Pensioners who anticipated compensation for pre-2009 inflation-eroded retirement savings will need to wait a while longer after the Insurance and Pensions Commission rejected submitted compensation schemes from pension funds due to non-compliance.
Out of a projected 1 395 applications, only 1 249 compensation schemes were submitted by pension funds, IPEC, which regulates the insurance and pension industry said.
The other 146 schemes face “appropriate regulatory sanctions” under Statutory Instrument 162 of 2023, which outlines the compensation framework.
The decision to provide compensation follows years of pressure from pensioners and policyholders, who argued they were unfairly disadvantaged by the currency conversion.
In 2009, Zimbabwe suspended its hyperinflation-eroded Zimbabwean dollar and adopted a basket of foreign currencies, including the US dollar. However, the conversion process resulted in significant losses for many pensioners and policyholders.
Pension fund values were badly eroded by hyperinflation, which soared to a record 500 billion percent in 2008, according to the International Monetary Fund.
The Government dealt inflation a blow in 2009 when it abandoned the use of the Zimbabwe dollar for a basket of foreign currencies dominated by the United States dollar, leading to what was generally called dollarisation. The Government—appointed commission of inquiry, chaired by retired Justice Smith confirmed “huge” loss of value among policyholders and recommended compensation for the losses suffered.
Some of the pensioners got zero values owing to a lack of benefit inflation-indexation and currency de-basing. That left many people, after years of hard work, vulnerable to poverty.
“As a result, the actual payments, which were initially scheduled to commence in March 2024, will not be possible,” said IPEC. “IPEC is actively engaged with each pension fund and pension fund administrator to enforce compliance within the confines of the law.
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The commission said selected submitted schemes were “close to fully complying,” suggesting potential for future approval and disbursement once compliance is achieved.
The commission said it would continue its ongoing engagement with pension funds and administrators to ensure compliance within the legal compensation framework.
In addition, the commission intends to utilise public notices through various media outlets to keep beneficiaries informed of the compensation process and its progress.
While pensions will be paid in local currency, there is a potential upside. Pension funds hold assets that generate foreign currency, like commercial properties. These assets could be sold for foreign currency, which could then be used for pension payments. However, this option is only available for divisible assets, like tradable stocks on the stock exchange (at their current market price).
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