Beyond the Bread Index: Zimbabwe’s pension industry faces a defining decade  

Zimbabwe’s pension industry is showing signs of recovery after years of decline.

However, a bigger question now confronts policymakers, pension fund managers and employers – can the industry rebuild a retirement system capable of providing dignity in old age while simultaneously financing national development?

That question is becoming increasingly urgent.

At first glance, the latest figures released by the Insurance and Pensions Commission (IPEC) offer reasons for optimism.

Average monthly pension benefits have increased more than fourfold over the past two years, rising from the equivalent of 20 loaves of bread – about US$34 in 2024 – to approximately 85 loaves today.

IPEC’s Bread Index, which measures pension adequacy by calculating how many loaves of bread an average pensioner can purchase each month, has become an unconventional but effective barometer of retirees’ welfare.

Yet beneath these encouraging statistics lies a stark reality – even improved pensions remain insufficient to sustain a decent standard of living for most pensioners.

Zimbabwe’s pension sector now stands at a critical crossroads. The decisions made over the next decade will determine whether pension funds become a cornerstone of the country’s economic transformation or remain a fragmented industry struggling to regain public trust after years of economic volatility.

Speaking at IPEC’s Eighth Annual General Meeting in Harare, Commissioner Dr Grace Muradzikwa highlighted the progress made while warning against complacency.

“We are not satisfied with where we are, but we are encouraged by the trend. That upward trajectory is what gives us confidence that the interventions we are implementing are beginning to yield results,” she said.

IPEC has also introduced tougher enforcement measures to recover outstanding employer contributions, including garnishment powers that compel delinquent companies to settle their arrears.

“We now have queues of employers coming to the Commission to negotiate payment plans. They are paying their outstanding contributions, and we are seeing meaningful reductions in contribution arrears,” Dr Muradzikwa said.

However, improving benefits from extremely low levels is not the same as resolving Zimbabwe’s pension crisis.

At a separate panel discussion during the Zimbabwe Association of Pension Funds (ZAPF) annual conference earlier this year, industry executives painted a sobering picture of the challenges that remain.

Minerva Risk Advisors chief executive Ms Lydia Tanyanyiwa revealed that some pensioners are still surviving on monthly payments of just US$30.

“At the moment, some pensioners are getting US$30 a month. A person cannot retire on those contributions,” she said. “That goes beyond pensions. It talks to the business leader. What is their culture towards employees once they retire?”

Her comments exposed a fundamental weakness in Zimbabwe’s retirement architecture.

Current employer and employee contribution rates, which typically range between five and six percent, are too low to generate meaningful retirement incomes.

For pensioners, the issue is no longer merely about receiving a monthly pay-out. It is about preserving financial dignity.

Although IPEC says it remains committed to implementing compensation programmes for pensioners who had their pensions eroded, public confidence remains fragile.

The challenge is as much demographic as it is financial.

Zimbabwe’s population is ageing, life expectancy is increasing, and the informal economy is growing. Yet the pensions system was designed primarily for formal employment structures that no longer dominate the labour market.

Unless pension coverage expands significantly, millions of Zimbabweans risk entering old age without adequate retirement protection.

Industry executives are now advocating targeted minimum pensions linked either to final salaries or to predetermined income thresholds. Such a shift would fundamentally alter the retirement landscape by moving beyond simple contribution accumulation towards guaranteed retirement outcomes.

It would also require employers to assume greater responsibility.

Perhaps the biggest untapped opportunity lies in how pension funds deploy their assets.

Zimbabwe’s pensions industry currently manages assets worth approximately US$3,1 billion. While substantial, this figure remains far below what is required to finance the country’s development ambitions.

Experts estimate Zimbabwe needs close to US$10 billion in annual investment to sustain economic growth of 5 percent.

The question is no longer whether pension funds should contribute to national development, but how they should do so.

Property executive Mr Ken Sharpe believes the answer lies in housing finance.

Zimbabwe faces a housing finance deficit exceeding US$20 billion, yet pension funds have barely participated in mortgage financing.

“How many pension funds can actually say they have invested even one dollar in mortgages?” Mr Sharpe asked. “I would have expected them to invest at least US$100 million in mortgages.”

His argument is straightforward – pension savings are inherently long-term capital and are therefore ideally suited to long-term mortgage financing.

“For every dollar of mortgages, you can generate up to three dollars of economic activity,” Mr Sharpe said.

“That means with just US$20 billion, we can unlock up to US$60 billion in GDP within a few years.”

The industry is also confronting an existential challenge.

Executives openly admitted that pension funds risk becoming irrelevant unless they evolve.

Ms Tanyanyiwa described what she called a “feeding frenzy” surrounding pension contributions.

“The cost of compliance – IPEC levies, trustees’ fees, administrators, investment managers and asset managers – are all feeding off that small contribution that people are making,” she said.

For an industry managing relatively modest pools of capital, high administrative costs can significantly erode investment returns.

Fidelity Life Assurance chief executive Mr Reginald Chihota proposed consolidating administrative systems and deploying artificial intelligence to reduce operating expenses.

“If we adopt AI tools in our operations, that should bring our administration and investment costs down,” he said.

The industry is also being challenged to innovate.

IPEC recently launched a regulatory sandbox that has already attracted about 10 applications. The initiative allows insurers and pension funds to test new products before full-scale market deployment.

This could prove particularly important in expanding pension coverage among informal sector workers and Zimbabweans in the diaspora.

For policymakers, the message from industry leaders is unequivocal – macroeconomic stability is non-negotiable.

Zimbabwe cannot afford to destroy pension savings.

They believe the Government must accelerate compensation for the 2009 pension losses, deepen capital markets, strengthen mortgage finance infrastructure and create investment vehicles capable of absorbing long-term pension capital.

IPEC is already encouraging pension funds to diversify offshore. Regulations allow funds to invest up to 15 percent of their assets abroad, yet current exposure stands at only 6 percent.

At the same time, authorities are pursuing initiatives such as insuring Government assets, domesticating marine insurance and introducing products for artisanal miners.

Insurance penetration has gone up to 1,6 percent from 1,1 percent in 2019. However, this remains far below the National Development Strategy 2 target of 4 percent.

Zimbabwe’s pension industry is no longer debating incremental improvements. It is confronting a fundamental question about its future purpose.

Will pension funds merely preserve retirement savings, or will they become engines of national development?

The answer will determine whether millions of Zimbabweans retire into poverty or financial security.

It will also determine whether the country can mobilise the long-term domestic capital needed to finance housing, infrastructure and industrial growth.

As Mr Chihota observed, the industry must first acknowledge its failures.

“The industry needs to address its collective sins,” he said. “We broke the promise to pensioners.”

The next decade will be defined by whether the industry can keep that promise the second time around.