Govt compensates pension and insurance policy holders
Harare (New Ziana) – The government has availed US$175 million towards compensating pensioners and insurance policy holders whose contributions were wiped off when the country adopted the multi-currency system in 2009.
In a post Cabinet briefing, Information, Publicity and Broadcasting Services Minister Monica Mutsvangwa said the targeted beneficiaries of the compensation are policyholders of life savings products and pensioners whose benefits were due or paid between 2000 and 2010.
“This is the period during which the macro-economic fundamentals had the most adverse impact on long-term savings contracts. The period 2009 to 2010 is meant to deal with conversions that took place in response to currency reforms,” she said.
“In recognizing the prejudice suffered by pensioners and policy holders, Cabinet has approved that government contributes US$175 million towards the pre-2009 compensation to partly cover for the loss of value suffered. This will also bring closure to this long outstanding matter.”
Life insurance policies and pension contracts eligible for compensation include With-Profit Insurance Policies, Investment Contracts or Cash Accumulation Policies, Unit-linked Policies, Inflation-indexed Policies, Unilaterally Terminated Funeral Contracts, Terminations due to Currency De-basing, Guidance on Stopped Premiums and Pension Products.
“Cabinet further highlights that the draft regulations to bring legal force to the compensation framework are now in place. The regulations will be issued in terms of the Insurance Act and the Pensions and Provident Funds Act.
“The regulations outline the process of quantifying prejudice to members in line with the type of contract, that is, Defined Benefit, Defined Contribution, life insurance savings policies and personal pensions. They also cover the calculation of prejudice for members of funds that converted from Defined Benefit to Defined Contribution. The sources of funding for the compensation are covered in the regulations with the exemption of Government commitment,” she said.
Mutsvangwa said the insurance industry was extensively engaged by IPEC regarding the compensation framework in general and the sources of funding in particular for this process.
There was public outcry over loss of value by insurance policy holders and pension fund members who pointed to lack of transparency in the manner in which their long-term contracts were converted from the ZW$ to US$ in 2009.
In response to the public complaints, the government commissioned the Justice Smith Commission of Inquiry in 2015, which culminated in a report which was submitted in 2017 and adopted by Cabinet in 2018.
In September 2018, Government then mandated the Insurance and Pensions Commission (IPEC) to implement the recommendations of the Justice Smith Inquiry.
Since the adoption of the Justice Smith recommendations, Mutsvangwa said significant progress had been registered in implementing the recommendations.
For example, she said, the legislation governing insurance and private occupational pensions funds which form the backbone of an effective regulatory and supervisory framework, had been reviewed.
“The Bills to amend the Insurance and Pensions Commission Act, the Pension and Provident Funds Act and Insurance Act are at different stages of consideration in Parliament. The amendment Bills will address all strategic deficiencies in the legal framework as identified by the Commission of Inquiry.
“The regulatory and supervisory capacity of the Insurance and Pensions Commission has been enhanced through increasing the head count from 26 staff members in 2017 to the current 118. The staff complement has been diversified to include the various required skills set, such as actuarial, legal, accounting, economics, risk management, insurance and pensions competencies,” she said.
“The necessary regulatory frameworks and systems were put in place in line with international benchmarks and risks that are peculiar to Zimbabwe’s insurance and pensions industry. Oversight of corporate governance, risk management and investment management in pension funds and insurance companies was improved for the protection of policyholders and pension scheme members.”