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Pension funds to fork out more for strategic projects

30 Nov, 2018 - 00:11 0 Views
Pension funds to fork out more for strategic projects

eBusiness Weekly

Prescribed asset status restricted to national projects n Players should provide compliance roadmaps to IPEC

Business Writer
Insurance and pension funds will have to fork out more for strategic national projects with effect from December 31, 2019 after Finance and Economic Development Minister Mthuli Ncube increased the minimum prescribed asset threshold and also restricted the status to Government related projects only.Prescribed asset status, which is done by the Ministry of Finance and Economic Development, compels all insurance and pension funds to invest in Government — approved instruments, in order to improve resource mobilisation to support key national projects.

The current minimum prescribed asset thresholds for the insurance and pension industry were introduced in 2010 and Government is now looking to increase them to higher levels.

“The current minimum prescribed asset thresholds for the insurance and pension industry were introduced in 2010. In order to improve resource mobilisation to support key national projects, Government is increasing the minimum prescribed asset threshold,” said Minister Ncube.

This is despite some sectors failing to even meet the current requirements.

Former IPEC commissioner Tendai Karonga, is on record saying the insurance regulator is “not satisfied with the contributions (towards national projects) because some of the sectors have not met the minimum prescribed asset requirement”.

“We continue to urge them to comply with the prescribed asset ratios. Ideally, we should be increasing our prescribed asset ratio levels to improve the contribution of the insurance and pensions industry in the economic development of the nation,” Karonga said when he was still in office.

Funeral Assurance companies and Pension Funds have been struggling to meet the current requirements with the former only managing 2,04 percent instead of the prescribed threshold of 7,5 percent.

Pension Funds have also failed to meet the requirements and are currently prescribed at 7,37 percent, instead of the required 10 percent.

Government is, however, asking for more and plans to hike the thresholds for Funeral Assurance and Pension Funds to 10 percent and 20 percent respectively, with effect from 31 December 2019.

Both Short-Term (non-life) Insurers and Re-insurers, which are compliant at current levels have also had thresholds increased to 10 percent from 5 percent.

Insurance companies and pension funds are expected to comply by December 31, 2019. In this regard, players should provide compliance roadmaps to IPEC by January 31, 2019, said Minister                                                                     Ncube. In an apparent departure from the past, Minister Ncube also said only Government related projects will be accorded prescribed asset status.

“Furthermore, with effect from 1 January 2019, prescribed asset status will be conferred to Government related projects only,” he said.

In the past, private companies could apply for prescribed asset status when doing various projects.

In 2010, the Central Africa Building Society, a banking unit of Old Mutual Zimbabwe, issued a $62,8 million bond to fund the servicing and construction of low cost houses in Budiriro, while Bindura Nickel Corporation issued a $20 million bond to finance the restart of its smelter to process nickel for export. Both projects were given prescribed asset status.

In 2014, Fidelity Life had its bond for the South View residential stands project accorded Prescribed Asset Status by the then Minister of Finance Patrick Chinamasa.

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