The Pensions and Provident Funds Act [24:09] has been in force since 1st July 1976. Throughout the course of time, the Insurance industry has seen dynamic changes financially and administratively without any major adaption by the governing Act. As such, calls for change based on the challenges within the Insurance and Pension sector were noted and accordingly a Commission of Inquiry into the Conversion of Insurance and Pension Values was established in terms of Statutory Instrument 8 of 2015 as read with Statutory Instrument 1 of 2016 led by the retired Justice Smith.
Major highlights and impact of the Justice Smith Report
The main aim of the Report was to change the landscape of the Zimbabwean insurance and pension industry for the betterment of social protection. The Report noted among other things that the major problems that had stormed the industry are;
- There has been loss of value arising from pension contribution arrears;
- There has been loss of value due to hyperinflation;
- There has been loss of value through conversions and dollarisation;
- There has been delayed processing of lump sum pension benefits;
- There has been poor policy formulation to govern the industry.
In a bid to address some of these challenges, the Report noted recommendations that were by and large centred on the need to have a complete overhaul of IPEC, policy reforms, adoption of a comprehensive insurance scheme, consumer protection and good governance.
Taking heed of the Justice Smith Report and pursuant to several debates in the House of assembly and the Senate, the Report was used as the basis for a proposed repeal to the Pensions and Provident Funds Act through the current Pensions and Provident Funds Bill, 2019.
Major takeaways from the Bill.
The Bill ushers in fundamental provisions, which if properly implemented will bring a paradigm shift to the insurance and pension industry. Some of the major provisions address the following;
- Right to Administrative Justice
IPEC has a major role as the regulator of pension funds. Nonetheless, the bill provides that IPEC will have to adhere to basic principles of corporate governance in carrying out its role. It will have to discharge its duties in a lawful, prompt, efficient, reasonable and proportionate way. Any failure on the part of IPEC will be subject to administrative review especially regard being to the powers which IPEC will have to revoke certificates of registration pursuant to breach of conditions or misrepresentation by a Fund.
- Consumer Protection
The major aim of the bill is to ensure protection for policy holders and pensioners. The bill emphasizes as one of its main objectives the need to treat customers fairly.
- Preservation of value
This is a major corollary of the Smith Report. The bill provides that the board of every existing fund shall as soon as possible after a currency conversion date cause the fund’s actuary to calculate the fund’s liabilities in the former currency towards its members, beneficiaries and other stakeholders at the currency conversion date and cause the fund’s actuary to apportion the fair value of the fund’s assets in the new currency between the members, beneficiaries and other stakeholder so as to establish, so far possible, the fund’s liability in the new currency to each of those classes of persons.
The Bill provides that a board of trustees shall manage the Fund. To ensure integrity, the board shall be composed of members who must be fit and proper.
- Technological advancements
In a move to bring the Pensions and Insurance industry to international standards, the Bill proposes the adoption of digital technology to curtail time and costs.
Are the proposed amendments enough?
Critics have pointed out that the bill ought to relate somehow to the recent Consumer Protection Act since its main objective is the protection of policy holders and pensioners. Further, there is no adequate accountability measures with regards to the Pension Protection Fund administered by IPEC. It has also been said that the legal regimes governing the insurance and pension industry remain unconsolidated and fragmented.
Despite the critics which the Bill shall invariably be exposed to, this, at least is a step in the right direction towards the improvement of the Insurance and Pension Industry and protection of policy holders and members thereof in line with modern standards in the industry.
Read the original publication at MawereSibanda.