Law reform in the financial services sector: A case study on Pension Schemes in Zambia

Abstract

Successive governments in many countries have enacted legislation to encourage both individuals and employers to plan for the provision of an adequate level of income in their retirement. These initiatives are evidenced in the existence of commercial financial institutions such as banks and non-bank financial institutions such as pension schemes and insurance companies, which are designed to operate as avenues of lifetime savings for their citizens.This paper will focus on one branch of non-bank financial institutions namely, the Pension Schemes. In Zambia about 80% of the population lives in abject poverty and this among other things such as international pressure has influenced over the years, the development of State pension schemes to provide a range of pension benefits that are dependant on a person's employment status and their level of contributions. The Zambian government has endeavored to establish various schemes namely, the Zambia National Provident Fund (ZNPF), the Public Service Pension Fund (PSPF), the Local Authority Superannuation Fund (LASF) and the National Pensions Scheme (NPS). Sadly however, is the fact that the majority of these social security schemes have been plagued with significant weaknesses occasioned by deficiencies in their design, financing, administration and legislation; and thus the benefits available from these schemes are inadequate for individuals who wish to maintain a reasonable standard of living in circumstances of old age, invalidity or (to surviving dependants) death. There are however private occupational pension schemes organized by individual companies to operate complementary to the National scheme; and these have generally operated with greater efficiency as compared to the State run schemes.This paper will by and large focus on the Zambian laws pertaining to pension schemes and the growing necessity of ensuring that the various pieces of legislation are streamlined and harmonized in order to increase the effectiveness and efficiency of these schemes. The paper will also consider the weaknesses and constraints within the pension sector and assess the legislation with a view to identify gaps, weaknesses, ambiguities and other shortcomings that exist in the pension schemes, which tend to limit the smooth operations of the pension scheme, and thereby provide alternative reforms. A number of foreign examples will also be analyzed to provide a wholesome picture of how the issues of pension schemes have been dealt with globally, identifying which models and methods are most suitable for Zambia to achieve growth and sustainability in the pension industry.