Firms directed to start compensating pensioners

The Chronicle

AFTER a long and uncertain wait, pensioners and insurance policyholders who were heavily prejudiced during the conversion of their benefits at dollarisation in 2009 could have smiles on their faces soon after the Insurance and Pension Commission directed insurers and pension funds to start computations to the losses.

Nearly a decade after the Government commissioned an investigation in 2015 into how pensions and insurance benefits were paid out following a big outcry from pensioners and policyholders, IPEC said protocols of gazetting the compensation regulations were at an advanced stage, signaling the imminent start of the process.

Pension fund values were badly eroded in values due to devastating hyperinflation, which soared to a record 500 billion percent in 2008 according to the IMF.

The Government wiped out the hyperinflation figures in 2009 when it abandoned the use of the Zimbabwe dollar for a basket of foreign currencies, but mostly dominated by the US dollar, leading to what is now generally called dollarisation.

The commission of inquiry, chaired by retired Justice Smith, confirmed a “huge” loss of value to policyholders and pensioners and recommended compensation for the loss suffered.

It established that while policyholders lost value during the conversion period, they also lost value throughout the investigation period between 1996 and 2014.

Thousands of insurance policyholders and pensioners have been hoping and holding out for additional pay-outs after receiving insignificant amounts as low as US$0,08c after several years of working.

Some of them got zero values owing to lack of benefit inflation-indexation and currency de-basing. The loss of value has left many people, after years of hard work, poor and have been expecting compensation. The IPEC said significant progress has been made and compensation regulations would be gazetted soon.

“To ease the pressure of work associated with implementing the regulations once gazetted, insurers and pension funds are urged to start preparation and computations based on the draft regulation,” IPEC said in a circular to stakeholders.

“This will aid to the smooth implementation process and adherence to timelines proposed in the draft.”

Analysts say compensating the policyholders and pensioners would bring huge relief to thousands who were short-changed.

“Some have already died but we still have some and compensation would be a great thing for them,” an asset manager with a Harare-based firm said.

“Hopefully, the compensation would be something reasonable.”

While the total prejudice suffered would not be quantified, the commission was satisfied the industry had “reasonable capacity” to compensate thousands of policyholders.

The compensation framework would take into consideration the criteria for assessing prejudice in relation to the insurance and pension contracts, the factors that caused loss of value, the shortcomings of the conversion and the soundness of the industry.

While the commission noted that the other reason for the loss of value was due to industry poor practices — here compensation will be expected from the private sector — the main reason was harsh macroeconomic environment characterised by hyperinflation.

The commission noted the loss that resulted from inflation, currency de-basing and the exchange rate used for de-monetization contributed 43 percent of the loss, regulatory flaws; 21 percent while poor industry practices contributed 36 percent.

The Government is also in the process of compensating pensioners for losses incurred during the 2019 currency reforms. Finance and Economic Development Minister Prof Mthuli Ncube, said following a dividend declaration by Kuvimba Mining House in 2021, a total of 3 547 pensioners from the first group of vulnerable pensioners have been paid US$100 each, translating to a disbursement of US$354 700, out of the US$400 000 allocated as at September 30, 2022.

The first dividend tranche targeted pensioners and beneficiaries earning an annual pension below $1 000 as at December 31, 2020 and subsequent disbursements will be made once more resources are available, Mthuli added. – Business Weekly

Article Source: The Chronicle

Enjoyed this post? Share it!