Online Reporter
Tawanda Musarurwa, Checkpoint Desk
FOR decades, Zimbabwe’s pensions industry has sold workers the idea that diligent saving today would translate into dignity in retirement.
However, addressing the Insurance and Pensions Commission (Ipec) annual general meeting earlier this year, the regulator’s Commissioner Dr Grace Muradzikwa made a surprising claim.
She said the regulator has come across various cases where pension funds’ expenses are in excess of the contributions (or premiums).
“In some cases, we do find regulated entities that have unsustainably high expense ratios, and we call them in to come and explain,” she said.
“(Pension funds) are in the business of paying claims, so they must have reasonable administration expense . . . we want them to have an underwriting profit, because without this they will not be able to meet future claims.”
Latest official data shows that the pension promise is increasingly undermined by the rising cost of keeping the system running.
According to Ipec’s 2025 Second Quarter Pensions Report, the local pensions sector spent US$98,23 million.
Of that amount, US$27,02 million — or 28 percent — went to administrative overheads. This means nearly one in every three dollars exiting the pension system never reaches members.
Ipec’s own archives show that in 2020, the average expense-to-contribution ratio was around 32,9 percent, meaning expenses have constantly been high for a prolonged period, affecting both service delivery and investment performance.
At face value, the local pensions sector’s assets are growing, but this is mostly because of currency revaluations, not fresh investment or efficiency.
According to the Q2 2025 Pensions Report, total industry assets increased to US$2,63 billion, primarily driven by foreign-currency asset revaluation rather than new investment gains or improved collections.
Most local pension funds are preserving value through asset positioning, rather than through operational efficiency or contribution growth.
Despite rising fees, administrators still posted a combined loss of US$1,24 million in the first-half of the year, with salaries, commissions and basic office costs absorbing most of their revenue.
Impact on pensioners
Dr Muradzikwa has said “in 2024, the average benefits paid to pensioners were US$30 per month, translating to 30 loaves of bread.”
The consequences are visible in the lives of retirees such as Mrs Harriet Banda (not her real name), an 89-year-old former school teacher in Murewa, whose pension stretches barely two weeks.
She contributed for more than 30 years and assumed she was saving for security. Instead, she now feels she was saving for the machinery that administers the funds.
“After 30 years of contributions, I thought I had earned security,” she said.
“But my pension lasts only two weeks.”
For many pensioners, declining payouts and rising operational costs tell much the same story. The swelling cost base has structural roots.
Zimbabwe has 968 registered pension funds, yet nearly half are inactive and over 370 are earmarked for dissolution, which is an expensive level of fragmentation.
Even dormant funds must still carry governance responsibilities, including reporting, auditing and compliance, all of which rack up expenses.
In addition to these problems, retirement contributions are already being strained by serious employer arrears.
According to the report under review, employer arrears remained very high, at US$110,43 million, nearly equivalent to a full year of contribution inflows.
Local pension funds are also not benefitting from outdated data collection and management systems.
“We are still manually processing 40 percent of all claims,” said a senior fund administrator who requested anonymity. “Most of our costs are simply duplication.”
The missing umbrella
The country is paying for hundreds of miniature pension systems when most could be consolidated under fewer, larger administrative umbrellas.
Actuary and investment consultant Mr Gandy Gandidzanwa says the country’s pensions sector is not taking advantage of economies of scale.
“The solution sits within umbrella funds. That is the only way you can effectively reduce costs, but also without compromising on quality,” he said.
“Umbrella funds would be the way to go, taking advantage of economies of scale.”
A sector with many funds that are too small to be efficient results in overheads that eat contributions before they have any chance to generate returns.
Mr Gandidzanwa said, with a small and medium enterprise-driven economy, an expensive financial services sector and typically small average fund size, the country’s pension fund is perfectly suited for “a robust and dynamic umbrella-fund-dominated sector”.
Umbrella funds (also known as “superfunds” and common in regions such as Australia) allow multiple, unrelated employers to pool under one retirement scheme instead of running hundreds of small, costly stand-alone funds.
The pension sector’s recent financial flows illustrate the strain.
