THE Insurance and Pensions Commission plans to close pension funds which are "financially unsound" as it seeks to avoid continuous erosion of values, it has been learnt.
In terms of the law, IPEC, the regulator of pension funds and insurance companies may discontinue operations of unviable institutions if satisfied that they may not be turned around.
In a circular to pensions funds dated August 4, 2014, the commission noted that poor or non remittances of pension contributions and sponsoring employers to the fund since dollarisation in 2009 and high administration cost versus low investment returns have resulted in most pension funds being in a financially unsound condition.
As such, the pension funds have failed to meet "members' reasonable expectations".
IPEC noted that there was continuous shrinkage of assets emanating from high administration expenses, increasing liabilities not matching assets, staggered pensions benefit pay outs, significant amounts in unpaid benefits and none or low upwards review on benefits since 2009.
In light of these observations, the commission has requested pension funds to provide informa0-tion relating to employers who have not remitted pension contributions since 2009, companies that have permanently shut down and names of other funds considered unviable by the life office pension funds administered funds.
In addition, life offices or trustees of self administered funds must recommend the dissolution of unviable funds or appropriate action that could be taken and a trustee resolution approving the proposed action recommended.
"Please note that the measures are taken pursuant to the need by the commission to ensure protection of fund member rights and avoidance of continuous erosion of member value," said IPEC.
Last year, pension funds struggled to collect contributions from sponsoring members and were in arrears of $170 million as at December 31, 2013.
At the end of December 2012, the arrears amounted to $142 million, IPEC said early this year.
Source: allAfrica
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