Local pension funds are seeking an exemption on capital injected by companies to boost the balance sheets of the funds until the economy fully recovers.
In a position paper seen by The Source yesterday, insurance players say due to years of economic decline, pension funds are 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 (Zapf) in its pre-budget submission.
“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.”
Finance minister Patrick Chinamasa is expected to deliver the 2015 national budget statement next Thursday at a time the economy is regressing due to weakening business activity and low foreign direct investment.
Turning to the prescribed asset ratios, Zapf proposed that Treasury should maintain the current dispensation on prescribed asset ratios until the economy recovers.
Short-term insurance companies are required to reserve 5% of their funds for prescribed assets while life assurance companies and pension funds are required to put up 7,5% and 10%, respectively.
“It is important that any intervention that has a bearing on investment earnings takes into account the fact that contributions made to pension funds belong to members of such funds,” said Zapf.
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“Any investments earnings net of administration expenses also belong to members of, or contributors to the funds. Any terms and conditions relating to regulatory compliance on investments directly affect the members of, or contributors to the funds.”
Zapf also proposed that the collection of value added tax on rental income be based on actual collections instead of accrued or expected income due to high defaults in the property sector.
The property sector is the largest investment portfolio for most pension funds but activity has slowed down in recent times to the underperformance of the economy.
– The Source
