The Life and Pensions Association of Malawi (Lipam) has trashed the draft Pensions Bill Amendment of 2021, saying it will only succeed in fueling old age poverty.
According to the leaked draft bill which is expected to be tabled in Parliament by Likoma lawmaker Ashems Christopher Songwe, the new legislation seeks to amend sections 65(1) and 68 of the Pensions Act [Cap 55:02 of the laws of Malawi] in order to provide a shorter period in which a member can access pension benefits upon permanently leaving the service of an employer.
The draft bill also seeks to increase the amount payable where pension benefits have been commuted in a lump sum from the current 40 to 70 percent.
The draft legislation also makes a provision for the payment of pension benefits to a member who has five years or less to retire.
Reads Section 68(2) of the draft bill: “The maximum lump sum payable under subsection (1) shall be calculated as follows (a) seventy percent of all the annuities and pensions payable in respect of a fund member where the member has permanently left the service of the employers in accordance with section 65(1), has retired or has five or less year to retirement age.
“All of the annuities and pensions payable in respect of a fund member where the member has permanently left the service of the employer in accordance with section 65(1) or has retired, and the amount payable does not exceed the amount prescribed for the purpose of this paragraph in the Registrar’s directives”.
But reacting to the issue, Lipam President Stain Singo said, once passed, the bill will put in great jeopardy all the gains that Pensions Act of 2010 brought in terms of the old age and retirement protection to citizens.
Singo said the bill would increase old age poverty in Malawi.
“When under the current Act members were allowed or had an option to commute 40 percent of the accumulated contributions, the replacement ratio [balance pension after commutation divided by last salary before retirement] was only around 18 percent. Allowing 70 percent commutation would reduce the income replacement ratio to around 8 percent.
“With improved medical science as proven by the increase of life expectancy in Malawi from around 45 to between 60 and 65 years, it means Malawi will have a large population of retirees who will be receiving very little pension to survive on,” Singo said.
Late last year, a group called Concerned Employees and Pensioners petitioned President Lazarus Chakwera to amend the Pensions Act of 2010.