THE Zimbabwe Association Pension Funds (ZAPF) has called for the pensions industry to reignite a savings culture to restore trust and confidence in the sector.
This comes as a myriad of challenges over the years, mostly around monetary policy mishaps, has eroded confidence in the sector and created mostly a consumer spending economy.
Pension funds remain some of the biggest institutional investors in the country.
Speaking at the Zimbabwe Association of Pension Funds Principal Officers and Chairpersons Convention in Bulawayo last week, ZAPF vice chairperson Willie Chibaya said creating a savings culture takes the effort of government and industry for it to be successful.
He added that government’s intervention could be direct or indirect through creating policy which allows the industry to create a culture of savings in the population.
“Post dollarisation up to 2017 the pensions sector saw a steady increase in pension contributions growth to GDP (gross domestic product). The peak year of contribution growth to GDP was in 2016. Post 2017, there has been a rapid decline in contributions towards pension funds with the worst year being 2019 following the pronouncement of the 1:1 policy measure,” he said.
“This decline is attributable to several factors that we need to address inclusive of the following; Economic instability - whereby the country continues to experience cyclical episodes of economic crisis stemming from currency reforms.
“Currency reforms - After every currency reform/change pensions suffer the brunt of value erosion, hyperinflation resulting in loss of value, lack of trust in institutions arising from the conversion process, salary skew towards non pensionable allowances, company closures and subsequent retrenchments, low pensions coverage ratio 2% - 9% vs emerging market coverage ratio range from 10% to 25% and high levels of informality which stimulate the perception that pensions are inaccessible or irrelevant to a significant portion of the population.”
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He said increased regulation and the need for co-existence and growing need for alternative and high yielding investments.
“All these have resulted in the lack of trust and low confidence in the pensions thereby calling for the need for industry to find ways in which to re-ignite the savings culture,” Chibaya said.
ZAPF reported that principal officers and chairpersons played a substantial role in heading the revival of the savings culture through multifaceted strategies.
Throughout the convention, ZAPF highlighted how principal officers and chairpersons carried the responsibility of being innovative through designing and implementing pension plans that meet the specific needs of members as an incentive for them to save.
Chibaya said that the industry had the responsibility to make strategic decisions that optimise investment returns while exploring other investment avenues in terms of treating members fairly, transparently and with accountability.
“In that regard, it is the collective responsibility of Insurers, Administrators, Principal Officers, Chairman and other service providers to ensure the sustainability of pension funds and reignition of the savings culture,” he said.
