Lawson Mabhena, Harare Bureau
INSURANCE policy-holders and pensioners should be compensated for loss of value suffered as a result of hyper-inflation in 2007-8 and the country’s adoption of a multi-currency system in 2009, a commission set up to investigate the effect of the change-over has recommended.
Also, the National Social Security Authority (NSSA) and other corporates should stop paying a flat pension benefit to retired contributors regardless of their salary level or years of participation in the fund, while funeral policy holders should be compensated for alteration of benefits or cancellation of policies following dollarisation.
The recommendations are contained in a long-awaited report on pensions and insurance, which was compiled by the Commission Inquiry into the Conversion of Insurance and Pension Values from the Zimbabwe Dollar to the United States Dollar appointed by former president Robert Mugabe in August 2015 to investigate the sector and quantify possible prejudice to policyholders.
The report, now before Cabinet, was made public on Friday through a gazette.
It will be sweet music to the ears of pensioners and policy-holders who have been waiting to be compensated for their contributions over long periods after they received tiny payouts from their respective service providers on the pretext that their investments had been wiped out by hyper-inflation.
The commission, whose investigation covered the period 1996 to 2014, looked into the operations of life insurance companies, pension fund administrators, stand-alone pension funds, funeral assurance companies, the Guardians fund, Government’s pension system and NSSA.
“Notwithstanding the unsound practices in the industry, the commission is of the view that a fair and just compensation framework can be implemented to compensate for the loss of value suffered by policy-holders and pension fund members over the investigation period. In the recommended compensation framework, the commission assessed the asset and capital structure of the industry in evaluating its capacity to compensate for loss of value. The commission was satisfied that the industry has reasonable capacity to make good and compensate policy-holders and pension fund members for loss of value,” reads the report’s recommendations.
“The commission stresses the very high expectations from members of the public on the findings of the commission with regard to compensation. The loss of value has impoverished policy-holders and pensioners and there is an expectation that the findings of the commission will remedy this. Government is, therefore, urged to implement the recommended compensation framework as a matter of urgency, in order to alleviate the plight of impoverished policyholders and pensioners,” the commission wrote in its 432-page report.
Government, the commission said, should establish an independent body to revisit the de-monetisation process and establish fair compensation for losses incurred by policy-holders.
The burden of proof, the commission further recommended, must be imposed on the employer to demonstrate that it made full settlement of commutations during the Zimbabwe dollar era.
On NSSA, the commission called for Government intervention to end the unfair practice of paying flat grants and the five-year limit for claiming benefits.
“Post-dollarisation, NSSA has been paying a flat grant of $25 as a contribution refund for members who retire before achieving 10 years participation in the fund. A flat lump-sum final benefit of $25 is paid regardless of the actual amount of contributions paid by a member. Thus, a member who contributes for nine years and one who contributes for two years are each paid the same, $25,” the commission observed.
“The contribution refund grant should be equal to the actual amount of contributions by a member during his or her years of participation. The contributions received pre-dollarisation should be converted to US$, based on the reasonable rate.
“NSSA members or beneficiaries have a five-year limit to claim grants or pensions. Members or beneficiaries who fail to claim their benefits within five years have their benefits forfeited to NSSA. The commission considered this provision to be prejudicial and recommends that it should be repealed. All prejudiced members and beneficiaries should be paid the benefits due to them. This responds well to the numerous public complaints received by the commission relating to NSSA,” the report reads.
As a statutory corporate body tasked by the Government to provide social security, NSSA is largely seen as a big let-down by members.
The Ministry of Labour and Social Welfare has since ordered a forensic audit to examine various transactions by the authority.
Auditor-General, Mrs Mildred Chiri, on Friday confirmed the audit to our sister paper, The Sunday Mail.
“Yes, there is a forensic audit for NSSA. We will be going out to tender for the audit,” she said.
Expectations are that heads will roll should the forensic audit unearth criminal activity at the body that has been under spotlight for years for making questionable investments and paying high salaries and perks at a time senior pensioners are getting $80 per month.
The parastatal spent $2,5 million in the now defunct CFX Bank, while $12 million was splashed on overpriced StarAfricacorporation shares, and $1,5 million on Africom Continental. At least $45 million is locked in Interfin Bank, which is under curatorship after being fingered in alleged abuse of depositors’ funds. The bank had non-performing insider loans of $60 million.
In addition, NSSA lost $11,2 million worth of property to local authorities for non-development.
The commissioners are said to have disagreed on methods used to calculate the conversion of pension and insurance policies from the Zimbabwe-dollar era to the multi-currency system, including the quantification of the compensation that has to be paid to those who might have been prejudiced.
One of the commissioners, Mr Martin Tarusenga, who is also the managing director of the Zimbabwe Pension and Insurance Rights Trust, resigned before the report was out. “The inquiry was subjective, relying mainly on sentimental views of commissioners and dispensing with literature review on many important matters of pensions and insurance provision in the terms of reference,” he said in a letter dated October 13, 2017 addressed Justice George Smith, who chaired the commission.
“It is my desire that the minister be appraised of this; my decision to recuse myself from the commission and to dissociate myself with the commission final report, in keeping with due process.”
It is believed that Justice Smith rejected the purported resignation and reminded Mr Tarusenga of the need to observe the Official Secrets Act.