The new pensions law: A regulator with no regulations

THIS article is part of a series of articles aimed at highlighting the changes brought about by the new pensions law in Zimbabwe, which came into operation on September 2  2022.

The year 2023 promises to bring a host of new opportunities and challenges in the retirement planning law.

With so many consultations, legislative changes (regulations and guidance notes), it can be difficult to keep up.

To better make sense of 2023, we discuss some of the range of key developments in the pensions industry.

The pensions industry continues to be impacted by regulatory changes — these not only include enhanced financial reporting requirements and actuarial guidelines, but an increased focus on governance, risk management, compliance requirements and consumer protection.

On September 2 2022, President Emmerson Mnangagwa passed into law a new pensions law, the Pension and Provident Funds Act (Chapter 24:32).

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This new law came into operation on the same date and repealed the existing Pension and Provident Funds Act (Chapter 24:09).

The new Act is designed at aligning our legislative and regulatory framework in line with global regulatory standards.

The Act seeks to modernise the regulation and supervision of the pensions industry and entrench principles of treating customers fairly.

In this article we provide an overview on the new pensions law and whether it is being implemented in line with the principles of prudential regulation and financial consumer protection.

Errors in new law

A review of the new Act will in fact show that the law is premised on the recommendations of the Justice Smith Commission Report. 

The report notes the following: “A number of recommendations are made in order to unleash the potential role of the Sector in economic development.

“These include policy macro-economic stabilisation, policy reforms, the adoption of a comprehensive social insurance scheme, strengthening the legal and regulatory regimes and promoting good governance practices, as well as consumer protection, among others”.

While the intention of the new pensions law is welcome in as far as it is designed at aligning our legislative and regulatory framework in line with global regulatory standards, these intentions are compromised by the drafting style, lack of definitions, errors in referencing and general editing errors, which affect the substance of the new law.

Errors in referencing are apparent in section 11, which deals with dissolution of funds (referencing to section 13 and section 36 are misplaced as they are not related to dissolution of funds). 

The most glaring error with drastic effect is to be found in section 25.

The Act generously carries with it two section 25s (qualifications and disqualifications for appointment of board member: Terms of office of board members respectively) and the adverse effect is in the referencing of section 25 in section 27.

Section 27 is a new section, which deals with the principal officers. It relates to qualifications, appointments and responsibilities of principal officers. Depending on which section 25 one decides to adopt as being referenced, a principal officer can only hold office for a period, which shall not exceed 10 years.

Section 16 (8), which carries the new provisions empowering the Commissioner to garnishee employers for outstanding pension contributions, requires deletion as the last line is misplaced.

The drafting style, general editing errors, referencing errors affect the substance of the Act and makes it harder to understand the law. The new pensions law is thus in need of urgent amendment.

It can further be argued that perhaps there is need to repeal the entire Act, incorporate all the issues not currently addressed and basically come up with a more comprehensive, coherent and effective piece of legislation that establishes permanent solutions to the challenges faced by pensioners.

Regulations

Legislation (Acts) is passed by Parliament and sets out broad legal and policy principles. It describes requirements and can include punishments for breaking the law.

Regulations on the other hand define and control how an authority operates to implement the law.  Regulations are supplementary to Acts. They link to existing Acts and they are designed to aid a person to apply the principles of the primary act.

Regulations fall under the category of what is known as delegated or subsidiary legislation. The Constitution of Zimbabwe makes provision for subsidiary legislation as shown below:

134 Subsidiary legislation

Parliament may, in an Act of Parliament, delegate power to make statutory instruments within the scope of and for the purposes laid out in that Act, but—

(a) Parliament’s primary law-making power must not be delegated;

(b) statutory instruments must not infringe or limit any of the rights and freedoms set out in the Declaration of Rights;

(c) statutory instruments must be consistent with the Act of Parliament under which they are made;

(d) the Act must specify the limits of the power, the nature and scope of the statutory instrument that may be made, and the principles and standards applicable to the statutory instrument;

(e) statutory instruments do not have the force of law unless they have been published in the Gazette; and

(f) statutory instruments must be laid before the National Assembly in accordance with its Standing Orders and submitted to the Parliamentary Legal Committee for scrutiny.

