• Asset Growth: Total pension sector assets rose 6% to US$2.63 billion driven by new investments, contributions, and fair value gains in properties and equities
• Rising Arrears: Pension contribution arrears surged 18.84% to US$110.43 million, signalling compliance challenges despite increased contributions of US$148.35 million
• Income Decline: Total income plummeted 78.74% to US$295.47 million due to exchange rate stability, exposing the sector’s reliance on volatile fair value gains

Harare- The pensions sector in Zimbabwe, as reported by the Insurance and Pensions Commission (IPEC) for the half-year ended 30 June 2025, showed strength with a significant 6% increase in total assets, reaching US$2.63 billion (ZWG 70.76 billion) from US$2.48 billion as at 31 March 2025.

This growth, driven primarily by new investments, contributions, and positive fair value adjustments in investment properties and equity instruments, marks a key development in the sector’s financial health.

Despite a stable exchange rate environment, which led to a sharp decline in total income, the asset growth highlights the sector’s ability to navigate economic challenges while serving nearly a million members. However, concerns remain over rising pension contribution arrears and a high proportion of inactive funds, indicating underlying structural issues that need attention.

The sector’s membership base experienced modest growth, with total membership (excluding beneficiaries) increasing by 0.38% to 994,572 from 990,801 in the prior quarter. This slight rise reflects steady participation in occupational pension schemes, though the slow pace suggests limited expansion in formal employment or new fund registrations.

As of 30 June 2025, the sector comprised 968 registered occupational pension funds, a marginal increase of one fund from the 967 recorded on 31 March 2025. However, the composition of these funds raises concerns: 479 (49%) were active, while 489 (51%) were inactive, with 372 of the inactive funds (76%) marked for dissolution.

This high inactivity rate points to inefficiencies or consolidation pressures within the sector, potentially impacting long-term sustainability and member confidence. 

Investment performance presented a mixed picture. Investment properties, a cornerstone of the sector’s asset base, grew by 1.75% to US$1.16 billion (ZWG 31.14 billion) from US$1.14 billion, reflecting stable demand and positive fair value adjustments. Unquoted equity investments also performed well, rising by 3% to US$108.17 million from US$105.06 million.

However, quoted equity investments saw a slight decline of 1.11%, dropping to US$460.37 million from US$465.56 million, possibly due to market volatility or profit-taking in listed securities. Additionally, prescribed asset investments, which are mandated to support government securities or other designated instruments, fell by 2% to US$274 million (ZWG 7.38 billion) from US$280 million, indicating a cautious approach to such investments amid economic uncertainties.

Pension contributions provided a positive development, totaling US$148.35 million for the period, a significant increase from US$84.98 million in June 2024. Of this amount, 83% (US$123.41 million) was received, signaling improved compliance by sponsoring employers. However, the sector continues to face a growing arrears problem, with pension contribution arrears rising by 18.84% to US$110.43 million from US$92.92 million in the previous quarter.

This increase, which includes both current period arrears and interest accrued on outstanding balances, reveals ongoing challenges in ensuring timely contributions. IPEC is actively engaging with sponsoring employers to address these arrears, but the rising figure could strain liquidity and affect benefit payments if not resolved promptly.

 A major concern for the sector is the sharp decline in total income, which fell by 78.74% to US$295.47 million (ZWG 7.87 billion) for the six months ended 30 June 2025, compared to US$1.39 billion in the same period of the previous year. This significant drop is primarily attributed to exchange rate stability, which reduced fair value gains and other income typically boosted by currency fluctuations.

While exchange rate stability is generally positive for economic planning, its impact on pension fund income reveals the sector’s reliance on volatile gains, raising questions about the sustainability of its revenue model in a more stable economic environment. 

Expenditure patterns also shifted, with total expenditure reaching US$98.23 million (ZWG 2.62 billion) for the period, compared to US$41 million in the prior year. Of this, 72% was allocated to member benefits, reflecting a strong commitment to meeting obligations to pensioners, while 28% covered administrative expenses.

The increase in expenditure, particularly for benefits, suggests growing demand from members, possibly driven by inflationary pressures or an aging membership base. However, the higher proportion of benefit payments compared to the previous year (when 60% of expenditure went to benefits) indicates a shift in priorities, potentially straining administrative budgets.

 Therefore, the IPEC HY 2025 report presents a complex picture of Zimbabwe’s pensions sector. While asset growth and rising contributions reflect positive developments, challenges such as high inactive fund rates, increasing arrears, and a significant income decline point to structural and operational issues. The sector’s ability to sustain growth and meet member obligations will depend on addressing these challenges, particularly by improving contribution compliance and diversifying income sources to reduce reliance on volatile fair value gains. As IPEC continues to work with stakeholders to resolve arrears and streamline fund operations, the sector’s long-term stability will hinge on balancing growth with adaptability in an evolving economic landscape.

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