CONTRIBUTION arrears in Zimbabwe’s pensions industry surged by 53% in the third quarter of 2024 to US$53,81 million, accounting for 2,5% of the industry’s assets.
This represents a significant increase from US$35,16 million in the same period the previous year, underscoring the growing concern of unpaid contributions by fund sponsors.
In response, the Insurance and Pensions Commission (Ipec) has initiated processes to garnish the accounts of defaulting employers, as required by the Pensions and Provident Act.
Contribution arrears refer to the funds deducted from an employee’s salary that are not remitted to the pension fund by the employer.
Historically, employers faced challenges in meeting these obligations due to economic instability, including currency fluctuations that eroded the value of contributions.
However, in recent years, many Zimbabwean employers have continued to deduct amounts from employees’ salaries or wages, but deliberately failed to remit these funds to the relevant retirement schemes, opting instead to divert them to support their own cash flows needs.
“The increase, though affected by exchange rate distortions, is also an indicator of a growing challenge of non-remittance of contributions by fund sponsors as they fall due,” Ipec’s third quarter report reads in part.
Section 16(8) of the Pensions and Provident Act gives the commission power to garnish bank accounts of employers who are not remitting contributions to the fund.
“The commission has since commenced instituting processes to garnish the accounts of defaulting employers as required by the Act,” Ipec said.
“The pension industry’s assets were heavily concentrated in investment properties and quoted equities, which together made up 69% of the total asset portfolio.”
As at September 30, 2024, investment properties were valued at US$961 million, representing 45% of total assets.
This was a decrease from US$1,1 billion, which accounted for 56,7% of total assets in the comparative period.
“The decrease was due to the channelling of investments to other asset classes as well as the reclassification of some investment property to prescribed assets,” the commission said.
Quoted equities increased by 27,8% in US dollar terms to US$519 million.
This increase was primarily due to fair value gains and new investments.”
Investments in unquoted equities decreased to US$71,36 million from US$86,42 million during the same period last year.
This resulted in a drop in the proportion of unquoted equities to total assets from 4,45% to 3,3%.
l Exchange rate as at September 30, 2024 was US$1:ZiG24,9
