Pension Fund Association Looks Beyond Borders

THE Zimbabwe Association of Pension Funds has asked government to outlaw a piece of legislation barring the association from investing beyond the country's borders owing to a subdued performance on the local capital markets. The sector is emerging from a low base after years of hyperinflation. Low industry capacity resulting from limited access to lines of credit and unsustainable interest rates on short term loans being offered by the banking sector has led to low pension contributions, ultimately stifling investment options for pension funds. The inclusive government formed last year has only managed to channel just over US$1 billion to revive the once moribund economy.

Davidzo Chitengu, spokesperson of the ZAPF told delegates attending the pre-budget consultative workshop in the capital on Wednesday that pension funds, which contribute to the bulk of trade on the ZSE, have resolved to look elsewhere for business growth. The ZAPF, whose mandate is to mobilise resources for retirement age and domestic savings for economic growth also has investments on the property market.

This proposal comes at a time when the local bourse is struggling to tick owing to liquidity challenges and investor anxiety over indigenisation laws compelling foreign-owned companies to dispose controlling stakes to black Zimbabweans over the next five years.

"Current pension legislation does not allow pension funds to invest offshore. We propose that offshore investment be allowed in order to diversify the funds' portfolios and reduce country or currency risk," Chitengu said. "The amount invested offshore should be limited to a percentage,we suggest a maximum of 10-15%, of the fund's assets to avoid concentration risk."

The associationalso urged government to grant further tax concessions to pensioners within 10 years of retirement to allow them to build an adequate retirement provision needed to alleviate the adverse impact of hyperinflation on their savings over the past decade.

The pension funds also appealed to government to extend tax exemption policy on income from a pension fund for pensioners aged over 55 years. Government introduced the reprieve for pensioners four years ago. Apart from this reprieve, banks are currently exempting pensioners earning US$25 monthly pensions from paying service charges.

"We note that non-working widows and surviving children under the age of 18 years who do not qualify for tax exemption for elderly citizens are grappling with the taxes which are almost wiping away the meager benefits. We propose that the tax exemption for elderly pensioners be extended to surviving spouses and children," Chitengu said.

Finance minister Tendai Biti however said government was satisfied with the recovery in the sector whose investments were wiped out by hyperinflation that came to an end last year after the adoption of multiple currencies.

"Insurance companies and pension funds have been revitalised by the improved macroeconomic environment," Biti said."The recovery in the sector has made it possible for my ministry to reintroduce prescribed assets that had been suspended and that encouraged the Insurance and Pensions Commission to implement minimum capital requirements for companies conducting insurance business".