Registrar's Circulars: 2003
The office of the Registrar of Pension and Provident Funds issued the following circulars in 2003:
No. 1 of 2003 (dated 30 April 2003)
Two items were covered in this Circular:
Increase in the full commutation ceiling
This was increased Z$30,000 per annum to Z$60,000 with effect from 1 January 2003. (This was subsequently gazetted as Amendment No. 10 (SI 166 of 2003) to the Pension & Provident Funds Regulations).
Comment: This change is merely a routine measure, adjusting, if only partially, a monetary limit to allow for high and rising inflation.
Pension increases
The ceiling on pension increases for the year 2003 has been removed. All pension increases must still be approved by the Registrar and must be accompanied by a certificate from the actuary.
Comment: On the other hand, this change is a much more significant one. The removal of a specific maximum increase for pensioners is most welcome as inflation accelerates to ever higher levels. Whether pension funds will be able to afford to keep up with inflation is highly doubtful but at least there is now no legislative impediment.
No. 2 of 2003 (dated 28th May 2003)
This Circular is concerned with the exchange control aspects of pensions which have not been able to be remitted to external pensioners. The Circular is set out in full.
"UNREMITTED PENSION FOR NON-RESIDENT PENSIONERS
The Office of the Registrar has received numerous letters from pensioners resident outside Zimbabwe enquiring of when they will be able to receive their pensions. The exercise to determine the Zimbabwe dollar equivalent of the figure that is required has been finalized and consultations with the Reserve Bank are underway.
The issue of interest accrual on non-remitted pensions has been clarified by the Reserve Bank of Zimbabwe through a directive issued in terms of Section 35(1) of the Exchange Control Regulations SI 109 of 1996. In their letter dated 20 May 2003 to the banking industry, the RBZ stated that Authorised Dealers could with immediate effect credit all unremitted pension funds in the pipeline and future pensions into interest earning blocked accounts (non-resident transferable accounts). Unremitted pension funds can now be invested in money market instruments and all funds accumulated in these accounts (capital [and?] interest) shall become remittable.
The RBZ required Authorised Dealers to have had submitted to Exchange Control an update of their current holdings of unremitted pension funds per customer by 25 May 2003. Authorised Dealers will also be required to submit monthly returns to Exchange Control indicating holdings of the pension funds in terms of the principal amount invested and the interest earnings, thereof. Please ensure that your bankers have this information and have met the RBZ requirements.
Acting Registrar of Pension and Provident Funds
Comment: If I understand this correctly, this appears to permit the unremitted pensions to accrue interest at money market rates while waiting in the pipeline to be remitted. Although welcome, this measure is totally inadequate because these rates are currently so far below the rate of inflation. The effect unfortunately will be the rapid destruction of the real values of these outstanding pensions.