via NSSA raids companies | The Financial Gazette by Maggie Mzumara 29 Jan 2014
THE National Social Security Authority (NSSA) will raid all companies effective February 1 to check on their compliance with its governing statutes as it is becoming clear that the country is headed for a potentially devastating pensions crisis that could distress millions of cash-strapped citizens due to the diversion of contributions by employers who are equally battling an inclement liquidity crunch.The Financial Gazette can report that many companies, including parastatals and local authorities have been deducting pension contributions from their workers in the past few years, but not remitting them to their respective pension funds
The employers have also not been making their own contributions as stipulated by the country’s laws. This has prejudiced workers whose expectation is to save for retirement or for their families in the event of death.
The situation has resulted in many companies accumulating hefty pension arrears, some of which have become onerous to clear due to the worsening economic environment.
The Zimbabwe Pensions and Insurance Rights Trust (ZimPIRT) says many institutions, including industrial giants, supermarket chains, State enterprises and churches have not been remitting pension contributions deducted from their employees for years.
“It is a major problem yet nothing is being done about it,” said Martin Tarusenga, general manager of ZimPIRT.
Tarusera said it was difficult to quantify the number of people affected by non remittals as there was “serious opaqueness in pension and insurance funds transactions/operations.”
He, however, estimates the number of people whose pensions are not being remitted to be more than a million.
Finance and Economic Planning Minister, Patrick Chinamasa, raised the issue of accumulating pension contribution arrears in his budget statement last month, saying the problem was prevalent among parastatals and local authorities.
“Government is concerned with pension contribution arrears mostly being accrued by parastatals and local authorities currently amounting to US$152 million,” Chinamasa said.
He said the arrears were arising from high contribution rates of up to 30 percent; absence of a policy framework which defines benefits and contribution structures for parastatals and local authorities; and failure to remit pensions contributions to pension funds even when deductions were made on employees’ incomes.
Tarusenga blames the crisis on the sector’s regulatory body, the Insurance and Pensions Commission (IPEC), as well as the Ministry of Finance and Economic Development, saying they were not acting to deal with the problem.
He also alleges that pension fund managers were using pension funds for purposes for which they were not intended and also often worked in cahoots with some service providers.
“Non-remittal of pension contributions is part of a huge fraudulent scandal perpetrated against pension and insurance funds in Zimbabwe,” said Tarusenga, indicating that government and IPEC had “shown an unwillingness to resolve (this problem)”.
“Indeed the Finance Minister acknowledges (in his budget statement) a major corporate governance problem in which pension fund management and related service providers award themselves hefty packages, among other forms of mismanagement. Some pension fund managers have over the years been paying themselves from these funds at the expense of pension fund members, pensioners and insurance policyholders, and in breach of established principles and practices of pension and insurance service provision,” Tarusenga said.
Questions to IPEC on the matter had not been responded to at the time of going to press.
The pay-as-you-go pension scheme, NSSA, has previously admitted that employers were deducting pension contributions from workers but not remitting these to the authority.
The country’s compulsory pension scheme, established in terms of the NSSA Act of 1989, is tasked with provision of social security, which includes running a national pension scheme.
This week, NSSA notified companies that it will be carrying out door to door inspections from next week to verify their compliance with the authority’s records and contributions for the year ended December 31, 2013 in terms of the National Pensions and Other Benefits Scheme (S.I 393/93) and Accidents Prevention and Workers Compensation Insurance Fund (S.I 68/90).
“Clients are strongly urged to ensure that their contributions and premiums records are up to date. It is a statutory requirement that all contributions and premiums are remitted to the authority by the 10th of every month. Failure to pay contributions and premiums by the 10th of each month does not only attract 50 percent surcharge and penalties but it may also attract criminal sanctions,” said NSSA.
Although questions were sent more than a week ago seeking their response and clarification, NSSA had not responded at the time of going to press.
Many employees, both in the public and private sector, had their pension savings heavily eroded by inflation during the country’s economic meltdown. And when the country abandoned the local currency and adopted the multi-currency regime in 2009, many lost out in the exchange resulting in thousands of pensioners who had made contributions for years losing out on life savings.
Tarusenga, whose organisation has been lobbying for years for fairness in the pension and insurance sector, said the prevailing scenario of non-remittals of pension contributions was likely to usher in “a dwindling insurance and pension industry, caused by a loss of confidence in the management”.
“We are watching a pension and insurance industry which is no longer performing its key economic role of intermediating funds for economic growth, we are watching a destitute aging workforce that had in fact made savings through pension and insurance vehicles.”
Tarusenga advocates a revamp of the current pension and insurance legislation including the NSSA Act to protect pensioners and create accountability and transparency in pension institutions.
Chinamasa has proposed an Insurance Amendment Bill, Pension and Provident Funds Amendment Bill and an Insurance and Pension Commission Amendment Bill to align current laws with international best practices.
He has also proposed to review aspects of the NSSA Act, among other propositions.
Crafting and tweaking pieces of legislature with the best of intentions is one thing, and quite another to effectively use the laws and regulations for the protection of the people, who from time to time fall prey to various elements, by design or by chance.