The Insurance and Pensions Commission (IPEC) has been slammed for not playing its oversight role resulting in the wholesale closure of pension funds, a development that could prejudice pensioners.
More than 1 100 pension funds were last week deregistered after they failed to comply with Section 10 and 11 of the Pension and Provident Funds Act. Section 10 noted that a registered fund may be dissolved in accordance with the provisions of the rules of the fund and shall be dissolved where so directed by the Registrar in terms of section 19.
Section 19 states that: “If, after examining any return or report in terms of this Act in respect of a registered fund, the Registrar is of the opinion that the fund is not in a sound financial condition and a satisfactory scheme for bringing the fund into a financially sound condition within a reasonable time has not been submitted to him.”
Under section 11 the fund could be deregistered where the Registrar has reasonable grounds for believing that, (a) a body which was registered in error; or, (b) a registered fund has ceased to exist or has been dissolved in terms of section 10; the Registrar shall, if possible, serve notice on the fund concerned at its registered office that he proposes to cancel its registration.
Martin Tarusenga, a board member of Zimbabwe Pensions and Insurance Rights, said before the closure of the pension funds the commissioner would need to demonstrate beyond doubt that there was no future source of finance to fund the pension fund, if they were to deregister it on grounds of unsound financial condition.
“In my view the first thing to note is that 1 100 is a lot of pension funds to deregister, having registered them in the first place. This particular point is suggestive of serious incompetence at the Commissioner’s Office, where pension funds are registered in error and/or for not complying,” Tarusenga said.
“The Commissioner’s Office must be investigated. Secondly, it is difficult to believe that 1 100 pension funds are not compliant in one instance.” Tarusenga said pension funds closure could happen when the company (employer) sponsoring the pension fund had closed down and when the pension fund had limited assets.
He said it was unusual for a pension fund to be run down abruptly as may happen with a bank as the rules of pension funds specified when benefits could be drawn and pension fund laws placed their own restrictions. “It should be thouroughly investigated that this deregistration exercise is not a ploy to exonerate insurance companies and the commissioner thereby massively depriving pension fund members,” said Tarusenga.
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“It is time the commissioner’s competence is put under spotlight, to minimise the potential for further significant loss by pension fund members,” he added.