Pensions Act to punish errant employers
Zvamaida Murwira-Senior Reporter
The Pension and Provident Fund Act which seeks to punish errant employers who embezzle or fail to remit workers’ pension contributions after deducting these from their pay has been signed into law by President Mnangagwa along with the Amendment of State Universities Statutes Act aligning all 13 Acts of Parliament governing State universities with the Constitution.
The State Universities Amendment Act amends all the university Acts in line with the Second Republic’s thrust of Education 5.0 policy that focuses on teaching, research, community service, innovation and industrialisation for the production of quality goods and services.
The signing of the two laws was announced by the Chief Secretary in the Office of the President and Cabinet, Dr Misheck Sibanda in a Government Gazette published recently.
It is, however, the Pension and Provident Fund Act that will excite employees, most of whom have their pension contributions deducted from their salaries, but at times employers have not remitted these to fund managers or have delayed forwarding them. The new law gives just 14 days for the money to be forwarded before criminal and civil action is taken.
The law will also come with a fund to compensate insurance policyholders and pensioners if they suffer losses from the collapse of the fund managing firms.
At the same time it tightens the control of fund managers by the Insurance and Pension Commission (IPEC) and ensures that the commission will take appropriate action when necessary.
The Act that sailed through Parliament in April this year is expected to restore confidence in the insurance sector.
It provides both criminal and civil penalties for errant employers who fail or neglect to remit employees contributions or who delay sending them on.
Errant employers have in the past been accruing huge debts to pension funds by not remitting contributions, even though they deduct such from employees’ pay, and that has paralysed the financial operations of many funds.
During debate in Parliament, Finance and Economic Development Deputy Minister Clemence Chiduwa said most of the reforms being made in the insurance and pension sector were a result of recommendations by a Commission of Inquiry into the conversions of insurance and pensions values by Justice George Smith.
He said the commission highlighted the need to review the legislation to strengthen the effectiveness of Insurance and Pension Commission’s regulatory and monitoring mechanisms to protect policyholders.
The law will change the landscape of the Zimbabwean insurance and pension industry by tightening rules that include loss of value arising from pension contribution arrears, loss of value due to hyperinflation, conversions such as dollarisation and delays in processing of lump sum pension benefits.
The Act ushers in fundamental provisions, which if properly implemented will bring a shift to the insurance and pension industry.
In the Act, the commission is obliged to adhere to basic principles of corporate governance in carrying out its role where it has to discharge its duties in a lawful, prompt, efficient, reasonable and proportionate way.
Any failure on the part of IPEC will be subject to administrative review especially regard being to the powers which IPEC will have to revoke certificates of registration following a breach of conditions or misrepresentation by a fund.
Another fundamental issue is preservation of value where the law provides that the board of every existing fund shall as soon as possible after a currency conversion date cause the fund’s actuary to calculate the fund’s liabilities in the former currency towards its members, beneficiaries and other stakeholders at the currency conversion date.
It also obliges the fund’s actuary to apportion a fair value of the fund’s assets in the new currency between the members, beneficiaries and other stakeholder so as to establish, so far possible, the fund’s liability in the new currency to each of those classes of persons.