Unleash full potential of pension funds — Professor Ncube

THERE is a need to use resources of the pensions industry to uplift the livelihoods of pension scheme members and also unlock wider economic opportunities, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube said yesterday. 

Globally, the pension and insurance sectors have the largest pool of resources used in driving new investments to develop economies while creating higher value for subscribers. 

Addressing delegates to the Joint International Organisation of Pension Supervisors (IOPS)-Organisation for Economic Co-operation and Development (OECD) Global Forum on Private Pensions that is underway in Victoria Falls, Prof Ncube bemoaned high inflation and interest rates experienced in 2022, which he said weighed down the growth of the pensions industry.

Citing the United Nations estimates, he said that by 2050 there will be almost two billion people over the age of 60 years worldwide, with close to 80 percent of these living in developing countries such as Zimbabwe. 

With such statistics, Prof Ncube said the need to have focused discussions on retirement income becomes a priority for most governments as they seek to ensure social protection in line with Sustainable Development Goals (SDGs).

“I am aware of a study carried out by the UN on ‘The domestic savings shortfall in developing countries – what can be done about it’, which revealed that 91 percent of Sub-Saharan African workers do not save for old age,” he said.

“This is a cause for concern as it implies that workers are not saving for life after retirement hence may struggle to generate income to meet some of their obligations including basic requirements after retirement.”

Consequently, Prof Ncube said pressure will continue to mount on governments to provide adequate social protection using public funds, which is not sustainable given the pressing demands for financing from Treasury.

Whilst pension schemes in sub-Saharan African countries are characterised by low contributions due to relatively low earnings, high informality as well as high financial illiteracy levels, Minister Ncube encouraged the forum delegates to contribute towards coming up with solutions that will ensure the attainment of Sustainable Development Goals.

“With the afore-shared statistics, it is evident that more needs to be done from a policy and supervisory perspective to unleash the full potential of the pensions industry to achieve better outcomes for pension scheme members,” said Prof Ncube.

He said the latest report by the International Pension Fund Association (IPFA), estimates that there are more than 300 million members of Defined Contribution (DC) schemes worldwide, with a total value of over about $15 trillion.

The African Pension and Savings Association (APSA) reports that the number of members in (DC) schemes across the continent increased by 12 percent this year.

Further, it is estimated that in 2021, the assets of DC schemes in Africa accounted for only 0,2 percent of the global pension assets and 0,8 percent of the African GDP.

Less than 10 percent of the labour force in Africa is covered by pension schemes compared to over

88 percent in Europe and 95 percent in North America. 

According to the International Labour Organisation (ILO), the informal sector is a significant part of the African economy accounting for over 86 percent of the employed population.

According to the OECD, world pension assets (OECD & other jurisdictions) increased by almost 50 percent from about US$40 trillion in 2016 to US$61 trillion in 2021.

Prof Ncube commended OECD and IOPS for mooting and implementing the idea of the Global Forum on Private Occupational Pension Funds, whose deliberations have certainly gone a long way in informing supervisory and policy reforms relating to the pensions industry.

He called for active participation of policymakers in governments, regional and international economic blocs, capacity-building institutions and cooperating partners to facilitate public and private sector dialogue on pensions.

Such an inclusive approach to international dialogue on pensions, he said, will undoubtedly inform holistic global pension reforms of both the public and private pensions and help to leapfrog the pension industry in driving global socio-economic development.

Prof Ncube said COVID-19 was a real test to the performance of the global pension industry and said he was pleased to note that the global pensions penetration, as informed by global pensions assets to global GDP, has been increasing over the years from around 33 percent in 2014 to 63 percent in 2021. 

“Notwithstanding the fall in world output from 2019 to 2020, the pensions industry assets continued to increase, indicating the industry’s resilience to shocks and stresses such as COVID-19 and inflation,” he said.

“The post-COVID-19 recovery of the pensions industry has thus been encouraging. For us policymakers in governments, we also drew our own lessons, which should inform future policy interventions.”

Minister Ncube said Zimbabwe is committed to the regional financial integration agenda under the auspices of the SADC including ongoing efforts under the SADC Committee of Insurance, Securities and Non-Bank Financial Authorities (CISNA) to among other areas, develop model laws for the private occupational pensions industry whose principles have already been enshrined in Zimbabwe’s recently enacted Pensions and Provident Funds Act.

“Zimbabwe is part of regional efforts through the SADC structures to develop, not just the pensions industry, but the entire financial services sector in line with the SADC Finance and Investment Protocol and SADC Vision of a peaceful, inclusive, competitive, middle-to high-income industrialised region where all citizens enjoy sustainable economic well-being, justice and freedom by 2050,” said Minister Ncube. 

The conference, which ends tomorrow is being held under the theme: “Entrenching Retirement Security in a Changing World”, which Prof Ncube said augurs well with developments across the world, which have had a bearing on the pensions industry and will continue to shape the future of the sector.

This is the first in-person IOPS forum to be held in Africa and the 2nd post-COVID-19 in-person forum following the Slovak meeting held in 2022.

Pension supervisors from around the world are attending. IPEC Commissioner Dr Grace Muradzikwa also said that hosting such a forum with a membership of 81 countries and eight associate organizations, as well as two observers, was a privilege for Zimbabwe.


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