Source: ZWG66bn unclaimed benefits conundrum – herald
Rutendo Nyeve
FINANCE, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, has blasted pension funds for administrative inefficiencies and failure to adequately trace beneficiaries amid a 62,19 percent jump in unclaimed benefits, which have clocked ZWG66 billion.
This comes at a time when country’s pension funds are facing several challenges, including the unresolved loss of value, which has resulted in pensioners losing a significant portion of their savings, poor governance practices, inadequate skills, poor risk management and high contribution arrears as some employers fail to remit pension contributions.
Local pension funds are failing to come up with effective investment strategies leading to poor returns and further eroding the value of pension savings.
Speaking at the Zimbabwe Association of Pension Funds (ZAPF) 50th Annual Conference held in Victoria Falls onFriday, Prof Ncube said the pensions industry players must introspect and attend to gaps leading to ballooning levels of unclaimed funds.
As a reflection of the past 50 years, when the pension sector in Zimbabwe was in its infancy, having gone through economic shocks, policy transitions, and demographic shifts, among others, Prof Ncube said the sector’s transformation must be anchored on solid public confidence and impact on livelihoods.
“Among these challenges is the rise in unclaimed benefits, which have gone up by 62,19 percent, reaching ZWG66,6 billion by December 2024,” he said.
“This backlog largely stems from administrative inefficiencies, inadequate beneficiary tracing and poor member data management.
“Without resolution, this situation risks further eroding public confidence in pension systems. In this regard, I urge pension funds to urgently locate the beneficiaries,” said Minister Ncube.
While the Government has created a favourable macro-economic environment in recent years, Prof Ncube said the pensions and insurance sector has not fully capitalised on this.
He stressed the need for industry players to diversify their investment portfolios to drive economic transformation and reap huge earnings.
Minister Ncube further challenged pension funds board of trustees to ensure they hold fund managers to account and also monitor investment cycles to ensure investments yield positive returns to improve pension payouts.
“The first order of Government is to guarantee stability if we are to improve the welfare of our pensioners. The issue has been currency stability and I am pleased to say ever since we introduced the ZiG, we have seen some stability,” said Prof Ncube.
He said inflation has come down and the erosion in purchasing power seems to be contained and as such preservation of value issues are under control.
“So, currency stability and macro-economic stability in terms of lower inflation are critical in terms of how Government should chip in policy wise,” said Prof Ncube.
Regarding the performance of the pensions and insurance funds, Minister Ncube said those in charge should be pro-active in monitoring investment cycles to ensure the investments yield positive or higher returns.
“What investment managers need to do is to change asset allocation in terms of the cycle that they are in. They should know that when interest rates are high, that is the time to be shifting their portfolio to other investments,” said Prof Ncube.
“I am not saying it is easy to do that but that is what you should do. When interest rates come down, that is rocket fuel to shift towards equity portfolios. So, you shift your asset allocation strategy according to the cycle of the economy.
“I know that some of the pension funds were caught in large exposures in the property sector with challenges for instance with yields in that sector, the offices are empty, tenants are not paying, then you have trouble getting out of that sector into other sectors even if you want to rotate,” said Prof Ncube.
“Pension funds must, therefore, shift from over-reliance on real estate and equities, and diversify into other investment classes.
“Government will continue to promote projects in areas such as infrastructure, agriculture, as well as those in the venture capital space, among others to enhance returns and drive economic transformation.”
Going forward, Prof Ncube said the Government will streamline offshore investment approvals and promote infrastructure, agriculture, and venture capital as viable asset classes to enhance returns and drive economic transformation.
He encouraged boards of trustees to come up with benchmarks, which fund managers must surpass to get enough resources to cushion pension payments.
“So, you must also come up with bench marks, especially the investment committee of the board of trustees and the fund manager must surpass these set bench marks,” said Prof Ncube.
“Depending on the pension fund, whether it is defined contribution or defined benefit, there are types of benchmarks that fund managers should be able to beat.
“What I am saying is that this is a shared responsibility with Government ensuring policy consistency and right policies and also fund managers through the pension fund boards doing the right thing in terms of following proper investment cycles,” said Prof Ncube.
Cognisant of the legacy issues affecting trust, Minister Ncube said Government was proactively rolling out a compensation programme for both depositors and pensioners.
“I know there are legacy issues from the time of hyperinflation before I became minister, values were lost.
Government has a compensation programme and it’s coming along, it is not quite there yet but we have already committed, we will do that kind of compensation for depositors and some pensioners for value loss,” he said.
Prof Ncube said going forward, IPEC has been mandated to work hard to ensure there is asset separation in terms of institutional investments from clients assets.
Commenting on the civil servants’ salaries, Minister Ncube said Government will continue to improve its workers’ salaries in both US dollar and local currency.
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