Some insurance and pension companies that have invested members’ funds in assets such as property and on the Zimbabwe Stock Exchange (ZSE), have no moral high ground to claim that the funds have lost value, the Reserve Bank of Zimbabwe (RBZ) has said.
The RBZ has waded into the contentious issue following remarks by some pension funds and insurers that pronouncements in the 2019 Monetary Policy Statement, especially the floating of the foreign currency trade, has dire consequences on their operations.
This has sent a chill down the spines of pensioners and insurance policyholders over possible loss of savings, with critics likening the current situation to what obtained in 2008 when the country moved to multiple currencies from the Zimbabwe dollar.
RBZ Deputy Director for Economic Research Division Dr Nebson Mupunga, recently said it was improper for all pension funds and insurers to suggest they have lost value of their funds when most of them were invested in property and the stock exchange.
“I am not in that industry but this is a question to pose; when those companies, pension funds (and) insurance companies received the money, where did they put the money?” asked Dr Mupunga.
“Normally, they buy assets or they can invest on the stock market and we know that the stock market has actually increased in value, more than even the parallel market rates (for forex).
“So, it means insurance (and pension) companies, to some extent are actually cushioned in terms of the exchange rate. Maybe save for those funds which were invested in money markets.”
Last year, the value of shares traded on the ZSE was 33 percent up in 2018 to $926,3 million, driven by renewed interest from investors who were running seeking refuge in equities due to inflationary pressures.
In 2017, turnover on the ZSE was $694,9 million.
House of Assembly members have also raised concern over claims by pension funds and insurers.
The MPs demanded that the pension funds should actually increase their payouts given that they had invested the funds for a long time. Added Dr Mupunga: “In terms of value, if they were honest enough . . . they should be able to increase the payouts they are giving to members, which is fair because they have used the money on the stock market, to buy buildings where they have obtained value but they don’t want to translate the same to members.”
ZimPIRT agonises over low benefits
In January this year, Zimbabwe Pensions and Insurance Rights Trust (ZimPIRT) general manager Martin Tarusenga, told the Public Finance Committee that the problems faced by pensioners and insurance policyholders included disregard of concerns and rights of consumers and “wrong benefit calculations”.
“Pensioners and insurance policyholders have, for some time, submitted that benefits entitled by insurance companies and other pension houses are way below the full rightful benefits.
“It is apparent that insurance companies and other pension houses use several techniques to misappropriate pension and insurance funds. Notable among them is unregulated excessive charging of pension funds for services rendered,” said Tarusenga.
However, chairperson of the Zimbabwe Association of Pension Funds (ZAPF) Reginald Chihota, recently told the media that the industry was contending with a serious loss of value.
Chihota said they are lobbying through the Insurance and Pension Commission (Ipec) for the implementation of a number of initiatives to protect accumulated funds and also value, going forward.
He proposed instruments such as inflation-linked bonds primarily for the prescribed asset category, whose compliance ratio was increased on budget announcement from the obtaining 10 percent to 20 percent and is compulsory by law.