In 1989, Zimbabwe's government established the National Social Security Authority (Nssa) to provide a vital safety net for workers injured on the job or retired.
Prior to Nssa, occupational schemes offered limited and non-compulsory coverage, leaving many workers vulnerable.
As a statutory corporate body, Nssa administers two critical schemes: the pension and other benefits scheme (POBS), also known as the national pension scheme, and the accident prevention and workers' compensation insurance fund.
However, since its inception, the Nssa scheme has been relied upon too heavily, despite its intention to provide only basic benefits.
According to Tendai Mutseyekwa, marketing and public relations deputy director at Nssa, this over-reliance has led to misconceptions about the authority's role and capabilities.
"(It) engenders a negative and misguided perception of Nssa as an organisation which pays inadequate benefits, leading to loss of confidence in the authority by clients and the public."
Furthermore, excessive dependence on Nssa discourages contributors from investing in additional pension schemes or savings arrangements, jeopardising their long-term financial security, he said.
Speaking during the 2024 insurance and pensions journalists' mentorship programme recently, Nssa director of social security Shepherd Muperi said the social security scheme only accounted for 9% of pension payouts, whereas the occupational pension scheme contributes 20%.
- UK based Zimbabwean divorces wife of 33 years over conjugal rights
- New perspectives: Role of private sector in resource mobilisation
- New perspectives: Money laundering red flags in insurance sector
- 3 000 non-resident pensioners owed US$1.5 million, says Ipec
Keep Reading
Nssa’s contribution rate is split equally between the employee and employer.
The social security scheme was created to co-exist with the occupational pension funds, which is why it only contributes a small portion of the pension income.
Experts highlighted that it was essential to strike a balance between providing a safety net and encouraging complementary savings and pension plans.
Cuthbert Munjoma, pension and life supervision director at Insurance and Pensions Commission (Ipec), revealed that there are about 960 000 members of private occupational pension funds.
However, 45% of the membership was no longer contributing to pension funds as they have left employment for various reasons.
"Thus, pension coverage for private occupational pension funds as defined by ratio of active members to total labour force of 4 million improved is around 24%," he said.
Other countries combine statistics for Nssa, government pension fund and private occupational pension funds for the purposes of determining pension coverage, he noted.
According to Munjoma, pension contribution rates for private pension schemes vary with employer’s affordability, with the average being between 12 to 22% for both employer and employee.
However, some outlier parastatal-related pension funds have contribution rates of up to 33% for both employer and employee, which presents sustainability challenges if the Nssa contribution of 9% was factored in.
"However, it is worth noting that while Nssa collects contributions on both basic and allowances up to a certain cap, private pension funds only collect from the basic salary," he said.
"Given the prevalence of cushioning allowances, which are not pensionable by private occupational schemes, it means the pension contributions by employees would be very low since basic salaries are generally lower than the allowances."
A pension industry expert, who preferred anonymity, said overreliance on Nssa was not by choice but resulted from the failure of occupational pension funds to deliver value to their pensioners.
The expert highlighted that at the point of conversion to the United States dollar (USD) in 2009, the values that emerged were so poor.
"People both pensioners and contributing members, got really angry. Up to now they are still angry," he said.
"However, the Nssa pension scheme, being on a defined benefits basis, continued to guarantee a pension. Nssa was also amongst the first to pay benefits in USD.
"Nssa continues to pay amongst the highest USD monthly pensions to its pensioners. The bulk of occupational pension funds were still paying only ZWL (Zimbabwe dollar) pensions up to the point of conversion to ZiG (Zimbabwe Gold)."
He noted that while Nssa was on a pseudo pay-as-you-go basis, occupational pension funds should also borrow from its experience on how it managed to deliver more value than them.
"In this case, pensioners' financial security was positively impacted by the Nssa benefits," he said.
Pensioners who had worked for several years had their pension values reduced to as low as US$0,80c in 2009 due to hyperinflation. They remain uncompensated for the losses incurred during that period, despite the government having initiated the compensation process.
A diversified pension system, Mutseyekwa noted, should be underpinned by sound tripartism, bringing together government, employer bodies and workers bodies.
In this regard, participation of workers’ and employers’ organisations ensures that due regard is given to the interests of all stakeholders, he underscored.
The International Labour Organisation Social Security Minimum Standards Convention 102 (1952) stresses the importance of social dialogue in the development of comprehensive social security systems.
The role of government is to institute appropriate legal, policy and regulatory frameworks and to ensure, through effective supervision, comprehensive policy design and implementation, as well as effectual monitoring mechanisms to engender a properly diversified pension system.
The involvement of social partners helps to ensure transparency and to ensure that policies meet the needs of the intended beneficiaries and are conducive to decent and productive employment as well as to economic growth, besides guaranteeing national consensus.
As a way forward, Mutseyekwa said the authority will address the over-dependence through enhancing its public education and information dissemination drive to raise awareness on the design and purpose of its POBS.
"Our ongoing regular stakeholder engagements are also envisaged to help in this regard," he noted.
Zimbabwe Pensions and Insurance Rights general manager, Martin Tarusenga called for good corporate governance principles and practices in the management of pension funds.
"In each of investment management, custodianship, administration, accounting of pension funds, solvency management, there are established principles and practices of engaging the disciplines in order to deliver pension benefits as per various legal provisions and agreements," he said.
The pension industry expert urged the Zimbabwe Association of Pension Funds together with Ipec to increase awareness through roadshows.
More importantly, he said the economy should be stabilised to facilitate optimum operation of occupational pension funds in particular.
"The integrity of pension funds was severely eroded during hyperinflation resulting in loss of confidence. This is the confidence which must be rebuilt so that more people can contribute to pension funds," he said.
