (policyholders and fund members) and to ensure that there is general stability of the insurance and pensions industry.

Equity Axis News


Please enter your comment!
Please enter your name here