The latest pensions report by the Insurance and Pensions Commission (IPEC) for the 2nd quarter to June 2019, is an encouraging one than that of the first quarter.
Despite pension values still worryingly low at an average capital accumulation of ZWL$8,821 per member, what is encouraging is that the sector is registering some growth in both membership and asset base.
The second quarter report shows the asset base for pension funds has increased by 30,86 percent from $5,38 billion as at 31 March 2019 to $7,04 billion as at 30 June 2019.
The increase was mainly due to an upward surge in the values of investment property and listed equities.
Investment property increased from $1,27 billion as at March 31, 2019 to $2,05 billion as at June 30, 2019, while listed equities increased from $2,40 billion as at 31 March 2019 to $3,03 billion as at June 30, 2019.
The increase in investment property was mainly due to revaluations of property values from US$ values to ZWL$ after the February 2019 Monetary Policy Statement, while equities values increased as a result of a “bull run” on the Zimbabwe Stock Exchange during the quarter under review.
The picture is, however, likely to change significantly by the end of the year.
The stock market has been on a downward trend since the end of June 2019 and this will show on the industry’s capital base as we head towards the end of the year. Since June, the ZSE main industrials index has lost 19,17 percent.
This is an asset class where most pension funds have been investing in.
By end of June, at least 43,74 percent of the asset base was in equities while 29,14 percent was in investment properties.
This picture is set to change by the end of the year.
While investment properties saw a $700 million increase after revaluations of property values more valuations are likely to be effected by end of year as is the norm in the property sector.
As at end of June 2019, pension funds had 29,14 percent on their assets in investment properties to $2,05 billion.
By end of year, this asset class could have a higher portion than what is invested in the equities market at the moment.
Also encouraging is the growth in membership with new entrants totalling 9,385 having joined during the quarter.
This took the total membership for registered occupational schemes to 798,400 as at June 30, 2019, increasing from 793,618 members reported as at March 31, 2019.
Also on the positive side is the growth of industry surplus to $1,16 billion for the six months ended June 30, 2019. The surplus was higher than the $121,02 million reported for the same period in 2018, and was mainly driven by fair value gains totalling $828,74 million for the quarter under review.
The fair value gains resulted in the industry reporting total income of $1,35 billion for the six months ended June 30, 2019.
Worryingly though for the period under review, is the continued growth in contribution arrears to $655,01 million, accounting for 9,30 percent of the total asset base for the industry. The contribution arrears increased from $627,02 million reported as at March 31, 2019.
Failure to remit contributions deducted from pension fund members’ salaries to their retirement funds is a systemic problem, which prejudices members in terms of the final benefit payable upon exit from service.
During the quarter ended June 30, 2019, the Commission requested trustees of funds with the highest levels of contribution arrears to submit turn around strategies for the funds including proposals for reducing the arrears in line with the provisions of Section 19 (1) (a) of the Pension and Provident Funds Act (Chapter 24:09).