adminbeing held by pension funds.
Addressing delegates at the just ended Insurance Institute of Zimbabwe Summer School, Fidelity Life Assurance group operations director Mr Paul Razunguzwa said it was also critical for employees to make improved contribution levels to enhance the sum they would get once they retire.
“Studies have shown that the average contribution rate for most pension funds in Zimbabwe is around 10 percent of salaries and the average pensionable service period is about 15 years. This only guarantees a 15 percent income replacement at retirement meaning that if this individual is earning US$1 000 per month he would end up earning US$150 per month on retirement.
He said this was critical in the absence of tangible plans to restore pension contributions that were eroded due to the hyperinflationary environment that existed before 2009 and the subsequent adoption of the multi-currency system.
Pension funds lost a major portion of their value as investments such as prescribed assets were wiped out completely.
Mr Razunguzwa said Zimbabwe’s case was not peculiar as pension funds in developed country lost over US$4 trillion in value due to the global financial crisis.
“Stock market volatility in most markets hit the most stable defined benefit plans forcing people who were within three to five years of their retirement to postpone this even for at least 10-15 years. They could no longer afford to retire,” he said.
He, however, said that the difference between the Zimbabwean and international case was on how the affected countries dealt with the matter.
“In major economies, where failure by the macro-environmental system is undisputed, the government would normally step in to inject money covering the losses.”.
Given the foregoing, he said although pension funds were under obligation to pay reasonable pensions to their clients, Government needed to compensate pension funds as losses they incurred were a direct result of Government policies.
“However, we are all aware of the challenges that the Government is facing, they cannot even pay civil servants decent salaries so we cannot expect it to meet this obligation,” he said.
In terms of pension funds, he said these just like companies require major capital injections or recapitalisation through various ways in order to alleviate the pensioners’ woes.
“Distressed companies, however, are not in a position to carry this extra burden where they are struggling to just stay afloat.
“This includes the employing company establishing the extent to which members have been financially prejudiced and putting in place methods to fund for this deficit, which Econet has done,” he said.
He said although most pension funds still had properties these were just a portion of the contributions that they were holding.
“In most instances these properties are not offering meaningful returns due to limited occupancy levels,” he said.
Most pensioners have been living as destitutes as most pension funds are paying out miserly amounts due to their limited capacity.
Speaking at the same occasion, Global Insurance Company managing director Mr John Mapani, who addressed the issue of professional development, called on delegates to carry out personal introspections in order to define their roles in their organisations.
He also urged them to strive for professional development which he said was key to self-refinement.
The IIZ summer school, which ended on Tuesday, was being held under the theme “Raising the bar . . . A journey to excellence”.
Online Reporter