adminThe future of the Local Authorities Pension Fund (LAPF) is facing a $341,4 million actuarial deficit as at the end of December 2012.
The LAPF comprises members from 47 institutions and is a self-administered benefit scheme whose membership is compulsory for all permanent local authority employees who have not attained the age of 55 years.
Other unions which are not necessarily local authorities such as Kwekwe Breweries, Zimbabwe National Water Authority, Go Beer Breweries and Kadoma Liquor Marketing are also members of the fund.
An actuarial deficit refers to the difference between the fund’s social security obligations and its income at present.
While the LAPF recorded a 4.14 percent income growth to $32,9 million in 2012 compared to the prior year, a study by Quantum Consultants and Actuaries (QCA) early this year revealed that the fund was insolvent.
At the end of December 2012, the fund’s actuarial asset value amounted to $170,6 million while liabilities stood at $512 million, leaving it with a $341,4 million deficit.
QCA, however, said the values of assets and liabilities were based on estimates.
“The actual financial position can only be determined once a full actuarial valuation has been conducted,” QCA said.
LAPF chairman Mr Misheck Mubvumbi said sponsors of the scheme must inject at least $110,2 million into the fund over the next three years for it to attain minimum solvency.
“Due to constrained financial capacity of member local authorities, the likelihood of the minimum solvency deficit being amortised as recommended by the fund actuary in the near term is remote,” he said in a statement accompanying LAPF’s annual report.
The fund’s financial position had also been made worse by the continued liquidity crisis in the economy that has seen local authorities failing to make regular contributions.
Contribution debtors in the review period shot up 45,6 percent to $75 million from $52 million prior year.
“Although considerable efforts are being made to stem the incessant escalation in contribution debtors, we do not anticipate a major turnaround in the near term,” Mr Mubvumbi said.
The fund also failed to review pensions paid out to members last year owing to its poor financial position while a four-month lag in payouts was recorded.
In 2012, the LAPF’s membership slightly dipped to 11 886 from 12 009.
With the economy’s outlook uncertain, it is envisaged the fund will continue to face funding challenges until its capital crisis has been addressed. – New Ziana.
Online Reporter