ZIMBABWE’S pension industry income declined by 49% to US$1,39 billion in the first half of this year, compared to the same period last year, due to exchange rate disparities and hyperinflation, a new report showed.
Pension funds are operating in an environment of mistrust from the public, largely due to a number of factors that have negatively affected the country's economy over the past two decades.
Zimbabwe’s hyperinflation of 2008 to 2009 eroded the value of most savings, including pension savings.
Despite that, the pension industry has made frantic efforts to resolve the concerns, focusing on responsible management and targeted investments.
“The total income for the period under review was US$1,39 billion (ZiG18,72 billion), representing a 49,48% decline from the US$2,75 billion reported in the same period the previous year,” the Insurance and Pensions Commission (Ipec) report reads in part.
“Of the total income, US$101,9 million was in foreign currency, making up 7,33% of the industry’s total income.”
Ipec said exchange rate disparities and the hyperinflationary environment in part explained the dip in income.
“To address challenges related to reporting on hyperinflation and the exchange rate distortions, the commission will reintroduce the requirement for pension funds to adopt full IFRS 9.2,” Ipec’s report noted.
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“The major source of income was fair value gains on investments, constituting 79% of total income, amounting to US$1,1 billion (ZiG14,83 billion). However, the realised income was US$292,08 million (ZiG3,94 billion) which was 21,05% of the total income.”
Ipec also noted a 967 decrease of registered occupational pension funds as of June 30, 2024, due to eight fund dissolutions, four transfers, and one merger.
The decrease in funds is from 970 last year.
An occupational pension fund is a pension provided by employers. They are also known as company or employers' pension plans.
“Of the 967 funds, 471 were active, accounting for 48,7% of the industry's funds.
“The remaining 496 funds were inactive as they were either paid up or earmarked for dissolution. Of the total funds, 37 pension funds were defined benefit schemes, three were hybrid (both defined benefit and defined contribution) and the remainder were defined contribution schemes.”
According to Ipec’s report, the total membership, not counting beneficiaries, has increased to 991 594 from 978 896 last year.
The growth shows policyholders’ commitment to set aside income to secure their future.
The regulator said that financially, the industry’s total assets have surged to ZiG29,82 billion (US$2,18 billion), marking a remarkable 37,11% increase from last year. It added that a significant portion of these assets, US$992,98 million, came from investment properties.
“The pension industry assets were concentrated in investment properties and quoted equities, which constituted a combined position of 69% of the industry’s total assets portfolio,” Ipec added.
