The provision of pensions is of fundamental economic and social importance, ensuring the successful delivery of adequate retirement income[1]. The promise to pay a benefit during retirement to today’s workers, covers a period that can span many decades. The capacity to meet these promises is one of the most important issues in the design of retirement systems.[2] All too often, policymakers mistakenly conclude that a pension system is financially healthy because it is generating short term surpluses [3].The effective supervision of pensions, and of the institutions that provide pension products and services, is required to ensure the protection of consumers[4]. The Pensions and Provident Funds Bill (the Bill) is a proposed new law that will repeal the existing Pension and Provident Funds Act [Chapter 24:09]. The Bill seeks to modernise and strengthen the regulation and supervision of the pensions industry.  There has been very little legislation on the subject of Pensions Law with the current law having been promulgated in 1976. However, the the adoption of The Constitution of Zimbabwe Amendment (No.20) Act 2013 and the Justice Smith Commission of Inquiry of 2017 has brought with it great optimism and should have an enormous impact on the Pensions Industry.


The Pensions and Provident Funds Act [24:09]
The Pensions and Provident Funds Act was promulgated in 1976. Throughout the course of time, the pension industry has seen dynamic changes financially, technologically, administratively and from a governance perspective without any major adaption by the governing Act. As such, calls for change based on the challenges within the Pension sector were noted and accordingly the Justice Smith was set up [5]. A review of the Bill will in fact show that the Bill is premised on the recommendations of the Commission of inquiry report. In order to appreciate and comprehend the Pensions and Provident Fund Bill, the role of the Justice Smith Commission of inquiry must be acknowledged. The report notes the following;


‘A number of recommendations are made in order to unleash the potential role of the Sector in economic development. These include policy macro-economic stabilisation, policy reforms, the adoption of a comprehensive social insurance scheme, strengthening the legal and regulatory regimes and promoting good governance practices, as well as consumer protection, among others.’


The Justice Smith Commission of Inquiry Report
The main objective of the Report was to change the landscape of the Zimbabwean insurance and pension industry for the betterment of social protection. The Report, among other observations, noted one of the major problems with the pensions industry as poor policy formulation to govern the industry. In a bid to address some of these challenges, the Report noted recommendations that were by and large centered on the need to have a complete overhaul of the laws regulating the Pensions Industry.The report further recommended a legal framework for the prudential regulation and supervision of insurance and pensions business in Zimbabwe that is consistent with the Constitution and promotes the maintenance of a fair, safe and stable insurance market.


Comments on The Pensions and Provident Funds of the Bill
The Bill 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;

• The intention of the Legislature in the Bill is welcome and designed to align our legislative and regulatory framework in line with global regulatory standards. The Bill also carries with it enhanced provisions dealing with the corporate governance of Pension Funds.
• 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.
• While the Bill carries provisions dealing with Consumer rights ,it is important to firstly acknowledge that the Consumer Protection Act is the principal legislation dealing with Consumer rights. The Bill makes no reference to the consumer protection framework in the Consumer Protection Act and makes no effort to complement this framework. The Bill should further entrench the principles of treating consumers of pension products and services fairly.
• The Bill introduces a Pension Protection Fund which is to be administered by IPEC. However there is 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 the State controlled Pension Funds and other industry owned pension funds (LAPF, MIPF, CIPF, UCPF,) are subject only to their dedicated laws. The scope of application of the Bill in relation to all pensions Funds is not addressed. The Bill does not address the fundamental problems with the current conflict of laws between the Pensions Act and other enactments establishing pension funds. Given the large number of Zimbabwe contributing to these pension funds, including many lower-income earners, fund members should arguably be subject to the same member protection as those regulated through the Bill.
• Climate change is real and the study of the impact of climate change on the pensions industry is important and has far-reaching consequences. Pension funds are major investors in government bonds, stocks and real estate. This makes the pensions industry a valuable ally in adapting to climate change. They have considerable capacity to make long-term investments in infrastructure to support climate change adaptation and investments. The Bill has no provisions dealing with climate-related risks or at the least regulatory objectives on climate change. This is inconsistent with Zimbabwe’s National objectives on climate change and its mitigation efforts. Any policy that fails to acknowledge and appreciate the impact of climate change is fundamentally flawed. The Bill must have provisions giving IPEC a mandate to come up with a framework on climate change related risks that has a bearing on a funds’ own risk and solvency assessments ,prescribed status assets and offshore investments.
  
  
  The International Organisation of Pension Supervisors IOPS, (2006) explains that pension scheme governance concerns the provision of a framework for defining the duties, associated responsibilities and accountabilities for all participants involved in the functioning of the scheme in order to ensure that the pension promise made to members is delivered. In 2021 the   Bill was tabled before Parliament for debate and amendments to the Bill were proposed and accepted. The Bill has been passed by Parliament and now awaits Presidential assent before becoming law. The Bill can lead to an improved legal and regulatory framework that can also support broader objectives in the financial sector, including ensuring that the sector grows in a more transformed and inclusive manner. The new law if enacted will provide for a legal framework for the prudential regulation and supervision of pension funds that is consistent with the Constitution and promotes the maintenance of a fair, safe and stable insurance market.

[1] OECD, (2006) Guidelines for Pension Fund Asset Management.

[2] An investigation into pension funds survival strategies during hyperinflation and how they adjusted to a multi-currency regime (2009-2012) Cheers Chikomwe

[3] 63 Marshall, J. (2011) “Investment Facts and Facies”. A paper presented to

the faculty of Actuaries, London.

[4] Op cite note 1.

[5] Commission of Inquiry into the Conversion of Insurance and Pension Values established in terms of Statutory Instrument 8 of 2015 as read with Statutory Instrument 1 of 2016 led by the retired Justice Smith.