IPEC proposes safety net fund

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THE Insurance and Pensions Commission (IPEC) has proposed the setting up of a safety net as a possible avenue of recourse for those affected by hyperinflation.
After the introduction of the multicurrency system in 2009, insurers and pension funds appointed actuaries to carry out a conversion of all Zim dollar policies into US dollar values.
The exercise was completed with a redistribution of policy holder assets, which had suffered considerable loss during hyperinflation, resulting in significant losses being incurred by policy holders.
The safety net was proposed by IPEC as part of a number of pension reforms which the regulator published last month. The fund is meant to complement a three-tier pension system which has also been proposed.
Josphat Kakwere, IPEC’s head of pensions, said this ‘tier zero’ could be an avenue of recourse for the losses incurred during hyperinflation.
“This could be a possible solution to compensate the loss of value which people suffered at the conversion of policies from the Zim dollar during hyperinflation,” Kakwere said during a stakeholder consultative workshop on the proposed reforms last week.
IPEC has proposed that the safety net fund be adopted by the government to deal with old age poverty alleviation for those not covered under the proposed three-tier system.
“The fund would however need to be funded from somewhere so as we look at how we can fund such a pool, we also need to consider how we can make it so that those individuals who lost value during hyperinflation can also be covered,” Kakwere said.
“These are people who contributed for years, some even up to 50 years, only to get $20.
“Others say why not come up with a long term bond, but this means that the current generation will actually be subsidising future generations.
“Some have also said why not introduce a levy similar to the AIDS levy to cover that, maybe from fuel or something like that., the idea in all of this is to make sure that no one gets into old age poverty,” Kakwere said.
IPEC says the proposed reforms are a follow up on findings and recommendations made by the Commission of Inquiry into the Conversion of Insurance and Pension values.
The commission, which was led by the retired Justice George Smith, identified a number of challenges in both, the public and private pension sectors, including lack of transparency, contribution arrears, high administration expenses and insufficiency or absence of retirement benefits coverage.
“We want to avoid old-age poverty…what comes out of a pension should be better than what an average investor would get otherwise the purpose is defeated,” said Kakwere.
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