Country Profiles

Zimbabwe

Country Profiles

Zimbabwe

Complementary pensions (Voluntary)

Updated: 31 March 2022

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2018- 2021: Pension and Provident Funds Act [Chapter 24:09] and the accompanying Regulations were revised. The Pensions Bill is still be promulgated as law although it is now before the Senate.
The principal regulations SI 323 of 1991 were amended by Statutory Instrument 80 of 2017 and Statutory Instrument 91 of 2020.

2021: Insurance and Pensions Commission (Levy) Regulations (S.I 86 of 2021); provide for levy formulae, the period of payment and penalty for non-payment for different classes of companies operating in the insurance and pensions industry.

2021: Pension and Provident Funds (Amendment) Regulations (S.I 84 of 2021); provide for registration fees for the pension funds, fund administrators, self-administered pension funds.

2021: Pension and Provident Funds (Amendment) Regulations (No. 91); provide for pension fund administrators registration requirements, which include their capitalisation, conduct of business, good governance compliance and penalties for non-compliance.

2014: SI 61 of 2014 provides that when benefits are not paid timeously, they should be paid with interest at the unsecured lending rate of the bankers of the fund.

2003: Pension and Provident Funds (Amendment) Regulations (No. 11); provide for member to make contributions without limit.

2002: Pension and Provident Funds (Amendment) Regulations, 2002 (8); provide for order of payment of death benefits.

2001: Insurance and Pensions Commission Act [Chapter 24:21]; provides for the establishment of the Insurance and Pensions Commission to supervise insurance and pension and provident funds and other issues related to the funding and operation of the Commission.

1996: Pension and Provident Funds Act [Chapter 24:09] (is under revision); provides for pension plan registration, management and administration and financial requirements.

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Plan sponsors

Employer(s), singly or as a group, may, on a voluntary basis, establish complementary occupational pension plans for their employees.

Plans established by a group of employers are known as umbrella pension plans.

Plans may be established through a decision of the sponsoring employer(s) or under a collective bargaining agreement.

Life insurers or professional fund administrators may establish umbrella schemes for unrelated employers or employees.

Types of plans

Pension plans: These are established as defined benefit, defined contribution or hybrid pension schemes to provide a pension at retirement. They may provide additional benefits such as death in service, ill-health, disability and funeral benefits.

Provident plans: These are mostly established as defined benefit employer sponsored plans. The law also allows for establishment of defined contribution provident plans. These plans provide a lump sum at retirement. These plans are regaining popularity due to the provision of lumpsum rather than monthly pensions at retirement.

All plans: Pension and Provident plans must be registered with the Commissioner of Insurance, Pension and Provident Funds before the funds can start to operate. The rules of the pension schemes must conform with provisions of the Act and Regulations.

The following documents must be attached to the application for registration of the fund:

 

  • Three copies of the fund rules;
  • a report and a certificate from an actuary setting out the method of financing the benefits, the interest rate used in the calculations, how benefit adjustments are taken into account, and whether the contribution rate is expected to be stable, increasing, or fluctuating; and
  • a list of the sponsoring employers (in the case of funds implementing group umbrella plans).

 

Upon the establishment of a new plan, or the amendment of an existing plan, current employees who are not yet members may elect to join the plan within 12 months of its establishment or amendment. For newly hired employees, joining an existing plan is a condition of employment. Plan members may not withdraw from membership while employed by the sponsoring employer.

There are no limits to employer contributions but they should be at least equal to those of the employee.

Employees may make additional voluntary contributions without limit.

Employers are allowed to inject lumpsum capital for the purpose of making the fund financially sound.

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All plans: Pension and provident funds are independent legal entities from the sponsoring employer and must be governed by a board of trustees. At least one-half of the members of the board of trustees must be elected by plan members, with the remainder appointed by the sponsoring employer(s). The chairperson of the board of trustees must be appointed by the trustees amongst themselves. The fund is allowed to appoint independent or expert trustee/s.

The board of trustees may manage the contribution and benefit administration in-house (stand-alone self-administered funds) or outsource the administration of the fund to a registered fund administrator (insured funds and self-administered funds).

A principal officer must be appointed to manage the daily administration of the fund. In the case of a fund implementing a plan that is based on a collective agreement, the principal officer must be an employee of the industrial council concerned. However, if the fund is administered by an insurance company, the principal officer must be an employee of the company. The principal officer must attend all meetings of the board of trustees.

There are minimum, fit and probity; corporate governance and risk management requirements for Trustees, Principal Officers and Fund Administrators. Fund administrators are also subjected to minimum capital requirements.

