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IPEC Worry Over Rising Pension Contribution Arrears

Tafadzwa Muranganwa-Own Correspondent

Zimbabwe companies have failed to remit pension contributions amounting to  ZWL$26.21 billion to respective pension funds in the 10 months  to December 31, 2022, reflecting a 395 percent increase from ZWL$5.3 billion  in  March 2022.

This comes amid fears that members will be deprived of their entitlements when they become due.

The insurance sector regulator, the Insurance and Pensions Commission (IPEC) has raised the red flag as the benefits can only be paid to beneficiaries whose contributions and premiums are up to date.

“IPEC has noted with concern the continued failure by some sponsoring employers to remit pension contributions to their respective pension funds,” said IPEC commissioner, Grace Muradzikwa.

“The failure by companies to remit the contributions is attributed to viability challenges faced by   the sponsoring employers to the detriment of pension scheme members who end up receiving reduced or no benefits when they become due.”

According to official data obtained from IPEC, of the ZWL$26.21 billion, stand-alone self-administered funds contributed a huge chunk amounting to ZWL$19.8 billion while self- administered funds had ZWL$4.55 billion. Insured funds contributed the balance.

It is however a criminal offence for companies to deduct pension contributions from employees’ salaries and wages but fail to remit to their respective pension funds, according to Section 2(a) of Statutory Instrument (SI) of 2014.

The SI specifies that all sponsoring employers should remit contributions within 14 days after the end of each month to respective pension funds.

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Despite the existence of the law, many companies in Zimbabwe continue to deduct amounts from salaries or wages of their employees and deliberately   fail to pay such amounts to the relevant retirement funds, choosing to fund their cash-flows instead.

Consequently, this is likely to weaken public confidence in insurance and pension business.

Market watchers have blamed  current penalties provided in  pension regulations which are not  deterrent enough since they are limited  to a level 6 fine or imprisonment  for one year or both such fine and such imprisonment.

IPEC has, however, proposed strengthening the Pension and Provident Funds Bill to force sponsoring employers to remit contributions.

The Bill is currently before Parliament.

If the Bill is passed into law, companies’ chief executive officers and finance directors who deduct pension contributions but fail to remit such to respective pension funds civil and criminal penalties in their personal capacities.

IPEC regulates about 981 registered pension funds. Of these, 504 are active, accounting for 515 of the industry’s funds. The remaining 477 funds are inactive as they are either paid up or undergoing dissolution.

The National Social Security Authority (NSSA) which is not under the regulation of IPEC but under the purview of the Ministry of Public Service, Labour and Social Welfare, also administers pensions.

It has emerged that it is also owed huge amounts of pension contribution arrears.

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NSSA says only 52 percent of registered companies in Zimbabwe remitted the compulsory employee contributions to the pension fund in 2022, meaning 48 percent did not comply with the law.

“The average compliance rate per month for the year 2022 stood at 52%. But, this does not comply with the fact that 48% completely defaulted in 2022. Rather, some employers comply in one month and fail to comply in other months,” said NSSA’s marketing and public relations deputy director, Tendai Mutseyekwa.

He added: “The consequences of not complying or remitting include levying of penalties and surcharges on outstanding contributions, penalties for late registration and legal processes such as garnish orders to enforce compliance.

“Over and above these penalties, any employer who contravenes any provision of the NSSA Schemes with which he must comply shall be guilty of an offence and liable to prosecution as set out in the NSSA Act.”

A former worker at a Harare based manufacturing company, Chipo, who is yet to get her pension said: “My Company (name supplied) was deducting pension from my salary every month for the past 30 years. But, when I retired in December 2022, I was told by our pension fund (name supplied) that my company was not remitting their contributions and was in huge arrears.”

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