eBusiness Weekly
Business Writer
The pension industry experienced a significant uptake of business in foreign currency during the first quarter to March 2022, a report by the Insurance and Pensions Commission (IPEC) shows.
The development comes as goods and services in the country are increasingly being charged in foreign currency amid a rapid depreciation of the local currency.
The local dollar started the year trading at $218 per US$1 but has since fallen to $392 per US$1 as of yesterday, forcing service providers to introduce foreign currency denominated products.
Pension funds have started offering US dollar products as a way of cushioning members from the incessant currency depreciation.
As a result of the growing business in foreign currency, the insurance regulator said pension funds would be allowed to make part payment of benefits in forex if the pension fund’s income is denominated in forex.
This, IPEC says, is meant to improve the benefits received by members.
According to the 2022 Q1 Pensions Report released this week by IPEC, total foreign currency-denominated income received by the pensions industry as at March 31, 2022 amounted to US$11,96 million.
Dividends from forex investments and contributions were the major drivers of income on foreign currency business constituting 53,22 percent and 43,05 percent, respectively, reads the Report in part.
There were 381 pension funds, under the Insured Schemes category, that reported foreign currency denominated income during the period under review.
Of these, there were only 19 funds receiving contributions in US$ in the first quarter of 2022, with 10 being under Old Mutual, 5 under Zimnat Life, 2 under First Mutual Life, 1 under Fidelity Life, and 1 under ZB Life, IPEC revealed.
In terms of Stand-Alone Fund, out of 14 Stand-alone funds, 4 reported forex business as at March 31, 2022.
The forex business written by stand-alone pension funds amounted to US$1,64 million in contributions with rental income at US$13,630 million that was reported by the Construction Industry Pension fund.
Stand-Alone funds recorded a surplus income over expenditure of US$1,63 million for the period under review with the contributions amounting to US$1,64 million of the total income.
Meanwhile the pensions industry had a total USD-denominated asset base of US$114,23 million as at the reporting date. This was largely concentrated in quoted equities, prescribed assets and the money market.
The total asset base in forex grew by 19,50 percent from the previous quarter.
For the Insured Schemes category, the forex business had an asset base of US$49,38 million having increased by 12.48 percent from US$43.9 million as at December 31, 2021.
The increase is attributable to fair value gain, IPEC said.
The total asset portfolio was mainly invested in quoted equities constituting 74 percent or US$36,33 million, followed by unquoted equities constituting 10 percent.
Prescribed assets, money market and cash at bank, and investment property constituted 7 percent, 6 percent, and 3 percent respectively.
“These are quoted equities trading on the Victoria Falls Stock Exchange and these are Padenga, Caledonia Mining, SeedCo International and Bindura Nickel.”
