THE Insurance and Pensions Commission (Ipec) has raised concerns that exorbitant service provider fees are depleting pension fund contributions, leaving little to no benefits for members.
These providers include administrators (for record-keeping and benefits processing), investment managers (to grow assets through investments), actuaries (to assess financial risks and determine contribution levels), and auditors (to ensure compliance and detect mismanagement).
Other key service providers are custodians (who safeguard fund assets), legal advisors (for regulatory compliance and dispute resolution), and trustees (who oversee fund operations and protect members’ interests).
Ipec’s warning comes as pension payouts continue to shrink annually, leaving retirees with diminished benefits despite years of contributions.
“From a regulatory perspective, we intervene to guide the fees charged by service providers. Running a pension fund often requires outsourcing certain services,” Ipec pensions and life department manager Polite Chidumwa told businessdigest in an interview.
“For example, a sponsoring employer may establish a pension fund but lack the systems to maintain records. In such cases, they must outsource administration services, and administrators charge for this work.
“However, we have observed instances where a service provider’s fees nearly wipe out all contributions.”
According to the Zimbabwe Association of Pension Funds, the local pension industry holds about US$1,7 billion in assets, with properties accounting for 41% of the total.
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Chidumwa said excessive deductions by service providers were eroding pension payouts, prompting Ipec to take action.
“We need to cap these charges to ensure pension funds primarily benefit their members, not just service providers,” he emphasised.
Sources told businessdigest that Ipec was considering reforms to curb these financial leakages and safeguard pension funds.
“We enforce investment guidelines to ensure funds are not exposed to excessive risk. From a regulatory standpoint, we guide permissible investments for pension funds,” Chidumwa said.
He noted that some asset classes were excluded due to their high-risk nature.
“We also regulate expenses under our current framework, which sets limits on what administrators and investment managers can charge pension funds. These are part of our ongoing reforms,” Chidumwa added.
National statistics show that pension fund assets contribute just 6% to Gross Domestic Product, despite billions invested in equities.
