INSTITUTE OF RETIREMENT FUNDS AFRICA CONFERENCE 5 – 7 JULY 2015 DRIVING AFRICA’S DEVELOPMENT AGENDA THROUGH SOCIAL DIALOGUE

STATE OF THE RETIREMENT INDUSTRY IN ZIMBABWE Zimbabwe’s old age security system comprises : The National Social Security Scheme (NSSS) Private occupational schemes Individual annuity plans and other private savings arrangements The NSSS forms the first pillar and is a defined benefit arrangement based on mandatory coverage of those in formal employment.

Commenced in 1994 and is a safety net scheme that provides floor benefits Is Governed by the National Social Security Act administered by the Ministry of Public Service, Labour and Social Welfare A pay as you go scheme financed on a partial funding basis Contribution are currently 3,5% of an insurable earnings limit of US$700.00

OCCUPATIONAL PENSION ARRANGEMENTS Form the second pillar These are either DC or DB Governed by the Pension and Provident Funds Act administered by the Ministry of Finance Regulated by the Insurance and pension Commission (IPEC) Member contribution rates range between 5 and 8% Employer contribution rates range between 5 and 15%

Retirement ages of 60 years and 65 years are common Individual annuity plans and other private savings arrangements make up the third pillar Legislation requires occupational funds to invest 10% of their prtfolios in prescribed assets for infrastructure development Due to liquidity challenges being faced by the country, sector is expected to play a major role in domestic resource mobilisation

ISSUES OF COMMONALITY AND FURTHER ENGAGEMENT WITH SA NATIONAL SCHEME Has reached maturity stage Actuarial reviews on the scheme now show a worrisome trend where it will need to constantly review contribution rates upwards to meet its liabilities Stakeholders fear crowding out of occupational schemes Dialogue is underway to ensure policy changes at the NSSS do not strain both employees and employers Proposals to put both under one Regulator Arrangements are also underway to implement a similar scheme in South Africa

OFFSHORE INVESTMENT In Zimbabwe, current legislation does not allow funds to invest offshore Industry has lobbied for authority to in invest a portion of their assets outside the country to allow for diversification of portfolios Pensions act under review and draft bill now has provision South Africa -25%, Botswana 70% and Kenya 15% Once legislation is enacted, we will collaborate with our peers on implementation modalities

EMPOWERMENT OF TRUSTEES Industry stakeholders have agreed on the need for capacity building for trustees ZAPF conducts regular training for newly appointed trustees and will soon launch a certificate course Runs a Pensions management Diploma in conjunction Harare Polytech. Students can progress to Btech in pensions and investments An area for further collaboration

PRI’S AND SHAREHOLDER ACTIVISM Dialogue on the need for responsible investment is gathering momentum in Zimbabwe ZAPF Council has undertaken to take an active role in information dissemination through training . We expect trustees to begin to incorporate the concepts in investment strategies ZAPF has applied for network supporter status with UN PRI office South Africa is way ahead and has a code for responsible investment. we need further engagement on the issues

FUND COMMUNICATION WITH STAKEHOLDERS Our pension legislation is under review and the Draft bill now has elaborate details of information that has be disclosed to stakeholders We expect funds to be more transparent through disclosures on such information as accumulated contributions, fund performance and pension increases South Africa has made strides in this area through initiatives such the communication challenge and we are eager to collaborate with IRF

PRESERVATION In Zimbabwe pension legislation has always made preservation of employer contributions mandatory when a member changes jobs Regulator gives the option to commute if the amount is less than US$300.00 Discussions are underway to make preservation compulsory in South Africa This is an area for possible collaboration

INCLUSION OF SME’s AND INFORMAL SECTOR IN RETIREMENT INDUSTRY This sector has been growing steadily over the years in Zimbabwe while formal employment has been on the decline A large proportion of the players operate unregistered enterprises, do not pay tax and are not members of retirement funds The burden of mobilising domestic savings for national development currently falls on the formally employed There’s need to engage representative bodies of this sector and strategize on how they can be included in the retirement industry

On retirement, they still need to live in communities with:- stable water and electricity Good road & railway networks Hospitals and Schools They therefore need to contribute towards resource mobilization for their retirement as well as for economic development