Insurers to compensate eligible members for pre-2009 pension losses

The Insurance and Pensions Commission (IPEC) expects the industry to compensate eligible members to the ‘fullest extent practicable’ following the gazetting of regulations where policyholders and pensioners are compensated for the loss of value of pension products suffered in the pre-2009 era.

On September 29, 2023, the government gazetted the Pensions and Provident Funds (Compensation for Loss of Pre-2009 Value of Pension Benefits) Regulations, 2023, through Statutory Instrument 162 of 2023, with an effective date of October 1, 2023

Zimbabweans have a bad memory of the pre-2009 era because the country recorded the highest inflation rate that wiped away their savings, and devalued their pensions and insurance following the conversion of the Zimbabwe dollar to the multicurrency regime in 2009.  

In 2015, a Commission of Inquiry was constituted in 2015 by then President, the now late Robert Mugabe, to investigate the causes and extent of loss of value of life insurance policies and pensions suffered by policyholders and pension scheme members following the conversion of the Zimbabwe dollar.

The Justice George Smith-led Commission of Inquiry found some policyholders and pension scheme members were prejudiced during the conversion process and recommended they be compensated. 

Pursuant to those recommendations, the regulations are applicable to private occupational and individual pension products to (a) recognise the loss of value of pension products suffered during the investigative period (01 January 2000 to 28 February 2009) by making sure affected members are compensated to the fullest extent practicable; 

(b) to provide the criteria by which all funds and insurers compensating affected members may assess and quantify the prejudice suffered by those members.

Addressing journalists on the 2009 Compensation Exercise, IPEC Commissioner Dr Grace Muradzikwa said compensation applied to every member or former member of a fund or insurer that offered private occupational or personal pension plans during the period January 1, 2000 to February 28, 2009. 

“This includes: a) active member; b) active pensioner; c) deferred pensioner; d) suspended pensioner; e) beneficiary; f) members or beneficiaries who exited the fund through death or other means contemplated by the rules of the fund g) For defined benefit schemes, only members who exited during the said period,” she said.

Pensioners paid in currencies other than the Zimbabwe dollar during the same period are not eligible for compensation under these regulations, said Dr Muradzikwa because they did not experience loss of value. 

“The form of compensation will depend on whether the affected individual is still employed or is now receiving a pension,” she said.

“All compensation will be done in Zimbabwe dollars. In the event a fund is generating enough foreign currency from its investments, compensation may be made in that currency.”

These are the steps to be followed until the actual payment:

“(i) Industry to Submit Compensation Plans Liable insurer or pension fund to submit compensation plan to the Insurance and Pensions Commission (IPEC), including the list of eligible policyholders or pension fund members and the compensation amounts within 90 days after the Regulations come into effect (by 31 December 2023). 

(ii) IPEC Approval of the Compensation Plans IPEC is to analyse the compensation plan and either approve or reject the proposed compensation plan (if it does not meet the expected standard) within 30 days after receiving the compensation plan (by 30 January 2024),” said the IPEC commissioner.

After approval of the compensation plan, the insurer or pension fund will publish in the media the beneficiaries. 

The insurer or pension fund will also be expected to disclose a summary of the actuarial report on the implementation of its approved compensation scheme; the individual member’s compensation amount and relevant pay-out timelines and complaints mechanism in place.

Dr Muradzikwa said if IPEC approves the compensation plan, the insurer or pension fund will be expected to start paying eligible policyholders or pension fund members no later than 30 days after the IPEC approval (by 02 March 2024).

“While we appreciate stakeholders have different expectations regarding how much will be paid, there is a need to take into account that the regulations state that full indemnification of the quantified loss of value of pension benefits over the investigative period is not practicable given that the losses were for the greater part fortuitous,” she said.

“ Nevertheless, it is right, fair, proper and desirable for those affected by the loss to receive some compensation from relevant pension funds and insurers, and from the State”. 

It is for this that IPEC expects the industry to make sure that it compensates eligible members to the fullest extent practicable, said the commissioner.

“We do believe that the industry has the capacity to compensate eligible members to the fullest extent practicable.”

“IPEC does not expect non-compliance given that we have involved the industry throughout this exercise. However, the regulations have proactively provided penalties in the event of non-compliance.”

Dr Muradzikwa said compensation is key to confidence restoration.

“The 2009 loss of value has contributed significantly to the low confidence the industry is currently grappling with. We believe in making good the compensation because it will help to restore confidence in insurance and pensions, which is key if the industry is to be sustainable,” she said.

“It is now all hands on deck to ensure that we successfully carry out this exercise for the benefit of all our stakeholders.”

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