By Kingsley Jassi:
The country’s pension industry is growing fast, with assets now valued at close to the K3 trillion mark, but not all the 8,000 employers are complying with the law, the Reserve Bank of Malawi (RBM) has said.
According to RBM, about 909 employers have a record of deducting funds from employees’ salaries under the guise of pension contributions but this money does not find its way to the pension administrators.
Figures presented show that pension arrears were recorded at K84 billion by September 2024.
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In trying to combat the problem of growing noncompliance, a special department called Pension Compliance and Support has been set up, a move RBM Governor McDonald Mafuta Mwale expects to bring sanity to the pension industry.
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“Non-compliance with these obligations puts pension members at risk as it undermines trust and defeats the very purpose of a pension system which is to ensuring dignity in retirement,” Mafuta Mwale said.
There is loss of value the pensioners suffer when long delays of remittances occur, according to Mafuta Mwale; as such, funds are not invested in profitable ventures, hence they suffer inflation.
He said the central bank would also ensure divestiture of pension funds as it strives to ensure pension funds investments bring above inflation returns if the purpose of pension is to be achieved.
The central bank has further declared NBM Pensions Administration Limited as a default person administrator to which dormant pension accounts of members will be transferred.
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Mafuta Mwale explained that what happens in most cases is that employees who change jobs do not move with their accumulated pension benefits at the point of exit.
He said, as such, their pension benefits are held in various pension funds across the industry, yet Section 141 of the Pension Act requires every employee to have one pension account.
“This therefore is a call to all pension funds to transfer to the default fund benefits of members who exited employment and failed to nominate a pension fund within seven months of leaving their jobs. The default fund will hold these benefits until members either fulfill the conditions for payment or request a transfer to a different pension fund,” the governor said.
Employers Consultative Association of Malawi Executive Director George Khaki admitted that there were high levels of non-remittance of pension deductions in the sector, attributing the development to prevailing economic conditions that continued to limit productivity and financial positions of many companies.
“Since the Covid pandemic, some companies have not recovered because there have been other shocks that affected the economy and industrial performance. These factors have contributed to the non-remittances but we are engaging the employers, in collaboration with the Reserve Bank [of Malawi], to increase awareness on the importance of remitting pension funds,” said Khaki.
