Abstract:
This study is about the analysis of the effects of longevity risk on pension planning in Zimbabwe
with a particular focus on defined benefit pension schemes. A defined benefit scheme is an
arrangement whereby the pension benefits are pre-determined by a formula which is a function
of service and salary. The study adopted a quantitative methodology to achieve the following
objectives:
a) Establish how uncertainty regarding future mortality and life expectancy outcomes would
affect the funding position of defined benefit pension schemes in Zimbabwe.
b) Establish the link between mortality and life expectancy in Zimbabwe.
c) Check the adequacy of the existing assets to meet the liabilities of the pension schemes in
Zimbabwe.
d) Determine the contribution rates that would be appropriate for the future.
e) Recommend possible approaches to forecast mortality and life expectancy.
The study considered the research topical given the inability of Zimbabwean defined benefit
pension schemes to meet their liabilities. A sample of 128 participants was drawn from randomly
selected active employees who are member of pension funds. Data were gathered using a
questionnaire. The study was interested in testing the proposition that mortality is improving in
Zimbabwe. The study found that Technological Advancement, Education and Lifestyle and other
factors which include the Millennium Development Goals and Government interventions are the
major contributors to mortality improvements. Generally there are mortality improvements in
Zimbabwe. Where there is mortality improvement, there is longevity risk which has got direct
impact on defined benefit pension funds.
The research objectives were fulfilled and the following recommendations were made:
(a) Indexation of pension benefits to life expectancy in order to partially offset the impact of
longevity.
(b) Policymakers are recommended to set up a Continuous Mortality Investigations Unit
within Zimbabwe.
(c) The Regulator of pension funds is recommended to put in place mechanisms of ensuring
that pension funds and annuity providers fully account for improvements in mortality.
