Pension fund arrears go up

HARARE - Contribution arrears in the pensions industry went up to $636,36 million as at June 30, 2018 from $618,88 million at the end of March 2018, with stand-alone funds accounting for the major part of the arrears, the insurance regulator has said.

In its report for the quarter to June 30, 2018, the Insurance and Pensions Commission (Ipec) contribution arrears accounted for 14,51 percent of the industry’s asset base.

“Stand-alone funds reported $502,53 million of the contribution arrears, accounting for 78,97 percent of total contribution arrears. The high level of contribution arrears reduces the level of investable assets for funds and heightens the liquidity risk in industry,” Ipec said.

Pension benefits arrears of $83,97 million were recorded as at June 30, 2018, with the benefit arrears increasing 5,41 percent from the $79,66 million reported as at March 31, 2018.

Ipec, however, noted that stand-alone funds accounted for 93,46 percent of the pension benefit arrears as at June 30, 2018.

“The arrear pension benefits for the sector were mainly a result of low liquidity emanating from contribution arrears and investments in properties that cannot be readily converted into cash to meet pension benefits,” Ipec said..

In the quarter under review, prescribed assets amounted to $323,13 million from $306,93 million reported as at March 31, 2018.

“This constituted 7,37 percent of total assets, which was not complaint with the minimum regulatory requirement of 10 percent,” the insurance industry watchdog said.

The commission noted however, that self-administered pension funds were compliant with the 10 percent regulatory threshold.

Total liabilities stood at $4,61 billion as at June 30, 2018, indicating a deficit of $221,46 million.

“The deficit was mainly a result of defined benefit liabilities which were not being supported by the requisite investment returns and sponsoring employer funding,” said Ipec.

The industry reported unclaimed benefit liabilities totalling $28,73 million as at June 30, 2018.

A net surplus of $121,01 million for the six months ended June 30, 2018.

“This surplus was mainly driven by contribution income totalling $177,92 million and investment income totalling $91,56 million. The two income streams accounted for 96,70 percent of the $278,66 million total income for industry during the period under review,” the regulator said.

The total income was 12,80 percent lower than the $319,55 million reported for the same period in 2017, with Ipec attributing the relative decline in total income to a decrease in investment income from $135,19 million for the six months under review to $91,56 million for the period under review.

“The relative decline in investment income was mainly a result of lower fair value gains on equities for the six months ended June 30, 2018 when compared to the same period in 2017,” Ipec said.

— The Financial Gazette

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