The Pensions and Provident Funds Act has been in force since 1 July 1976. Throughout the course of time, the Insurance industry has seen dynamic changes financially and administratively without any major adaption by the governing Act. The new Act has addressed most of these changes and it has also incorporated changes that were brought about by statutory instruments that were published.
HIGHLIGHTS FROM THE ACT
The Act ushers in fundamental provisions, which if properly implemented will bring a paradigm shift to the pension industry. Some of the major provisions are discussed below
Additional functions of the Commission
The Act now has additional functions of the Commission in addition to functions already conferred to it by the Insurance and Pensions Commission Act. The additional functions are mostly aimed at protecting the fund and its members. Under these additional functions, the Commission is given powers to conduct investigations or inquiries relevant to the pension industry and inspect and examine records or premises of a registered person or fund.
The Act also permits the Commission to search the premises of any registered person or any person suspected of carrying on the business of a fund, and seize any relevant documents or records. This will help the members in having confidence in the way in which the fund is run. It is also notable that in this new Act most of the responsibilities lie with the Commission as a whole unlike the previous Act which bestowed most of its responsibilities on the Commissioner.
Establishment of the Pension Protection Fund
The Act introduces a Pension Protection Fund which is to be administered by IPEC. However, there is a need for further clarity on the role of the Pension Protection fund. This fund involves public funds and therefore, there must be scrutiny on how IPEC administers the fund. Currently, State-controlled Pension Funds and other industry-owned pension funds are subject only to their dedicated laws. The scope of application of the Act in relation to all pension Funds is not addressed. The Act does not address the fundamental problems with the current conflict of laws between the Pensions Act and other enactments establishing pension funds. All fund members should be subject to the same member protection as those regulated through the Act.
Establishment of a Board
The Act establishes a Board provides that a board of trustees shall manage the Fund. To ensure integrity, the board shall be composed of members who must be fit and proper. The establishment of the Board for funds is not necessarily new as it had been introduced by some statutory instruments prior to the enactment of this Act. Amongst its many functions it has the duty to ensure that the rights and benefits of members and beneficiaries of the fund are protected, ensure that the rules, operations and administration of the fund comply with this Act and any other law, take all reasonable steps to ensure that contributions to the fund are paid when they are due and take all reasonable steps to ensure that the fund is managed in a sound manner.
Protection of members
The major aim of the Act is to ensure protection for policyholders and pensioners. The Act emphasizes as one of its main objectives the need to treat members fairly. The Act has managed to attain this by making sure there is transparency in the way in which the funds are run. Section 14 of the act gives the Commission the duty to provide its stakeholders with the rules of the fund at its expense. Also under this section, the Act has made financial documents of the fund to be available to the members upon request. As had already been mentioned above, The Board and the Pension Protection Fund also help protect the interests of the members.
Minimum benefits
The Act now has a provision for the minimum benefits which a member is entitled to should he/she cease to be a member of the fund prior to retirement in circumstances other than dissolution of the fund. The Act also provides that where the fund is converted to a defined contribution category fund, the amount to be credited to each member’s individual account shall not be less than the minimum individual reserve. This will allow all members to benefit from the Fund.
Role of IPEC
IPEC being the Pensions industry regulator has been given a more robust and involving role in this Act, giving clarity to its mandate which will improve the regulation and supervision of the industry. the Act provides that IPEC will have to adhere to basic principles of corporate governance in carrying out its role. It will have 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 pursuant to breach of conditions or misrepresentation by a Fund.
Currency conversion
The Act has managed to address issues regarding currency conversion as is common in the Zimbabwean economy. The Act under section 48 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 and cause the fund’s actuary to apportion the 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. This will assist the Fund to preserve its value.