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All plans: Private and public sector employees.

Plans may not discriminate on the basis of sex, salary, wage, rank, seniority, or occupation. In order to prevent discrimination through different benefit structures and eligibility conditions, employers may not establish more than one plan for their employees unless approval is obtained from the Commissioner of Insurance, Pension and Provident Funds. The benefit formula must, in general, be the same for all members. However, subject to the approval of the Commissioner of Insurance, Pension and Provident Funds, different accrual rates may apply to members in hazardous occupations, or if such differences can be justified on actuarial grounds.

The plan rules must not include provisions that render admission to membership or benefit eligibility to any discretionary power. Membership must be granted to all eligible employees between the ages of 16 and 70 depending on the retirement age provided in rules of the fund.

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Sources of funds

Employee contributions

All plans:
Contributions must be specified in the plan rules as a percentage of salary, including any regular commission or bonus and any other allowances. Members whose salary is reduced may elect to contribute at an increased rate to ensure continuation of the same contribution level as before the salary reduction.

Plan rules do not limit contributions. Contribution limits are based on an agreement between the employer and employees.

Employer contributions

All plans:

Employer contributions should be at least equal to those of the employee for defined contributions, and for defined benefit schemes, cotributions will be as per the professional advice from the actuary from time to time.

Other sources of funds

All Plans: Voluntary contributions and transfers from other private occupational funds.

Methods of financing

All plans: Funded.

Asset management

All plans: The board of trustees may manage the assets in-house or contract out the asset management to asset managers registered with the Securities and Exchange Commission of Zimbabwe. If the contributions and benefit administration is managed by an insurance company, this company will usually also manage the assets and where necessary the investment of assets is outsourced..

Of total assets invested, a minimum of 20 per cent must be in prescribed instruments.

The Insurance and Pensions Commission issued an Expense framework in 2021 which states the basis for asset management fees and administrative costs.

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Acquisition and maintenance of rights

Waiting period

All plans: The waiting period is agreed between the employer and the Board of Trustees. Plan rules may provide for a maximum waiting period of three months.

Minimum and maximum age limits for membership are 16 and 65 years respectively.

Vesting rules

All plans: Employee and employer contributions together with declared interest/bonus vest immediately. For insured funds that are invested in a life insurer's guaranteed fund, part of the contributions are held in a non-vested account, although the non-vested portion almost always becomes vested at the time of the member's withdrawal or retirement.

Upon termination of employment, members are entitled to a refund of their own contributions plus interest equal to the rate of return on the fund.

Preservation, portability, transferability

All plans: Upon changing employment before retirement, a member may continue to contribute to the same plan if the new employer participates in the same group umbrella plan or transfer his contributions to the pension fund of the new employer. 
Upon termination of employment before retirement, or on changing employer and the new employer does not participate in the same group umbrella plan, a member's accrued rights or accumulated capital must either be preserved or transferred to another plan or the member may opt to receive his or her contributions plus interest earned less tax; the benefit based on the employer's contributions is preserved until the member reaches at least age 55 or dies, whichever is earlier. Only employer contributions that fall above the prescribed minimum amount are automatically preserved in a preservation account of the member's choice.
Fund rules must provide for transfers of benefits at members' request in terms of the regulations. Preserved rights earn interest at the same rate as the fund investments. However, transfers from a pension fund to a provident fund and vice versa are presently not allowed.

Retirement benefits

Benefit qualifying conditions

All plans: The benefit eligibility age must be defined in the plan rules and may be between 55 and 70 (for both men and women). Plan rules may provide for early retirement (usually not before 55) or deferred retirement (usually no later than 70).
Discriminatory eligibility conditions such as those based on sex or race are not allowed, however superior or lower benefits may be offered to a specified group of members if the differentiation is based on actuarial considerations or meant to benefit employees engaged in harzadous occupation.

If a member is made redundant or retrenched, the payment of benefits will commence as per plan rules, which permit the payment of early retirement benefits even if the member is younger than 55. Early retirement before 55 is also permitted if medical evidence is submitted to the fund of the member's permanent incapacity to continue in employment.

Benefit structure / formula

Pension plans: Defined benefit or defined contribution.

Pension plans in Zimbabwe are mostly defined contributions (95%) and there are few remaining defined benefit pension plans (5%). The plan rules must specify the benefit structure. The benefit formula which is applicable to the defined benefit scheme must generally be the same for all members. However, subject to the approval of the Commissioner of Insurance Pension and Provident Funds, different accrual rates may apply to members in hazardous occupations or if such differences can be justified on actuarial grounds.

