tawandamusarurwa
Tawanda Musarurwa
The efficacy of a system is not indifferent to the extent of its scope.
Social security – of which retirement income is a part of – is a human right according to the Universal Declaration of Human Rights (Article 25 of 1948), and a constitutional right enshrined in the Constitution of Zimbabwe (Chapter 2, Sub-section 30).
According to the Zimbabwe National Statistics Agency (ZimStat)’s Quarterly Labour Force Survey for the second quarter of 2023, Zimbabwe had a working age population of 8,97 million.
And while 3,2 million were employed locally (in both the formal and informal sectors), many Zimbabweans have for long been emigrating to various countries across the world, as they seek out economic opportunities.
Data from the 2022 National Housing and Population Census shows that most of the country’s emigrants are within Southern Africa.
According to the report, South Africa accounted for 773 246 emigrants from Zimbabwe, while Botswana had 47 928.
Internationally, the United Kingdom accounted for the largest number of emigrants, with 23 166.
Although in a number of cases, individuals who emigrate do find ‘greener pastures’, problems have arisen in terms of their planning for retirement income, especially when they decide or are forced by circumstances to relocate back home.
For example, the Covid-19 pandemic hit at the beginning of 2020, and as at August 5 2020, statistics from the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) showed that 14 044 migrants had returned to Zimbabwe from neighbouring countries, largely due to the impact of the global health pandemic.
In the past, the portability of pensions was a significant concern, but under the Pensions and Provident Funds Act (Chapter 24:32) – which came into operation in September 2022 – there appears to be scope for the portability of pensions.
Section 17 (1) of the Pensions and Provident Funds Act (Chapter 24:32) reads:
“Where a person ceases to be a member of a fund and becomes a member of another fund which permits him or her to transfer to that other fund any benefit or right to which he or she has become entitled from the first-mentioned fund, the first-mentioned fund shall, within thirty days after the member has in writing requested it to do so, or within such longer period as the Commission may allow, transfer that benefit or right, in full, to the other fund.”
Corporate lawyer Nobert Phiri said it is important to be aware whether or not the hosting countries allow for pensions to be transferred across their borders.
“We must first appreciate that the Pension and Provident Funds Act regulates funds in Zimbabwe, and so would apply to funds in Zimbabwe.
“In order for one to determine whether a migrant worker could have their benefits transferred into Zimbabwe, we would need to read the law of that particular country,” said Mr Phiri.
Risk and Investment Management Consulting Actuaries (RIMCA) director Mr Gandy Gandidzanwa believes that international and regional pensions portability should be possible.
“Our reading of the Act is that it (transferring of pension assets from overseas) should be possible,” he told The Sunday Mail.
“While we have not gone through such a process ourselves, we have reason to believe that it has been granted where it has been sought.”
Although the country’s updated pensions law has opened the door for the portability of pensions, there is a need for regulations that clarify how the transfer of pensions assets should be done between a foreign and a local pension fund.
It is also important for the regulator to provide clarity on whether pensions assets are also transferable to a public pension fund, and the modalities thereof.
There is also a need for clarity on the modalities of transfer of assets if they were accumulated under defined benefit (DB) or defined contribution (DC) plans.
There are various countries around the world that are effectively implementing portable pensions systems, for example Ireland.
According to Ireland’s Department of Social Protection, allowing pensions from overseas to be transferred to an approved occupational pension scheme in the country is contingent upon several factors.
The factors include, that the transfer takes place before pension benefits under the overseas scheme come into payment; that the scheme member requests the transfer; that the rules of both the Irish and overseas scheme permit the transfer, and that the trustees or administrator of the transferring scheme comply fully with any transfer rules, regulations or requirements in the other jurisdiction.
It is also a requirement that the revenue authority in the country from which the transfer is made approves the transfer.
Irish emigrants also have the option to transfer overseas pensions to a Personal Retirement Savings Account or Buy-out bond.
But, beyond the issue of portability of pensions, there is a need for the development of a pension system that also benefits emigrants in informal employment abroad.
As aforementioned, South Africa accounts for the largest number of Zimbabwe’s emigrants, and a significant number of them are employed in informal jobs.
This automatically eliminates them from the country’s pension system, which is traditionally structured for formal employment.
Addressing the Organisation for Economic Co-operation – International Organisation of Pension Supervisors (OECD/IOPS) Global Forum on Private Pensions in Victoria Falls last month, D3P Global chief executive officer and United Nations Capital Development Fund (UNCDF) senior advisor on insurance and pensions Mr Will Price said lessons can be drawn from programmes that other countries have implemented.
“In a part of the United Arab Emirates, there is a compulsory defined contribution pension plan for migrant workers, paid by the employer, and so there are the seeds, if you like, of things which can work here,” said Mr Price.
“India and Mexico have both done innovative things with a remittance provider, so that the worker working overseas can effectively contribute directly back into their domestic individual pension plan.”
To the extent that Zimbabwe can effectively implement portability of pensions, this could allow the country to better tap into Diaspora funds to build bigger pension pools that benefit the wider economy.
As the India and Mexico examples show, it is possible for emigrant workers to contribute directly into a local pension scheme through formal remittance channels, which will guarantee their retirement income.
Zimbabweans in the Diaspora are already remitting over US$ billion annually.
According to Reserve Bank of Zimbabwe figures, the country’s Diaspora remittances rose to US$1,66 billion in 2022, up from US$1,43 billion in 2021.
In the first six months of 2023, Diaspora remittances amounted to US$919 million.
At a broader level, there is a need for bilateral and/or multilateral arrangements between countries that assure social protection portability.
Online Reporter