IPEC sets 2009 pension loss compensation modalities

Source: IPEC sets 2009 pension loss compensation modalities | Herald (Business)

Oliver Kazunga-Senior Business Reporter

The Insurance and Pensions Commission (IPEC) says modalities to start
compensating insurance and pension losses suffered prior to 2009 will be
concluded before the end of this year.

A Commission of Inquiry led by Retired Judge Justice George Smith was set
up in 2015 to probe the process used in converting pensions and insurance
benefits following the dollarisation of the economy.

Following recommendations by the Commission of Inquiry, IPEC has
established a working group to facilitate the closure on compensation of
the policy holders and pensioners for the loss of value suffered due to
hyper-inflation in 2007 and 2008 and the country’s adoption of
multi-currency system in 2009.

Responding to questions during the 2021 IPEC and National Social Security
Authority Journalists Mentorship Programme launch held virtually on
Wednesday, IPEC director for actuarial services, Mr Robson Mutangadura,
said: “At high level we have come up with the implementation roadmap with
clear milestones in terms of activities that need to be done and the time

“If all goes according to plan, we expect to come to conclusion by the end
of this year and hopefully that will see some compensation trickling
through early next year.”

The commission of inquiry was set up on the back of wide spread concerns
by pensioners that their pensions and insurance benefits were undervalued
during the change over from the Zimbabwe dollar to the multi-currency

“In terms of major activities, the main hurdle was for us to dissect the
Justice Smith Report and then try to come up with standard approach across
all insurance companies and pension funds,” he said.

“As you are aware that insurance products are unique and they are
different per each insurance company, for us to then come up with a
standard approach in terms of how to implement that compensation
framework, it’s one of the issues that took a bit of time.”

Commenting on the same issue in relation to losses suffered in 2019 when
the Government reverted to the local dollar, IPEC director for pensions,
Mr Cuthbert Munjoma, said a guidance paper of currency reforms has been

“Basically, that guidance paper is to ensure that pension scheme members
benefit from assets that were matching their liabilities prior to currency
conversion,” he said.

“So, we have successfully implemented that guidance paper and there has
been an equitable allocation of assets prior and post conversion in 2019.
This has resulted in some pension increases and bonus increases, among
other things.”

With respect to writing of business in foreign currency, Mr Munjoma said
the Government has gazetted Statutory Instrument 28 of 2020, which allows
pension funds to receive contributions in forex as well as paying out
benefits in hard currency.

“So, there are employers that are paying salaries in foreign currency and
as we all appreciate, pension contracts arise from contracts of employment
and normally as a percentage of your salary,” he said.

In the Mid-Term Budget Review Statement presented last week, Finance and
Economic Development Minister Professor Mthuli Ncube highlighted that IPEC
was seized with bringing closure to the pre-2009 compensation.

“A roadmap for the envisaged milestones and timelines for compensation
will be published for the benefit of policy holders and pensioners and
compensation modalities will be concluded before the end of this year,” he

As at March 31,2021, the insurance industry registered a nominal growth of
436 percent to $7,61 billion from $1,42 billion in March last year. In
terms of asset base, the industry also registered a nominal growth of 22
percent to $61,4 billion as at March 31,2021 from December 31, 2020 rate
of $50,4 billion.

IPEC commissioner general, Dr Grace Muradzikwa, told participants some of
challenges facing the insurance industry include product relevance and
insurance fraud.

“There is a big issue here, when we were in a hyperinflation environment,
it becomes very difficult for an insurance company when you cannot track
value in real time and this is where the issue of product relevance is
coming in as a result of loss of value,” she said.

“Our penetration rate is still less than three percent.”