November 12, 2024
Nssa, civil service funds to compensate pensioners
CIVIL service pensioners will start getting payments in 2024 as compensation for losses they incurred in 2009 when the government abandoned the Zimdollar due to hyperinflation, Finance minister Mthuli Ncube has said.
This comes as payments to members of private schemes are also set to begin next year after the Insurance and Pensions Commission (Ipec) set a December 31 deadline for the submission of compensation plans by funds and life assurers.
Through the 2024 budget, Ncube allocated $269,6 billion for compensation of civil service pensioners, which he said would commence in March. “In the same vein, the National Social Security Authority (Nssa) will also compensate pensioners under its purview.\
Finance Minister, Mthuli Ncube
“It is envisaged that compensation will instill confidence in the insurance industry, a critical source of savings. “This will also give the much-needed relief to pensioners, who have been eagerly waiting for this compensation,” the minister said. The government laid down the framework in October through Statutory Instrument 162 of 2023.
“The 2009 loss of value has contributed significantly to the low confidence that the industry is currently grappling with … we believe making good the compensation will help to restore confidence in insurance and pensions, which is key if the industry is to be sustainable,” Ipec commissioner Grace Muradzikwa told journalists recently.
Private pension funds are expected to submit compensation proposals to Ipec before the end of this year and begin disbursements not later than a month after the regulator approves their schemes. Ipec says it will not take longer than a month to approve plans, so disbursements could start as early as March 2024. The regulator will also devise a supplementary compensation scheme and disbursements for this will be funded by the state.
IPEC commissioner, Gace Muradzikwa
Some players in the sector expect “challenges” in executing the plan, but Ipec believes the industry “can follow through”. A 2015 inquiry into currency conversions that followed the demonetisation of the domestic unit found that about US$3 billion was lost to inflation and the absence of a definitive valuation framework.
From pension funds and life insurers, the regulations primarily seek redress for valuation failures that may have occurred as a result of the conversion. To calculate the prejudice to their members, funds are expected to appoint independent actuaries.
After approval of the compensation plan, the pension fund will publish in the media, the names of the members entitled to compensation. They will also be expected to disclose a summary of the actuarial report on the implementation of the approved compensation scheme; and the individual member’s compensation amount and relevant pay-out time-lines; as well as their complaints mechanism. Among other things, the regulations also stipulate compound, discount and exchange rates to be used in the computations. Zimbabwe Association of Pension Funds director-general, Sandra Musevenzo, said compensation would help restore confidence in the industry, but pointed out some “flaws” in the gazetted framework.
She said some provisions of the regulations “pierced and encroached” on the status of funds as separate legal entities from the board members. Under certain circumstances, funds will be required to pay a one percent annual levy on the total value of their assets, until compensation liabilities are extinguished and this, Musevenzo said, would prejudice members.
Musevenzo said there were restrictions in the forms of compensation provided for by the regulations — cash and fund assets. Meanwhile, Ipec says it is finalising the framework for compensation of insurance policyholders who were prejudiced by the currency change in 2009.
