Firms accumulate $170m pension arrears

HARARE - Companies are increasingly failing to remit employees’ pension contributions due to mounting economic challenges, accumulating arrears of up to $170 million, the Insurance and Pensions Commission (Ipec) said.

The regulator, in its report on the state of the pensions industry in the quarter to March 2014, said rather than remit the pension dues, companies were settling operational costs and other pressing needs, with pensioners bearing the brunt.

“Due to the challenges the economy is facing, companies end up unable to meet obligations,” Ipec said, adding that the “companies must address their challenges, examine their cash flows and see to it that pensioners get their pay outs”.

It said $170 million was in arrears as at December 31, 2013, and the amount has increased in the first quarter of 2014.

This comes on the back of massive company closures as the economy stutters, while the few operational ones are struggling to pay salaries.

According to the insurance sector watchdog, fund administrators reported total contributions received in the sum of $222 million from $142 million and total expenditure (net of benefits) of $51 million reflecting a 23 percent contribution to expense ratio.

“Total fund membership rose by 25 percent from the prior year to 360 000 partly due to previously errant funds submitting their quarterly returns,” it said.

“Active members contributed 57 percent or 204 000 (December 2012:69 percent), deferred pensioners remained flat at 18 percent, pensioners numbered 68 000 or 19 percent (December 2012: six percent) whilst the balance of six percent, or 22 000 was made up of beneficiaries,” said Ipec

It said failure by companies to remit contributions deprived pension funds of investment income and further depleted their coffers.

“In light of these challenges, pension funds should always seek to meet fund objectives such as income replacement through better investment decisions and adhering to good practices of corporategovernance,” Ipec said.

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