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Contribution arrears of self-administered funds increased 63 percent in the first quarter to March to $168 million from $103 million reported in the previous quarter as liquidity challenges continue to affect sponsoring employers.
According to the Insurance and Pension Commission report for self-administered funds, arrears contributions, high expense ratios, and meagre benefits and capital values to members continue to be the major challenges for the pensions industry.
The report covers 15 stand-alone funds, four fund administrators and three life assurers. In the period, self-administered funds reported total received contributions amounting to $61 million, a 6 percent growth from $58 million reported in the comparative quarter last year.
Fund administrators reported a total expenditure bill of $40 million (March 2014: 21 percent) reflecting a 66 percent expenses-to-received contributions ratio (March 2014: 19 percent). Although costs are increasing, the high expenses have been exacerbated by non-expense items such as depreciation and investment losses.
“The Commission will investigate this trend further in subsequent reporting periods in line with our mandate to protect and promote member values,” said IPEC.
Total assets grew to $2,04 billion from 1,88 billion. Of that amount, stand-alone funds which include Clothing Industry pension fund, Mining Industry, Local Authorities, NRZ and Zimpapers, make up $1,2 billion (or 59 percent), fund administrators $519 million and insurer administered funds $323 million. The average prescribed asset ratio grew to 6 percent from 2 percent as a result of improved availability of Government paper and increased stakeholder engagements efforts.
Total fund membership of standalone self-administered funds grew 4 percent from the comparable year ago period at 367 000. Active members contributed 203 000 or 55 percent (March 2014: 198 000 or 56 percent), deferred pensioners were 33 percent or 123 000 (March 2014: 19 percent or 66 000), pensioners 6 percent or 20 000 (March 2014: 19 percent or 66 000) while the balance of 20 000 or 5 percent was made up of beneficiaries (March 2014: 7 percent or 21 000).
Employer contributions amounted to $22 million or 17 percent of total contributions (March 2014:$12 million or 17 percent) while active members contributed $11 million or 8 percent of total contributions (March 2014: $14 million or 19 percent). Arrears contributions grew from 64 percent reported previously to 74 percent to close the reporting period at $95 million.
“The Commission continues to engage key stakeholders in monitoring payment plans as well as requiring upfront disclosure of the unfunded portion of member benefit statements and employer financials.”
For the quarter ended March 31 2015, total received contributions were $33 million, a 28 percent growth from the same period last year. Standalone funds realised $48 million as total income (March 2014: $41 million).
For the same period the expense ratios improved marginally which IPEC notes is a sign of prudent expenditure cuts in an effort towards preserving member values given generally depressed investment avenues obtaining in the market.
“The relationship between the industry expense ratio and the prevailing inflation levels shows a lot of distortion. The Commission therefore urges administrators to act prudently to protect pension member values. Additional measurers will be introduced to encourage prudence and fulfillment of reasonable expectations of members.” – Wires
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