IPEC to announce compensation framework

Source: IPEC to announce compensation framework | The Herald February 21, 2019

Kudakwashe Mhundwa Business Reporter
Insurance and pensions regulator, IPEC, is soon expected to announce a compensation framework to policy holders whose claims were eroded during the conversion of values from Zim-dollar to the United States dollars during the February 2009 period.

Devaluation of pension and policy holder accounts during the hyper-inflation period has been detrimental to Zimbabwe`s pension industry with citizens disregarding the insurance services due to low confidence levels.

According to IPEC statistics for the period 2010 — 2018 only 9 percent of Zimbabweans have pension cover.

Acting IPEC Commissioner Blessing Kazengura, said lack of confidence was one of the major problems affecting the country`s pensions industry, mostly caused by the hyperinflation period, a situation that they expect to change once the commission issues the compensatory framework.

“Most people lost their savings during the 2008 hyperinflation of 2008. This coupled with the current challenges affecting the economy continue to impact on consumer confidence regarding the insurance and Pensions products.

“IPEC is working on providing a compensation framework as per the recommendations of the commission of inquiry. We believe that any amount that will go towards compensation will address the issue of low confidence levels.

“The commission will continue to monitor capital levels of insurance companies to ensure that they have underwriting capacity and enhance the ability to meet claims,” he said.

In 2015, former President Mugabe set up a Commission of Inquiry led by Retired Judge Justice George Smith to probe the conversion process used in converting pensions and insurance benefits following the dollarisation of the economy.

The commission was set up following widespread concerns by pensioners that their pensions and insurance benefits were undervalued during the changeover from the Zimbabwe dollar to the multi-currency system.

Pension fund values were badly eroded in values due to devastating hyperinflation, which soared to a record 231 percent at the last official count in June 2008.

The commission of inquiry said pensioners and policy holders suffered a “huge” loss of value and recommended compensation. It also noted values were not only lost during the conversion period, but during the investigation period between 1996 and 2014.

In its report, the commission said high levels of inflation, currency debasing, dollarisation conversion process and de-monetisation were the main reasons of the loss of value.

Comm Kazengura said the industry regulator is working on a Micro-Pensions regulatory framework to cater for the country’s informal businesses as a way of enhancing financial inclusion for this previously excluded sector as well as growing pension’s penetration in the country.

“In order to increase pension coverage IPEC is working on introduction of a Micro-pensions framework to cater for the informally employed and those with irregular incomes in line with successful models that have been implemented elsewhere within the region for example Rwanda.

“IPEC is also amending the legislation to make it mandatory to all employees,” he said

Zimbabwe`s informal sector could be the sixth largest in the Sub-Saharan region, contributing between 40 and 50 percent to economic growth.

The informal sector contributes over 60 percent of employment in the country.