Stakeholders in the pensions sector have expressed mixed views to the Pensions Amendment Bill of 2022 which Parliament passed last Thursday.
Among other things, the law proposes increasing the proportion of pension benefits to be paid as a lump sum at retirement from 40 to 50 percent.
The bill has also proposed stiff penalties for employers that fail to remit pension deductions to fund managers.
The bill proposes a maximum of K150 million penalty and a custodial sentence for offending firms.
Life Insurance and Pensions Association of Malawi (Lipam) President Stain Singo said they were consulted on the law and are happy that what they presented has been taken on board.
“However, there is a need to look a little closer at the penalty for non-remittance of pension funds because if a company is failing to remit pension funds, it means they are passing through some economic difficulties. Therefore to slap them with such big fines might just be adding salt to their wound,” Singo said.
Malawi Confederation of Chambers of Commerce and Industry President Lekani Katandula said the penalty should be looked at closely.
He suggested that if the law is enacted within its current form, the regulator of financial institutions should make sure that there are clear considerations on companies that are not remitting tax because of financial problems and separate them from those who are defaulting deliberately.
“If we impose a penalty as high as K150 million, we might end up with a lot of people losing jobs from companies who have failed to pay the fine. Therefore, there should be a balance between penalising those who are really struggling to pay and those who are deliberately defaulting,” Katandula said.
Pension arrears grew to K27.9 billion by June this year from K22.9 billion by the same period last year, according to Reserve Bank of Malawi.
The bank disclosed this year that it has commenced legal proceedings against 21 companies for failure to remit pension funds and that 854 companies have pension arrears, of which 828 are private while 26 are government parastatals.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.