admin
Martin Kadzere Senior Business Reporter
Government has ordered pensions funds and insurance companies to submit plans indicating how they intend to comply with their prescribed asset obligations by Friday, a senior official said. In a letter to the Insurance and Pension Commission, Mr William Manungo said compliance with prescribed asset requirements should be attained by September 30.
In terms of law, pension funds must purchase prescribed papers and the money raised is normally used to support Government linked projects.
But last year, pension funds invested only 2 percent of their assets on prescribed paper with industry players saying this was due to insufficient investments that had prescribed assets status.
According to the law, 10 percent is the prescribed assets ratio for pension funds.
Assets for pension funds grew to $1,8 billion last year from $1,5 billion a year earlier.
This implies that as much as $180 million should have been invested in prescribed papers, but pension funds invested $33 million.
This was however up from $21,8 million in 2012.
Life companies are required to buy prescribed papers at asset ratios of five percent for short-term insurers and 7,5 percent for long-term insurers. Life industry’s total assets grew to about $2 billion last year.
“In this regard, the indicative plans for compliance should have been submitted earlier,” said Mr Manungo in a letter to IPEC dated June 30. “To facilitate compliance by the set date, you are requested to submit the indicative plans by 8 August 2014.”
Life companies are required to buy prescribed papers at asset ratios of five percent for short-term insurers and 7,5 percent for long-term insurers.
Life industry’s total assets grew to about $2 billion in 2013.
Last year, some of the papers that had prescribed assets status included Old Mutual’s $27 million funding for distressed companies, CBZ Bank’s $15 million Agricultural Marketing Authority Bills to finance soya beans production, NMB’s $50 million facility for SMEs and FBC Bank/Agribank’s $15 million Agro Bills to finance soya beans.
The world over, pension funds are increasingly playing an important role in the national economies and if properly invested, they provide a mechanism for stimulating economic development.
In addition, pension funds across the globe are also increasingly looking at infrastructure investment with some investors actively pursuing opportunities in the sector.
Last year, Russia proposed to use its pension reserves for loans of up to $43,5 billion for three big infrastructure projects and other investments.
The Russian government proposed to distribute at least $14 billion from the reserves as loans to modernise the Trans-Siberian Railway, construct a 500-mile high-speed rail line between Moscow and Kazan, and build a superhighway ringing Moscow.
Finance Minister Economic Development Minister Patrick Chinamasa said in April this year that Government was looking at ways of tapping into pension fund assets as a potential source of financing infrastructural projects, particularly for the energy sector.
He said the Government was considering coming up with a financial instrument to mobilise funds from retirement savings.
Online Reporter