Pension funds defy Govt order

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Martin Kadzere Senior Business Reporter

SOME pension funds have defied a Government order to exempt people retrenched before attaining
the age of 55 from paying tax, the Insurance and Pension Commission said.

Finance and Economic Development Minister Patrick Chinamasa said in the 2016 Budget, that workers
getting $10 000 or less will not be taxed while those receiving pension payouts of up to $60 000 will
have a third of their earnings exempted from tax.

Prior to the directive, only those who attained the prescribed age of 55 were benefiting from the
exemption.

At the time of the order, at least 20 000 workers were retrenched following the ruling which gave
employers power to terminate workers’ contracts at any time, without offering packages by giving
them three months’ notice.

Minister Chinamasa noted that most of the retrenched workers had minimum employment
opportunities. As such, pension proceeds had become the only source of income.

“We have noted with concern that some pension funds have not implemented the minister’s decision
to the detriment of the affected employees,” IPEC said last Friday.

“As fund administrators and principal officers are therefore directed to comply with the minister’s
ruling and ensure that retrenched employees who have not attained the age of 55 are not prejudiced.

Future pension payouts accruing to these retrenched employees will, however, not benefit from the
income tax exemption. The prevailing economic challenges stemming from liquidity constraints among
other challenges has forced many companies to close and downsize, rendering thousands of
employees redundant.
In 2015, most companies took advantage of the court ruling which allowed employers to terminate
contracts on three months’ notice to offload excess labour force.

Huge wage bills with no corresponding productivity was cited as one of the major reasons affecting
viability of companies. Before the court High Court ruling, it was difficult for companies to retrench
because the costs to undertake such exercise were extremely high. – The Herald

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