"In fact, more people will start to take up retirement annuity policies which are not linked to employment. It is also imperative that pension fund assets must achieve good returns on investment.
"Sadly, during the period of hyperinflation the returns were negative thereby eroding the values that they were meant to grow. Once this is done, pension fund savings will become attractive again."
The expert said co-existence is the key operative word in any discussion on multiple pillars of pension provision. Each pillar should be aimed at achieving a specific objective, he noted.
According to him, Nssa is deemed to be a safety net and should provide basic minimum benefits at reasonable contribution rates.
"The next pillar should be the occupational pension fund which should provide the bulk of the benefits," he said.
"In Zimbabwe, it is not compulsory to operate an occupational (pension fund). This obviously leaves a significant number of employed people outside of the second tier of retirement provision.
"The third pillar would be the contracts for the self- employed and those not on occupational pension schemes and also those who wish to enhance their total retirement package."
As a sweetener, he said new design concepts allow people to access a portion (within limits) of their benefits before retirement if they so wish.
"This should be readily welcome in Zimbabwe and such features are likely to attract more people to save for retirement under the various pillars," he said.
"Again, co-existence is paramount since any design changes may impact other pillars negatively or positively. There needs to be consultation with occupational pension schemes before any design changes are implemented.
"If, as an example, Nssa benefits and corresponding contributions were increased and also based on earnings without limit, this would make occupational pension funds unattractive and unaffordable.
"The end result would be the demise of some private pension funds in favour of Nssa. The unintended consequence would be that one of the pillars of retirement saving would disappear."
Accordingly, he said Nssa should continue to provide the first layer of benefits which are very basic and cater for the majority of employed people.
This then enables the other pillars to function properly, he noted.
"Whilst each pillar should operate independently, it is important to always consider interdependence that exist between them," he said.
"Government should create an enabling environment through economic stability, which is a prerequisite for proper and successful functioning of retirement funds within each pillar.
"Employers must encourage participation of employees in retirement funds including those not in permanent employment. Employers must also take the initiative with their trustees to communicate as much as possible the benefits of pension funds.
"Trustees should be properly educated so that they are effective in trustees’ meetings and they fully represent the constituency that put them on the board.
"Employees must feel proud of their fund and that it is for their benefit and speak positively about it."
He added: "Employees also wish to see their fund at work not only through payment of decent pensions but also through provision of housing. At the end of the day, employees will have both income and a roof above their heads.
"The days of a straight jacketed approach are long gone and even the trustees and their advisers should become innovative if retirement funds are to remain attractive."
Munjoma said the government is expected to take the lead in establishing a comprehensive regulatory and policy framework that incentivises and mandates participation in multiple pension pillars.
This can include enabling macroeconomic fundamentals to promote savings, tax incentives for both employers and employees to contribute to occupational and voluntary pension schemes, while also ensuring the financial stability and efficient management of the public pension system.
Employers, he said, should be required to offer occupational pension plans to their workforce, making it easier for workers to save for retirement.
"Employers can also be encouraged to match employee contributions, further boosting the accumulation of pension assets," Munjoma noted.
"Employees, in turn, should be educated on the importance of pension savings and the benefits of contributing to both mandatory and voluntary schemes.
"They should be empowered to make informed decisions about their retirement planning, actively participating in occupational pensions and utilizing tax-advantaged personal pension accounts to diversify their retirement savings.
"Employees should be made aware of the adverse implications of partial withdrawals of pension accumulations in cases of job switching as it impacts on adequacy of pension on retirement."
Munjoma said the payment of non-pensionable cushioning allowances presents an opportunity cost to pension savings, hence employees have a right to negotiate with their employers for reasonable pension contributions.
"By aligning the efforts of the government, employers, and employees, Zimbabwe can create a robust and sustainable pension system that provides adequate retirement income and reduces dependence on one pillar of the national pension system," he said.
Ipec recommended holistic pension reforms of all pillars of the national pension system, that is both the public and private occupational pension funds.
The holistic pension reforms, the regulatory body noted, will ensure the re-design of a multi-pillar pension system, consisting of a publicly-managed funded scheme, mandatory, privately managed, occupational pension schemes, and voluntary, privately managed personal pension schemes, as well as a means-tested scheme.
"This approach can be complemented by enacting policies that mandate employers to provide occupational pension schemes to their employees, while also offering incentives to encourage participation," Munjoma said.
"Additionally, the establishment of a framework for voluntary personal pension accounts, coupled with tax incentives, can further promote pension savings, as was the case with paid up permanent shares in the banking sector in the past.
"A robust regulatory and supervisory framework, along with financial literacy and awareness programmes, can help ensure the solvency, transparency, and efficient management of both public and private pension schemes."
He said mechanisms for portability, transferability, indexation, and inflation protection, as well as diversified investment strategies, can also contribute to the resilience and sustainability of Zimbabwe's pension system.
To hedge against an inflationary environment, investment experts urged workers to invest in non-monetary assets.
"If you are in a very volatile environment, inflationary environment, or an environment with highly unpredictable policies, one of the things that you might want to do is to serve or invest in non-monetary assets," investment analyst Rufaro Hozheri said.
"We are talking about commodities and real estate. So, I would really recommend that somebody invests in non-monetary assets. I think real estate is one of the easiest, especially in Zimbabwe, for one to invest in.
"So, if you are somebody who is going to work and you have any monthly income, you can invest in real estate by buying, using your periodical income towards an asset, be it land or a property.
"That way, if the currency is debased or if hyperinflation hits, you can always reprise your asset, which is your real estate, in another currency to hedge it against inflation."
Old Mutual, one of Zimbabwe’s largest pension managers, recently disclosed that it was investing primarily in stocks and property as well.
