THE current pension system, encompassing private and public schemes, is falling short of providing retirees with reasonable benefits raising the need to have a retirement planning mechanism in place, experts have said.
Last month, the National Social Security Authority (NSSA) warned retirees not to overly rely on pension pay-outs.
Pensioners have, for years, suffered from paltry pay-outs. NSSA pays a monthly pension of US$60 paid through banks (US$40 in cash and US$20 converted to local currency at the prevailing exchange rate).
This is worsened by the fact that these payments are at made in local currency and remain an unlivable amount, buoyed by the country’s economic meltdown.
Thus, pension alone, is not enough to sustain people in their old age at retirement, experts told NewsDay Business.
Most Zimbabweans do not have retirement plans in place as they cannot plan with an unlivable pension.
Consulting actuary Tapiwa Maswera told NewsDay Business that the repeated collapse of the country’s financial system had time and again taken down the savings, insurance and pension plans that retirees relied on.
He said when the financial system fails, the pension system also fail, implying that premiums and contributions meant to fund future benefits simply vanish, leaving pensioners with a bleak future.
- Zimra garnishes gem miner’s bank accounts
- Zanu PF frustrating Mbare flats rehab: Mayor
- Nssa pushes for national health and safety standards
- Housing backlog shoots to 2m
Keep Reading
“The failure of our pension system represents a failure of our money system and our economic counting system. The system is now failing to collect economic value from workers in the form of insurance and pension premiums and contributions to give it back to them as insurance and pension benefits,” he said.
“At the moment, the system takes people’s premiums and contributions and pays nothing in benefits. The financial system makes this kind of financial fraud possible. The legal system is incompetent to address it.”
Maswera said building trust in life insurance and pension products would require a complete overhaul of Zimbabwe’s financial architecture.
He said the buyer and seller of these products should engage in a fair, transparent transaction, with the economic value of contributions faithfully preserved and translated into future benefits.
“The ‘sausage factory’ is supposed to take in contributions on the one hand and give out benefits on the other side. The economic value of the contributions must be moved into the future. This is not happening at the moment,” Maswera said.
He said this reset had to address the fundamental flaws that allowed economic values to vanish, leaving pensioners high and dry.
The Insurance and Pensions Commissions (Ipec) has ordered players to compensate clients who lost the values on their policies from the country's great depression of 2008/09.
The regulator may further order more payouts, owing to the exchange rate volatility.
“The market is not functioning effectively, with people not receiving value for their money. In Zimbabwe, you pay the equivalent of a cow every month for over 40 years to get less than what it takes to buy a chicken,” Maswera said.
“There is simply no market which works on the basis of such blatant daylight robbery. A system overhaul is needed to protect workers’ savings. You cannot talk about retirement planning when the system is not delivering. Retirement planning means when you pay contributions, you expect and get a benefit.”
He said when the system failed to provide what it was supposed to deliver, a complete overhaul is needed.
“You need to ask yourself, where is the money going? How do we redirect it so that it goes to the right place?” Maswera questioned.
Ipec pension and life director Cuthbert Munjoma, however, has another train of thought.
“Retirement is a journey that begins when one joins the workforce. Just as a farmer plans for a bountiful harvest, individuals must strategise for their post-work life well before retirement,” he said.
By tapping into the various pillars of the pension system from mandatory schemes to personal investments, Munjoma said, retirees could build a more secured financial foundation.
The official added that financial advisors, retirement planning literature and government resources all served as valuable guides on this journey.
Munjoma said employers, too, had a critical role to play.
“By offering workshops and resources to help employees prepare for their golden years, employers can empower their workforce to achieve financial freedom in retirement,” he said.
While the challenges facing Zimbabwe’s pension system are daunting, Munjoma believes that with the right approach, retirement planning can be the pathway to lifting pensioners out of poverty.
“As the nation works to restore trust in the pension system, each of us has a role to play. By planning ahead and harnessing the power of diverse retirement savings options, we can ensure that our later years are filled with the secure and fulfilling life we deserve,” Munjoma said.
Old Mutual Zimbabwe group marketing and communications manager Melenie Gumbo said industry leaders must work to empower citizens to take charge of their retirement planning, leveraging programme like On the Money to equip Zimbabweans with the knowledge and skills to manage their finances effectively.
“Financial freedom is about more than just buying a policy or saving. It is about cultivating good financial habits and a customised plan that you implement with discipline,” she said.
“With the industry’s adaptation to the country’s economic realities, including new investment options and flexible savings products, the path to a secure retirement has never been clearer. By taking responsibility for their financial future, Zimbabweans can break the cycle of pensioner poverty and embrace the retirement they deserve.”
Experts agree that retirement planning can enable individuals to invest for financial stability in their later years and workplace retirement plans empower workers to build financial security for the future.
