Addressing unclaimed benefits problem in Zimbabwe

Unpaid and unclaimed benefits are both included in the Zimbabwean context's unclaimed benefits.

The assets include annuities and unclaimed death benefits from insurance companies and pension fund administrators as well as unclaimed retirement benefits that are kept by insurers and pension fund administrators.

The administrator of the pension plan or the insurer has the duty and responsibility of processing a member's accrued benefits when they become due.

As a result, it is crucial to maintain regular contact with fund members in order to advise them of capital accumulations and to update contact information.

As at  March 31, 2022, the total number of members with unclaimed benefits was 146,370 an increase from 66,787 reported in December 2017. 

Between 2017 and 2022, the number of members not claiming their benefits relative to the total number of members in the pensions sector increased from 9.1% to 15.33% (IPEC, 2022).

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The value of assets of unclaimed benefits have been increasing in nominal terms, from $139.82 million in December 2019 to $263.46 million and $2.97 billion in 2020 and 2021 respectively.

They were valued at $4.41 billion as at  March 31, 2022.

Factors contributing to the rise in unclaimed pension benefits

Data integrity issues

Poor record-keeping by the pension funds and outdated records make it difficult for the pension funds to trace members with unclaimed.

 Legacy weakness in data management has been the main reason why entities failed to locate some of the members whose benefits became due after 2009 dollarisation, especially where the sponsoring employer was operational during the pre-2009 Zimbabwe dollar era and ceased contributing after conversion to the multi-currency system.

Poor data records have been passed from one administrator to another during transfer of business.

For example, the Motor Industry Pension Fund attributed the high number of unclaimed benefits to data integrity issues inherited from the previous administrator Old Mutual that lacked contact details thus making it difficult to trace the members.

Data integrity issues have been identified in cases where the sponsoring employers wound up operations, therefore, reflecting poor data integrity on the part of the pension fund or administrators.

It shows that pension funds and administrators were not maintaining adequate member records or not regularly updating such.

Furthermore, the industry appears not to have a common understanding of what constitutes unclaimed benefits as noted with some pension funds that did not categorise unclaimed benefits resulting in automatic preservation or deferment of unclaimed benefits.

It, therefore, follows that the data being reported is either being understated or overstated.

Insufficient knowledge of employee pension benefits entitlements

Some pension funds do not educate members on their benefits and the process of claiming pension benefits.

As a result, members do not have basic knowledge of their benefits such as entitlement to a withdrawal benefit if they resign, are dismissed or retrenched from their employment, and how to file claims. 

Fund members and/or pensioners not advising spouses and beneficiaries of survivor benefits  

Some pension fund members are not open to their partners or beneficiaries about their pension, which may lead to beneficiaries not claiming their benefits because of a lack of knowledge.

Low individual member benefits

Individual membership values reflected on some of the schedules submitted to the commission are very low, in some instances, as low as ZW$30.00.

Such minute values discourage members from claiming the benefits as the cost of claiming outweighs the benefit.

Majority of low value cases relate to the 2009 currency conversion from ZWL to USD, thus confirming the commission of Inquiry’s findings on the loss of value to members on conversion.

Poor classification of unclaimed benefits by administrators

Some pension funds were treating unclaimed benefits as deferred pension benefits, therefore not reporting any unclaimed benefits, which affects the accuracy of data being reported by entities.

There are cases where some pension funds were also treating suspended pension benefits as unclaimed benefits, which also distorts the actual amount of unclaimed benefits.

Some pension pay-outs could not be settled due to the unavailability of foreign currency, and this resulted in some pension funds classifying such a category of pensioners as unclaimed benefits, hence amplifying the benefits problem.

Measures to address unclaimed benefits

Trace and educate members on unclaimed through the following:

• The use of bulk SMSes platforms;
•  Annual site visitations to educate members on unclaimed benefits;
• Writing letters and calling individuals and their next of kin;
• Publishing the names of the affected members on the Fund’s website;
• Quarterly home visits to the last known address of the members; and
•  Roadshows or member communication tours outreach programmes.

One of the commendable efforts put in place by the Insurance and Pensions Commission to reduce unclaimed benefits worth acknowledging is setting up a search engine on its website to assist members with unclaimed benefits trace their benefits.

Members enter their name and identification particulars to check for any existing unclaimed benefits in their name.

Pension fund administrators must be actively involved in educating  their pension benefits when they retire, as well as refunds the refunds they may be entitled to before reaching retirement age pension funds ensure that membership data is regularly updated and maintain current contact details of members; pension fund members take the initiative in advising their pension funds of any changes in their contact details; and pension fund members be open about pension benefits with their beneficiaries.

Insurers and fund administrators must take data integrity issues seriously and invest in systems that help data management.

This will minimise the loss of contact details, which often create an administrative burden in terms of finding the members and in dealing with benefits that cannot be reconnected to their rightful owner.

Pensions dashboard can be useful in dealing with unclaimed benefits.

A pensions dashboard is a digital platform that allows individuals to access information about all their pension savings in one place.

Pension dashboards also help to locate missing pots, thus reducing the problem of unclaimed benefits the pensions industry is currently grappling with.

In conclusion, ensuring proper management of unclaimed pension benefits by administrators and funds will help in building confidence in the country’s pension system. 

This can be achieved through implementation of measures that will assist in effective supervision of the pension systems.

Ronald Zvendiya is an independent policy analyst. Feeedback: rzvendiya@gmail.com,

 *These weekly articles are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Private) Limited, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe.

Email - kadenge.zes@gmail.com and mobile No.+263 772 382 852.