A Review of Foreign Investments Allowance for Pension Funds in Zimbabwe
AbstractThe hyperinflation era in Zimbabwe (2003-2008) eroded pensioners’ capital values and has seen pre-dollarisation retirees receiving paltry pension payouts from year 2009. We review global trends on foreign investments for pension funds in order to add input to the local debate pitting the Zimbabwe Association of Pension Funds (ZAPF) members against the Insurance and Pensions Commission (IPEC) on whether the Pension and Provident Fund Act [Chapter 24:6] of Zimbabwe should permit foreign/offshore investment. We interview ZAPF members & partners and carry out secondary analysis of data on pension payouts, asset management and life & pensions asset allocations and returns post-dollarisation. Findings reveal that meeting liquidity and diversification goals require allowances for foreign investments. ZAPF members and partners would welcome any level of foreign investments allowance, despite Zimbabwe offering weighted returns that are above those currently obtainable from foreign assets. We conclude that there is lack of confidence in the long-term sustainability of the capital values and returns given that the tenure of the prevailing Multi-Currency System (Dollarisation) is uncertain and hence the need to allow limited foreign investment by pension funds.
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