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Tinashe Makichi Business Reporter
Insurance and Pension Commission said pension arrears for last year amount to an estimated $250 million as company contributions continue to nose-dive on the back of numerous company closures.

The commission said the pensions industry continues to grapple with arrears contributions, high expense ratios not matched neither by favourable investment returns nor viable investment avenues and low benefits among other factors.

IPEC commissioner general Mrs Manett Mpofu yesterday said companies have been failing to remit pensions on the back of the tight liquidity environment.

“The figures for 2014 are still being received from industry players. Our estimates are that arrears contributions amounted to about $250 million,” said Mrs Mpofu.

Pension funds have been struggling to collect contributions from the country’s corporate sector with figures from IPEC as at December 2013 sitting at $170 million in arrears.

The figure has since shot up as the liquidity crisis affecting the industry took a turn last year resulting in more employers failing to remit their pension contributions.

Mrs Mpofu said although it sounds like a good idea, IPEC has not applied for garnishing powers given the tough economic situation in the country.

She said ordinarily IPEC would not deal directly with employer companies but through regulated pension administrators, including life companies.

“The common reasons cited for failure to remit pension contributions are the harsh economic situation in our country where companies are shutting down operations, operating below capacity and hence being unviable and liquidity constraints,” said Mrs Mpofu.

She said the most worrisome situation for IPEC is where employers deduct employee contributions from salaries but fail to remit to the pension fund.

Mrs Mpofu said according to IPEC this is tantamount to fraud as the contributions are intended to save for a better life at retirement and not to be used by the employer as liquidity support for the employer’s operations.

Most companies have failed to remit pension contributions because of cash-flow challenges and the chief culprits have been local authorities which are said to be deducting pension contributions from employees’ salaries and converting the funds to other uses.

A number of companies have closed since the beginning of last year owing to a cocktail of challenges among them high utility bills, high interest rates, lack of competitiveness and the shortage of working capital.

Company closures, which worsened following the adoption of the multi-currency regime in 2009, compounded the unemployment situation in the country.

IPEC has been warning companies that failure to remit pensions is illegal and the commission may be forced to intervene to stop the rot.

The commission has always said that failure to remit contributions deprives the pension funds investment income and further depletes their coffers.

A robust pension fund industry is normally one of the biggest sources of capital but because of the challenges in the local industry, pension funds have remained at the periphery of economic activity.