Old Mutual explains pension fund setup


Old Mutual Malawi has called on employers to comply with the provisions of the Pension Act of 2010, which makes it mandatory for every employer to set up a pension fund.

Old Mutual National Sales Manager, Vincent Mkandawire, said the Act stipulates that firms with a minimum of five employees, earning K10,000 each per month, are supposed to have pension funds.

“What this means is that if you have a carpentry shop, for example,employing five people, who are earning K10,000 and above, you need to set up a pensions fund.


“Similarly, where you are running a small firm with less than five individuals but earning, say K50,000 each per month, you too need to set up a pension fund. The Ministry of Labour sets the minimum wage at K25,400 per month, it means every employer must set up a pension fund regardless of number of employees,” he said.

Mkandawire added that Section 11 of the Act calls for the setting up of a board of trustees in a firm to manage the operations of the pension fund.

According to Mkandawire, while previously, pension funds were managed and controlled by management of organisations, with the coming in of the Pension Act of 2010, the role was shifted to boards of trustees.


He said the boards of trustees are supposed to have equal representation, comprising of a minimum of three employees and a minimum of three members under management.

“The members are supposed to meet as equals and not in a manager, employee atmosphere,” Mkandawire said.

He added that the duty of the trustees is to ensure that pension deductions are remitted to pension fund administrators in time, which is every 14th day of the following month, as well as making sure that employees get their benefits on time.

“Section 12 of Part III of the Act provides for minimum contribution rates for employees and employers, saying workers are supposed to contribute a minimum of five percent of their pensionable monthly earnings while employers must contribute a minimum of 10 percent of the employees’ pensionable salary.

“Here we need to be very clear. The Act says a minimum of 10 percent contribution from employers, meaning that they could contribute more, if they wish. Similarly, employees, individually, may opt to contribute more than five percent,” Mkandawire said.

He added that employees have the freedom to transfer their pension benefits from one pension fund manager to another without giving any reasons to any approved unrestricted fund of choice after two years.

“Apart from the 10 percent pension contribution, firms are also mandated, under Section 15, to pay group life insurance to coveremployees in times of death.

“The minimum Group Life insurance cover as per the Act, is one yearsalary. Employers are encouraged to consider higher cover, where financially capable, as the rates are very affordable, like at Old Mutual,” Mkandawire said.

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