As indicated above, employer arrears continue to choke cash flow, leaving funds without the contributions they need to invest.
The funds are being starved of capital, while administrator expenses rise.
Even the administrators themselves are caught in a kind of cost trap, earning US$8,73 million in fees during the first six months of this year, but collectively posting a loss of US$1,24 million due to high salaries, commissions and office costs.
The result is an industry charging more, while remaining inefficient.
For savers, the effects are material.
High administration costs mean every dollar contributed buys less retirement protection.
Many funds are increasingly compelled either to raise contributions, eroding household budgets already stretched by inflation, or reduce eventual payouts.
The third consequence is erosion of trust.
Pension systems rely on member confidence that contributions today will become pensions tomorrow.
But, when 28 cents in every dollar leaves the system before investment, confidence suffers.
The contrast with other countries underscores the challenge.
South Africa’s large umbrella funds typically operate with total expense ratios of between 0,5 percent and 2 percent.
Kenya’s fee disclosure rules hold most funds below 2 percent.
In Organisation for Economic Co-operation and Development (OECD) markets, pension administration rarely exceeds 1,5 percent.
By comparison, Zimbabwe’s expense ratios of between 20 percent and 40 percent sit far outside international benchmarks.
After dipping temporarily in 2023, costs have resumed their upward trend.
Currency volatility plays a role, with multiple shifts in reporting requirements increasing actuarial, audit and administrative workloads. Technology adoption is patchy; many funds remain paper-driven, amplifying labour requirements.
Salaries alone accounted for nearly half of administrators’ expenditure in 2025, while commissions and basic office running costs absorbed substantial additional sums.
And fragmentation compounds it all; Zimbabwe is shouldering hundreds of times the overhead of systems that other countries handle at industrial scale.
The maths is unforgiving: A worker contributing US$100 a month for 20 years hands over US$24 000.
If 25 percent of that disappears into overheads, the saver loses US$6 000 permanently.
At a 40 percent expense ratio, the loss rises to US$9 600 — a level that can permanently reshape retirement outcomes.
Silver lining
However, the system is not failing outright.
The country’s pension assets have grown to US$2,63 billion, and foreign currency assets rose more than 5 percent in the latest reporting period, helping to at least preserve value.
The problem is not performance capacity, but industry efficiency. Too much money is consumed before it reaches the members who contributed it.
Other countries offer useful lessons.
South Africa cut costs by consolidating thousands of employer plans into a handful of large funds, spreading trustee, audit and reporting costs across vast membership bases.
Kenya introduced public transparency on fund fees and performance, allowing savers to see which institutions delivered value and which consumed it.
Namibia and Rwanda digitised compliance, significantly reducing manual data processing and filing requirements.
Zimbabwe has the capacity to follow suit, but has not yet done so at scale.
Ipec has strengthened supervision, requiring enhanced governance structures, imposing board training and increasing on-site inspections.
But the country still lacks public comparison tables, mandatory cost caps and broad fee transparency, leaving members largely in the dark about value for money.
Contributions to the system are rising. Investment assets are growing and the wider economy is more stable than it has been in several years.
The sector does not have a revenue problem; it has a cost problem, which is embedded in outdated administrative models, duplicated governance and slow adoption of modern processing systems.
Analysts say if just half of the wasted admin spend was redirected into productive investment, pension funds could increase annual allocations to infrastructure by millions of dollars each year.
“Our current, fragmented and small-fund-dominated industry remains a far cry from the required structure to mobilise and pool the needed resources for infrastructural projects,” said Mr Itai Mukadira, a consulting actuary.
“Only a consolidated, structured, focused and real-investment-driven industry will be able to provide the all-critical pro-infrastructural development capital required.”
Pensions exist for one purpose: to take a modest slice of earnings today and return a meaningful income to workers when they need it most.
If administrative inflation continues to outpace the value delivered to members, that promise will grow steadily harder to honour.
The country’s pensions sector is growing in size but shrinking in efficiency, with high administrative costs, employer arrears and structural fragmentation absorbing value long before it reaches retirees.
The industry can still change course; but only if cost reduction becomes as central a priority as asset growth.
