Total contributions in the self-administered sector increased 12% to $447.57 million in the six months to June from $400.5 million last year although 77% or $343 million was in arrears. The Insurance and Pensions Commission report for the sector shows that arrears increased 16% in the period against last year.
The growth in arrears is reflective of the deteriorating liquidity situation being faced by sponsoring employers but for employees the non-payment of their contributions results in low investment growth and ultimately loss in savings. However, IPEC said: “Various arrear contribution amortization and collection efforts continue in collaboration with sponsoring employers and fund administrators. The Commission continues to monitor the situation and may deploy administrative measures in line with the Act and Regulations. However, the Commission shall not write off arrear contributions under any circumstances.”
According to the report, total contributions of standalone funds increased by 19% (2015: $266million; 2016: $316 million). However, 84% or $263 million were arrear contributions (June 2015: $217million or 82%) implying that only 16% of contributions were collected. contributions for insurer administered funds were pegged at $65million just like last year. However, 63% or $41million were arrear contributions (June 2015:61% or $40million). The total contributions remitted to the insurers were 37 % or $24 million of the total expected contributions.
IPEC said the sub-sector continues to be affected by challenges relating to high cost-to-contribution ratio, liquidity challenges, arrear contributions, and compliancy issues related to prescribed assets. “However, the administrative and regulatory interventions by IPEC appear to be bearing positive results slowly,” said the commission adding that following administrative measures to protect member values and benefits, cost management efforts have now gained traction in the industry. The expense-to-contribution ratio closed the review period at 21% from 32% in June last year.
The total asset base for the self- administered funds was $2.23 billion from $2.106 billion as at the comparable period last year. Prescribed assets uptake rate was 7% due to IPEC’s increased engagements with funds to comply as well as improved supply of government paper.
In the period, active pension fund (standalone) membership constituted 54% or 183 162, deferred members-107,370 or 32%, pensioners-25182 or 8% while the balance were beneficiaries. Total membership declined by 10%, to current 336 678, due to Statutory Instrument 24 of 2016 which legalized automatic commutations for members earning pension payouts of less than $50 per month as well as company closures.
The total asset base for standalone funds was $1.37 billion broken down as follows: property-45% or $623million (June 2015:47% or $596million), capital market-$130million or 10%(June 2015: $149million or 12 %), money market-$51million or 4 %(June 2015: $34 million or 3%) , prescribed assets-$63million or 5% ( June 2015:3% or $33million),other assets-$504million or 37% ( June 2015:36% or $449million).
“Prescribed assets continued to be grossly undersubscribed despite directives to the contrary. The Commission will continue to penalize the industry in order to ensure compliancy.”
The report says insurer administered funds received $24 million in contributions from the self-administered schemes (June 2015: $25million). Although expense ratios reportedly fell by up to 9%, the targeted ceiling is 10%.
For the period under review, fund administrators reported $27million in collected contributions (June 2015: $30million). In line with falling investment returns, total income contracted by 14% from the previous $50 million to $43million, whilst total expenditure (net of benefits paid) reduced by 58% from $16million to $7million. The expenses- to- contributions and expenses- to- income ratios were 25% and 16% (June 2015:45% and 27%)