The Insurance and Pensions Commission (Ipec) has developed a draft micro-pensions framework to foster financial inclusion and grow the pensions industry through pension products for non-standard workers and those informally employed.
The regulator is now gathering comments and industry’s review before finalisation and release for implementation.
A micro-pension/provident fund is a voluntary fund with both savings and retirement benefit entitlements that support small, irregular and sustainable savings by individuals to provide them with a regular stream of pension annuities or lump sum in old age.
The member contributes personally to obtain benefits based on a defined contribution in the form of pensions or otherwise, payable on death, retirement or any other occurrence, which entitles a member to start receiving benefits under the rules of the particular fund.
IPEC Commissioner Dr Grace Muradzikwa said the guideline had been developed as part of the Insurance and Pensions Commission’s strategies of promoting development and sustainability.
“This is also in line with driving the financial inclusion agenda through complementing Government efforts pursuant to the National Financial Inclusion Strategy and contributing towards the attainment of the United Nations Sustainable Development Goal Number 1 of eradicating poverty in all forms.
“The guideline is, therefore, part of the commission’s pension reforms aimed at expanding pension coverage to the self-employed, informal sector and low-income earners, in order to address issues of old age poverty,” she said.
According to the draft framework, the micro-pension/provident fund will be a voluntary and defined contribution in nature.
The administration options for micro-pension/ provident funds shall include voluntary funds established and administered by Fund Administrators, Life Companies or such other persons as may be approved by the Commission and voluntary organisations as may be approved by the commission.
The fund shall have a board consisting of at least five members and a maximum of nine.
Members should be 18 years of age and above to be eligible to participate in a micro pension/provident fund and membership shall be open to persons who are domiciled in Zimbabwe and abroad.
According to Dr Muradzikwa, contributions should be flexible in terms of amounts and frequency of contributions to cater for income fluctuations and seasonality of incomes.
She said micro-pension/provident contributions may be weekly, monthly, quarterly, seasonally, bi-annually, annually or at such other intervals elected by the member.
“A member may change from one frequency of payment to another subject to giving at least one calendar months’ notice to the Fund.
“The mode of payment of contributions should be flexible enough so as to match the mode through which the member earns their income.
“Thus, payments can be by cash, mobile or electronic transfers or any other mode, which is suitable and responsive to the members Contributions, can be made in local or foreign currency,” said Dr Muradzikwa.
The draft framework noted that contributions shall be remitted to the fund within the timelines as prescribed by the fund rules and the fund expenses, including administration or other fund costs, shall not exceed 5 percent of contributions or any threshold prescribed by the regulator from time to time.
The draft highlighted that given the nature of income inflows for informal workers, a member may make additional contributions to the fund in addition to the minimum contribution amount prescribed by the fund.
In the event that a member revokes his/her decision to continue making additional voluntary contributions to the fund, the additional voluntary contributions already paid up to the date of such revocation shall remain in the fund until the normal retirement date (NDR), unless the member withdraws or dies before the NRD.
The Ipec’s framework rides on Government’s financial inclusion policy which seeks to address the level of financial exclusion be it in banking, insurance and capital markets. – The Herald
