eBusiness Weekly
Taking Stock Kudzanai Sharara
The most basic purpose of having a pension fund is to provide some assistance when one retires from work or for loved ones to be able to get by when one dies.
Yet millions of dollars in pension funds and probably more in life policies go unclaimed each year for one simple reason: Lack of knowledge on the part of members about when and how their benefits become due to them.
Poor communication is another likely reason. All too often, people pay pension premiums or buy life insurance policies and don’t let their beneficiaries know about it. Regulator the Insurance and Pensions Commission (IPEC) points another finger at the insurance and pension industry.
IPEC said poor record-keeping by the pension funds or outdated records, could be the other reason, which makes it difficult for the pension funds to trace the members.
Said IPEC: “Previously, the major source of information for pension administrators has been employers. However, given that some companies closed shop, pension funds found it difficult to get the information pertaining to the respective members.”
We took time to ask IPEC on the level of unclaimed pension funds and what is being done to make sure would-be beneficiaries do not live in poverty while their monies lay idle.
Below are responses from IPEC’s director pensions Josphat Kakwere:
- How much is in unclaimed benefits?
As at December 31, 2018, there were about 49 960 members who had not claimed their benefits to the tune of about $27 million compared to about $28 million that was reported as at September 30, 2018.
- How are these distributed by industry?
Stand-Alone Pension Funds were the major contributors to unclaimed benefit liabilities, accounting for about $17,7 million of unclaimed benefits, representing about 66 percent of the total liability for the industry. Of the $17,7 million with the Stand-Alone Pension Funds, members from Mining Industry Pension Fund accounted for $11,6 million of the unclaimed benefits liabilities, attributable to 66 percent of the liabilities for the sector and 43 percent of the industry’s total liabilities. Clothing Industry Pension Fund and National Railways Pension Fund accounted for liabilities totalling $3,1 million and $2,2 million respectively while the Zimbabwe Mining Development Corporation had liabilities totalling $756 000.
- What are the major reasons for unclaimed benefits?
The major reasons for the obtaining situation are attributable to lack of knowledge on the part of members about when and how their benefits become due to them.
For instance, some of the members who leave work earlier, relocate sometimes to their rural homes and forget about the benefits they left behind while others do not advise their beneficiaries, including spouses about their contributions. What then happens is that when the normal retirement date come, or the member dies, the member or his beneficiaries will not claim the benefits because they have forgotten about the benefits or do not know about their existence respectively.
It also appears that some of the people who left employment before dollarisation, may have assumed that their benefits were wiped out by inflation, yet they have reasonable amounts with the pension funds.
Poor record-keeping by the pension funds or outdated records, could be the other reason, which makes it difficult for the pension funds to trace the members. Previously, the major source of information for pension administrators has been employers.
However, given that some companies closed shop, pension funds found it difficult to get the information pertaining to the respective members. Pension administrators are therefore, now required to have alternative contact details of their members so that they do not solely rely on the employers.
- What is IPEC doing to make sure beneficiaries get what belongs to them?
The Commission has been carrying out awareness campaigns to sensitise pension scheme members about their right to claim their pension benefits when they are due.
We also continue to urge the pension funds to come up with strategies to identify their members with unclaimed benefits so that they can claim the same. Some pension funds have been publishing the names of the members who have not been claiming their benefits in the press.
We believe that the IPEC initiatives coupled with the strategies employed by pension funds have worked, albeit marginally, considering that unclaimed benefits have declined by about 5 percent between December 2017 and December 2018 from 52 664 as at December 31, 2017 to 49 958 as at December 31, 2018.
- What is IPEC’s general comment on this situation?
As a regulator whose mandate is to protect the interests and rights of policyholders and pension scheme members, we are concerned by the magnitude of unclaimed benefits because it means those members or their beneficiaries could be living in poverty yet there are pension benefits due to them. As IPEC, we continue to sensitise the public about their right to claim their benefits when due as well as their duty to ensure that their contact details are kept updated at the fund’s office.
We also encourage members to notify their dependents and/or families of the existence of their pension plans.
As mentioned above, we also continue to urge fund administrators to strengthen their data management systems so that they are in constant touch with the members.
