Source: Reprieve for pensioners | Daily News

HARARE – Many Zimbabweans who were offered $5 for their life’s savings and pensions by the country’s bankrupt government in 2015 could get more money if latest findings are anything to go by.

Three years ago, the Reserve Bank of Zimbabwe announced that would pay $5 to all those who held Zimbabwe dollar bank accounts and pensions when it abandoned its domestic currency late 2008.

The move was, however, roundly criticised by various stakeholders in the country “as gross unfair” prompting the government to setup a commission of inquiry into the matter.

The commission of inquiry, which probed the process used to convert insurance and pension benefits before and after dollarisation, has confirmed a “huge” loss of value to policy holders and pensioners recommended adequate compensation for the loss suffered.

“The exchange rate used in 2015 for converting for demonetisation was prejudicial to pensioners and policy holders,” Finance minister Patrick Chinamasa said in parliament last week while presenting findings of the inquiry.

“The maximum an individual could get was $5 and all insurance companies and pension funds received a combined total of less than $135 000.00.  The commission therefore, recommends that the demonetisation process be revisited in order to ensure a fair compensation of insurance policy holders and pensioners,” he said.

In order to achieve objective decision making, accountability and transparency, as well as to remove regulatory capture, the commission recommends enhancement of the operational independence of the insurance regulator from undue political and industry influence through removal of conflicting board appointments.

Serving members, managers of Insurance and Pension Funds (IPEC) used to sit on the board of the regulator, hence were conflicted.

Currently, ministry of Finance permanent secretary Willard Manungo sits on the IPEC board.

Chinamasa noted that on record keeping, the inquiry observed that entities in the industry do not maintain proper records, hence in most cases, the lack of data became a hindrance and some issues could not be concluded due to lack of data.

“In order to ensure mandatory record keeping since the industry is data intensive and requires information to be kept over long periods of time, it is recommended to mandate through legislation the insurance and pension industry a minimum period of 100 years for the commencement of ICT supervision in the sector,” he said.

As part of measures to protect consumers of insurance and pension services, the report noted that IPEC should further be obligated to maintain an independent register of the assets and the corresponding liabilities of insurance and pension funds on a product by product basis which is cumulatively adjusted on a year by year basis to take into account changes in the assets and liabilities that happen each year.

In order to safeguard the interests of the pensioners, the commission also recommended the repeal of the requirement in the Pension and Provident Funds Act for pension fund assets to be accounted for on a historical cost basis.

The recommended legislative amendment is that the accounting should be governed by the Audit Professions Act to ensure that the accounting practices are dynamic and in line with international standards.

“With respect to the appeal process, the International Organisation of Pension Supervisors to which IPEC is a member has standards which require that the regulator and regulatory processes be operationally independent from undue political influence,” Chinamasa said.

“In line with the international best practices and for the purposes of expediency in the handling of appeals, it is recommended that the current appeals process be amended to provide for the establishment of an Appeals Board headed by a retired judge or a legal practitioner who is qualified to be appointed as a judge.  The function of the Appeals Board will be to handle appeals against decisions of the regulator.  Its determination will be final and can only be reviewed by the High Court,” he said.

The commission further recommended the setting up of the office of the Ombudsman of the insurance and pension industry in order to handle all complaints in the pensions and insurance industry coming from contributors, given that current pensioner representative bodies are exploitative.

The Treasury boss said the commission noted that the financial sector has operated without a strategic direction over the medium to long term.

“In order to guide the strategic direction and developmental role of the financial services industry in the economy, including insurance and pensions, banking, securities, micro-finance, it is recommended that a financial sector development plan which will spell out the role of the sector in mobilising long term capital for national development, confidence building measures and financial skills development and introduction of a skills development levy among others be crafted,” he said. – The Financial Gazette