First Mutual has sparked outrage on social media for offering a pensioner US$45 for a US$2 600 investment that they made 26 years ago. The customer, Mr Muzivi invested in First Mutual Pension Preservation Mutual Funds back in 1996 and was promised a payout of about $10 million ZWD (note the currency) which would have given him a pension of around $1.9 million ZWD per month for the rest of his life once he had reached the age of 65. Now Old Mutual is offering a mere $18 000 ZWL (again note the currency) once-off payment to clear this whole investment up.

The letter to Mr Muzivi from back in 1996

For the sake of comparison let us restate the key figures of this letter in amounts you can understand:

  • $10 million ZWD from 1996 is roughly US$1.429 million
  • $1.9 million ZWD from 1996 is equal to US$271 428.57
  • Mr J. Muzivi invested about $15 600 ZWD which is roughly $2 228 ZWL

NB, We used a very conservative rate of $7 ZWD as to 1 USD here. We also rounded up the figures to make the easier to digest. We assure you that neither of these things will be material.

In other words, the investor was supposed to get a payout of $271 428 per year but instead First Mutual is offering him US$18 instead! What is even more ironic is that he had invested in a pension fund that was supposed to have protected his money from the very things First Mutual will probably claim have eroded it. Pension preservation funds are created precisely to combat things like inflation which, according to First Mutual, eroded his funds.

Zimbabweans assurance companies are “scammers”

Zimbabwe’s insurance and pension industry are second only to banks when it comes to being mistrusted by the public. Very few people bother to invest with them anymore because of these perceived scams. They lure people in with promises that whoever invests with them will receive huge payouts. The truth though is that eventually, the pension or insurance company will find a way to wiggle out. The result has been that insurance companies have only found limited niches where they can thrive:

  • Car insurance is a statutory requirement. Every insurance company has some form of car insurance because that is where the money is.
  • Life assurance. Companies like Ecosure, Doves and Nyaradzo have thrived. This is because in Zimbabwean culture getting a dignified send-off is considered important.
  • Pensions because they are again mostly statutory and compulsory

Sadly apart from the Life Assurance sector, the services of players in other sectors have been lacklustre. Even NSSA has often found ways to weasel its way out of paying pensioners. When they do they offer peanuts. Meanwhile, executives at these companies and their investors often get to reap the benefits of fleeced workers who invested with them. Even in the life assurance sector, we have Doves a company that got tangled in a scandal when they shoved a body into a pauper’s grave and buried an empty coffin to cover up their mistake. Car insurance company take their sweet time making payouts whenever they can. Often they demand to make onerous demands and deductions when it comes to making the payment. It is therefore hard not to come to the conclusion that most pension and insurance companies are cheats looking for an opportunity to scam you of your hard-earned money.

Buy shares instead

Companies like FINSEC which operate C-Trade allow you to buy shares as a retail investor. Mr Muzivi would be rich right now if he had say bought Delta Shares. When pension funds cheat you the money is going to their shareholders in most cases. You are better off being a shareholder compared to an investor in a pension fund. Being a shareholder gives you a voice and when the currency roller-coaster reaches the bottom your money’s value is preserved since assets can just be revalued into another currency.

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