Plans are not integrated with the social security schemes.

A pension of less than an amount which is prescribed and reviewed regularly is commutable. There is an entitlement to an amount exceeding a maximum monthly pension allowable amount, reviewed regularly by the Commissioner of Insurance, Pension and Provident Funds, who can authorise full commutation for members who intend to build the member's first dwelling house or purchase a house or a residential stand or repay a mortgage loan,payment of school fees and medical expenses Extension of a house is not provided for in this arrangement.

Provident plans: Defined contribution and Defined Benefit.

A defined benefit or the accumulated capital is paid as a lump sum.

Benefit adjustment

All plans: There is no upper limit to pension increases.

The board of trustees may increase pensions on a discretionary basis which is exercised based on the recommendation of the Fund's actuary. These increases are subject to the approval of the Commissioner of Insurance Pension and Provident Funds. In order to obtain approval, the following documents and information must be submitted:

 

  • the reasons for the proposed pension increase;
  • a list of all pensioners, the amounts of their individual current pensions, the proposed increases, and the resulting pensions;
  • a certificate from the fund's actuary or auditor estimating the total cost of the proposed increase and certifying the financial soundness of the proposed method of financing the increase.

 

Survivors

Pension plans: Plans may provide for a capital sum to be paid after the death of a contributing or retired member.

A part of the capital sum not exceeding the greater of twice the annual contributory salary of the member in the 12 months before retirement or death and one-third of the capital sum may be paid as a lump sum to eligible survivors.

The rest of the capital sum must be used to buy an income drawdown or annuity for the surviving spouse or children ( in the case of children the annuity is to be paid at least until age 18 or up to 24 for children still attending school) or other dependants.

Eligible survivors are the surviving spouse and children; in the absence of a surviving spouse and children, eligible survivors are (in order of priority) dependants, named survivors or the deceased's estate.

Provident plans: Survivors receive as a lump sum the defined benefit or accumulated capital of the deceased member.

Eligible survivors are the surviving spouse and children; in the absence of a surviving spouse and children, eligible survivors are (in order of priority) dependants, named survivors or the deceased's estate.

Disability

All plans: Plans may provide for disability benefits before age 55 if medical evidence is submitted to the fund of a member's permanent incapacity to continue employment.

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Protection of Assets

All plans: Pension and provident funds are independent legal entities which hold assets separate from the assets of the sponsoring employer(s).
For insured funds, the Act requires that the Insurer designates assets for pensions business which must be held in security in the Insurer's Pension Fund. These assets are designated and evaluated periodically through actuarial valuations to ensure that they are sufficient to meet the Insurer's pension liabilities. These assets enjoy legal protection, from attachment for the Insurer's debt, should the Insurer undergo liquidation.

Provision is made for statutory actuarial valuation of the assets every three years. However, the Insurance and Pensions Commission in 2019 issued an enforceable guidance paper requiring pension funds to be valuated annually to account for revaluation gains..

The Insurance and Pensions Commission issues Investment guidelines giving limits of investment per asset class.

Financial and Technical Requirements / Reporting

All plans: Self-administered funds (see section Institutional Framework) must submit annual financial statements, consisting of income and expenditure accounts, a balance sheet, a cashflow statement, a list of the names of sponsoring employers and a membership statement to the Commissioner of Insurance, Pension and Provident Funds.

Insurance companies must, for each fund they administer, submit to the Commissioner of Insurance, Pension and Provident Funds, annual financial statements consisting of income and expenditure accounts, a balance sheet and a statement of assets. In addition, insurance companies must submit information on all new funds administered by them, with a list of sponsoring employers for each fund.

All financial statements must be accompanied by a report signed by an auditor and must be compliant with IFRS 29 on hyperinflationary reporting.
In addition, all funds submit quartery returns, which for the time being, must also be compliant with IFRS 29 on hyperinflationary reporting.

Monthly information on the asset allocation must be submitted to the Commissioner of Insurance, Pension and Provident Funds.

An actuarial examination must be conducted every year in terms of the 2019 Guideline for Adjusting Pension Values in response to Currency Reforms issued by the Commission and a fund must keep such records as are necessary to enable an actuary to carry out an examination at any time.

If the actuary concludes after the examination that the fund is in an unsound financial position, the actuary and the board of trustees must jointly consider methods by which a sound financial position can be restored. Such methods are reported to the Commissioner, for consideration, in the form of a scheme. Generally, the sponsoring employer(s) must finance the unfunded liability immediately or according to a funding plan recommended by the actuary and approved by the Commissioner of Insurance, Pension and Provident Funds.

