THE Local Authorities Pension Fund (LAPF) has said it is failing to pay pensions in time due to failure by employers to remit contributions to the Fund in time.
The report by LAPF came at a time when across all sectors of the country’s tottering economy, the trading environment has further deteriorated due to a cash crisis.
Almost all companies have been struggling to stay afloat due to depressed demand and the inability by cash-strapped customers to pay for goods and services on time.
The result has been an unhealthy working capital situation that has seen most companies lagging behind with payments for their raw materials and other inputs, salaries, medical aid and pension contributions as well as statutory payments such as taxes.
However, while statutory bodies like the Zimbabwe Revenue Authority have turned to desperate measures to collect funds, non statutory bodies are struggling to collect funds from companies.
“The fund administrators continue to experience problems in timeously discharging pension payroll obligations,” LAPF said in its latest report covering the period to December 31, 2015 released recently.
The situation, according to sources, had worsened last year against the background of the deterioration in the financial circumstances of many local authorities.
“The inability to pay pensions on due dates is a consequence of inadequate cash flows on account of consistent failure by subscribing employers to make their respective payments within legislated timescales. The failure to remit monthly pensions when they fall due has greatly compromised the welfare of pensioners and seriously dented the fund’s reputation,” the report added.
The Fund had 12 481 beneficiaries during the period, from 12 353 the previous year.
Its assets of US$103 million were inadequate to funds its liabilities of US$495 million during the period.
Pension funds have tried to explore ways of improving their operations in order to continue meeting their obligations to pensioners.
In a position paper two years ago, insurance players said due to years of economic decline, pension funds were facing challenges to remain liquid while delivering on pension benefits.
“The association is encouraging sponsoring employers to boost pensions by injecting capital into their pension Funds wherever they can,” said the Zimbabwe Association of Pension Funds in a document sent to the Ministry of Finance and Economic Development.
“We recommend that such capital injections into pension funds be exempted from tax. We further recommend that any application for exemption be supported by an actuarial certificate confirming the basis of calculation and fairness and consistency of application,” it said.