Thus, in order to be successfully implemented the new pensions law must be accompanied by its own regulations. The Pension and Provident Funds Act (Chapter 24:32) in section 62 provides for the promulgation of regulations by the Commission (Insurance and Pensions Commission, Ipec)

Section 62

(1) The Commission may make regulations with approval of the minister, prescribing anything which under this Act is required or permitted to be prescribed or which is necessary or convenient to be prescribed for carrying out or giving effect to this Act and for ensuring the proper conduct of pension and provident fund business in Zimbabwe.

(4) Regulations made in terms of subsection (1) shall not have effect until they have been approved by the minister and published in the Gazette.

From September 2022 to June 2023, the only regulations that have been gazzetted under the new law,  Statutory Instrument 105 of 2023, deal with registration fees.

It would be reasonable under the circumstances to conclude that the pensions industry is unregulated. Without its own  regulations the Act cannot be implemented and so there is no prudential regulation of the industry.

Statutory instrument 323 of 1991 being regulations that were promulgated in terms of the now repealed Pension and Provident Fund Act [Chapter 24:09] fell away on September 2 2022.

In order to deal with its regulatory challenges, Ipec has resorted to the issuance of circulars and guidance notes. These circulars, it must be emphasised, do not carry the force of law as they have not made in terms of section 62 above.

Arguably, some of the circulars are not consistent with the provisions of the new Act. One example is Circular number 4 of 2023, (issued 16 February 2023), which notifies Pension funds that notwithstanding the provisions of section 64 (4) of the Act requiring pension funds to ensure their fund rules comply with the new Act by March 2 2023, Ipec is deferring such compliance to a date in the future.

A statutory requirement construed as peremptory usually still needs exact compliance for it to have the stipulated legal consequences and any purported compliance falling short of that is a nullity.

The conformity of all stakeholders to an enacted Act is the first step in the enforcement and actualisation of its provisions. Without such, the Act remains virtually inoperative and therefore utterly ineffective.

One may seek to argue that Ipec has power to issue guidelines and standards as set out in Statutory Instrument 69 of 2020, Insurance and Pensions Commission (Issuance of General Guidelines and Standards) Regulations, 2020 issued in terms of the Insurance and Pensions Commission Act (Chapter 24:21);

3. (1) Whenever the Commission considers it necessary, convenient and in the best interest of policy owners, and pension and provident fund members, the Commission may issue general guidelines and standards which may provide for the following — What is pertinent to note is that these regulations although issued in terms of the Ipec Act do not empower the Commission to issue guidance notes and circulars that carry the force of law.

These regulations restrict Ipec to general guidelines and standards on specific issues. The power to issue guidelines, directives or statements of prudent norms ( section 5 of the New Act) can only be exercised in terms of section 62 of the new Act, that is through the issuance of regulations which are gazetted.

The new Pension and Provident Funds Act was borne out of the various challenges within the pensions industry which needed urgent addressing.

Its enactment was thus much-needed as was recommended by the Justice Smith Commission Report.

The Justice Smith Commission Report recommended a legal framework for the prudential regulation and supervision of insurance and pensions business in Zimbabwe that is consistent with the Constitution and promotes the maintenance of a fair, safe and stable insurance market that protects consumer rights.

The International Organisation of Pension Supervisors IOPS, (2006) explains that pension scheme governance concerns the provision of a framework for defining the duties, associated responsibilities and accountabilities for all participants involved in the functioning of the scheme in order to ensure that the pension promise made to members is delivered.

The new pensions law is thus in need of urgent amendment and regulations need to be promulgated in order for the new law to be successfully implemented.

• Phiri holds an  LLB (Hons) LLM, Postgraduate Diploma in Financial Planning. He is a partner at Muvingi & Mugadza Legal Practitioners - a member of the Alliott Global Alliance. Phiri is the head of Corporate & Financial Advisory Practice Group. He is an attorney of the High Court and Supreme Court with extensive experience in advocacy and full corporate advisory. He is a registered legal practitioner and a member of the Law Society of Zimbabwe, International Bar Association, International Pension and Employee Benefit Lawyers Association and an Arbitrator with the Association of Arbitrators Southern Africa.