THE Insurance and Pensions Commission (IPEC) will soon embark on stakeholder consultations to come up with a policy framework that defines benefits of pension funds run by local authorities and parastatals.Outgoing Finance Minister Tendai Biti in the mid-term national fiscal presentation recently said the Government was concerned by the pension contribution arrears being accrued by parastatals and local authorities.
“The arrears are mainly arising from the following factors: contribution rates of as high as 30 percent; adoption of very high and unsustainable benefits structures; absence of a policy framework which defines benefits and contributions structure for parastatals and local authorities pension schemes; poor corporate governance and accountability on these contributory institutions, which have seen some of the executives awarding themselves hefty salaries and allowances, making book entries while failing to remit pension contributions to their pension funds,” he said.
Minister Biti said cumulative arrears were detrimental to pension fund members, fund administrators, the Government and the pension industry at large.
“To address this challenge, the Insurance and Pensions Commission (IPEC) will, through stakeholder consultation, come up with a policy framework which defines benefits, contribution structures and governance of pension funds in local authorities and parastatals,” he said.
During the first half of the year, the insurance and pensions industry recorded a steady recovery with the sector’s assets recording a 2,23 percent growth to $3 million in the first quarter, up from $2,9 million as at 31 December 2012.
The growth is mainly attributed to a stable macro-economic environment that has prevailed since the multicurrency system in February 2009.
While the insurance and pension industry is key to economic growth, the sector was however, facing challenges such as negative public perception following values lost during the hyper-inflationary period and poor corporate governance in some institutions.
Meanwhile, Minister Biti said a report on the conversion process of pension benefits at the inception of a multi-currency system was now with the Treasury and the appropriate policy pronouncement will be announced in due course.
In 2009, Government engaged an independent actuary to evaluate the transparency in the conversion process of pension benefits.
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