Whistleblowing

All plans: The chairperson of the board of trustees, other trustees and the principal officer must notify the Commissioner of Insurance, Pension and Provident Funds if the sponsoring employer fails to make contributions specified in the plan.
All trustees and other officers of the fund, in line with their fiduciary responsibility, are required to notify the Commission of anything that may prejudice the fund and fund members' interests.

Standards for service providers

All plans: Fund administrators must be registered with the Commission and possess adequate technical capacity and administration systems.

Auditors of pension and provident funds must be fellow members of the Institute of Chartered Accountants of Zimbabwe or of an institution approved by the Commissioner of Insurance, Pension and Provident Funds.

Actuaries must be fellow members of the UK Institute of Actuaries or Faculty of Actuaries, the Society of Actuaries in North America, or such other actuarial association as may be approved by the Commissioner of Insurance, Pension and Provident Funds.

Auditors and actuaries must be independent of sponsoring employers.

Fees

All plans: Limits to fees are prescribed through the framework on Expenses that was issued by the Commission in 2021. This followed observations by the Commission that the expense limits were persistently high, which is prejudicial to fund members given that most funds are defined contribution plans.

Winding up / Merger and acquisition

All plans: Winding-up procedures must be specified in the fund rules. When a fund is wound up, a liquidator must be appointed and such merger or liquidation must be approved by the Commission.
The Act and the Commission issued Circular on dissolutions to guide the process of dissolving a fund.

Bankruptcy: Insolvency Insurance / Compensation Fund

All plans: The fund rules must protect the assets against dishonesty on the part of any of its officers through a guarantee from the sponsoring employer(s) or insurance of such amount as the principal officer deems adequate. The principal officer and the board of trustees are responsible for the proper management of the plan.

Disclosure of information / Individual action

All plans: The fund is required to disclose information (benefit statement, financial statements, fees, etc) to members and beneficiaries.

The fund rules must include procedures for settling disputes between the fund management and members. The principal officer must inform the Commissioner of Insurance, Pension and Provident Funds in writing of all disputes.

Members can take legal action against plan managers if they fail in their duties.

Other measures

All plans: None.

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Taxation of employee contributions

All plans: Pensions contributions by members are tax-deductible to a maximum limit prescribed from time to time by the revenue authority.

Taxation of employer contributions

All plans: The employer contributions are tax deductible to a maximum prescribed by tax authorities from time to time.

Taxation of investment income

All plans: Tax-exempt.

Taxation of benefits

Pension plans: Pension benefits are taxed as income for members that are below the age of 55, for members above 55 pensions are paid tax freeLump-sum benefits resulting from commutation of pensions are tax-exempt up to the 1/3 limit .

Provident plans: Tax-exempt.

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The Commissioner of Insurance, Pension and Provident Funds: supervises insurance companies, insurance brokers, funeral assurers, Life Companies, fund administrators, pension and provident funds and reports to the Board of Directors of the Insurance and Pensions Commission.

A Pensions Advisory Commission advises the Commissioner of Insurance, Pension and Provident Funds on matters related to pensions and provident funds. The Committee comprises representatives of the Zimbabwe Association of Pension Funds, the Life Offices Association of Zimbabwe, Brokers Association of Zimbabwe, the Ministry of Public Service Labour and Social Welfare, the Ministry of Justice, Legal and Parliamentary Affairs, the Insurance and Pensions Commission, the Employers Confederation of Zimbabwe and the Zimbabwe Congress of Trade Unions.

The Life Advisory Committee and Non-Life Advisory Committee advise the Commissioner of Insurance, Pension and Provident Funds on matters related to the non-life insurance company operations in the industry.

Commissioner of Insurance Pension and Provident Funds
160 Rhodesville Avenue
Greendale
P. Bag HR 6773
Harare
Zimbabwe

Tel: (+ 263) 0242 443358/443361/443422
Cell: 0772 154 281/2/3/4
Fax: (+263) 0242 443304

WhatsApp: 0772 154 281
Email: [email protected]
Facebook: Insurance and Pensions Commission
Twitter: @IPECZW
Website:www.ipec.co.zw


Insurance and Pensions Commission: supervises insurance companies, insurance brokers, funeral assurers, Life Companies, fund administrators, pension and provident funds and reports to the Board of the Insurance and Pensions Commission. The Insurance and Pensions Commission Board controls and manages the operations of the Commission. The Insurance and Pensions Commission became operational effectively from 1st January 2006.

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