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Non-remittance of monthly contributions by local authorities and limited cash resources is crippling the Local Authorities Pension Fund’s ability to fully discharge its obligation of remitting pension benefits, chief executive Charles Mandizvidza said. The fund’s investment activities are virtually paralyzed currently on account of severely curtailed cash resources.Mr Mandizvidza said the fund is however in constant engagement with errant local authorities who have not been remitting their monthly contributions.
“The major constraint being faced by the Fund in failing to discharge its obligation to timely remit pension benefits is financial Incapacity on account of limited cash resources. This unhealthy situation is on account of the non-remittance of monthly contributions by local authority members subscribing to the Fund,” said Mr Mandizvidza in an emailed response to the Herald Business yesterday.
He said the fund does not envisage a normalization of the situation in the short term taking into account the prevailing absence of liquidity in the economy that has impacted negatively on all economic actors in the country.
“We are not aware of the “bad investments” allegedly made by the Fund which endeavors to prudently invest funds accruing to it in line with its strategic asset allocation. The Fund is presently predominantly invested in fixed property and listed equities. Performance of these investments is in line with the respective market fundamentals,” he said.
LAPF’S membership currently stands at 30 000 (roughly 20 000 current members and 10 000 pensioners) and the growth in the fund’s membership since the advent of multi-currencies has been minimal. Mr Mandizvidza said the fund’s balance sheet size (assets) amounts to over $200 million before impairing receivables of which contribution debtors are a substantial amount.
He said the fund’s investment focus for 2016 would be informed by their asset allocation strategy which centres on asset diversification and achievement of real returns on the basis of a long term investment horizon.
“Please note that the fund’s investment activities are virtually paralyzed currently on account of severely curtailed cash resources. The prevailing economic environment is without doubt a major hindrance to the progress of institutions like pension funds seeking solid investment opportunities, delivering real and sustainable performance to cover present and future liabilities,” said Mr Mandizvidza. He said as fund administrators they fully empathize with the plight of pensioners emanating from delays being encountered in remitting their monthly pensions.
“Concerted efforts are being made to redress and normalise the situation, however in the context of prevailing adverse economic challenges we do not think solutions are imminent. Through stakeholder communication our members have been informed of the financial condition of their Pension Fund,” said Mr Mandizvidza.
LAPF admitted failure to honour its obligation of paying out pension benefits saying the economic downturn has affected cash-flows from investment activities, such as property rentals.
The fund however is under fire from pensioners who accuse the fund managers of making wrong investments hence failure to fulfill the obligation of remitting pension benefits in time.
Pensioners who talked to the Herald Business yesterday say they have been failing to access their pension benefits for some time.
“Every time that we ask them about our pension benefits we are told by the staff working there that there are some areas where they made wrong investments. We have been patiently waiting to receive our benefits but to avail,” said one pensioner who requested anonymity.
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