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Pension assets leap to K1.7 trillion

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The country’s pension assets rose to K1.7 billion in the second half of 2022 from K1.4 trillion, the Reserve Bank of Malawi (RBM) has disclosed.

In its December 2022 Financial Stability Report released on Thursday, RBM says the pension sector was stable in the final half of the year 2022, recording overall strong growth in assets and positive annual investment returns.

According to the report, total investment income closed 2022 at K301billion from K77 billion in June 2022. This also compared favourably to K227.6 billion as reported in December 2021.

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“Unrealised gains alone, accounted for 62.0 percent of the total investment income notably grew to K186.7 billion from K24.2 billion as at June 2022 (December 2021: K128.6 billion).

“This was on account of a bullish performance of the stock market. Annual pension contributions collected amounted to K165.0 billion from K103.7 billion in June 2022 and K141.7 billion in December 2021,” the report says.

It notes that the growth was largely supported by enrolment of new members on the national pension scheme as pension membership stood at 542,223 from 532,901 in June 2022.

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On the other hand, contribution arrears were seen at K24 billion, a decline from K27.5 billion in December 2021.

“The asset portfolio mix was concentrated in listed equities, which represented 50.5 percent of the total investment assets.

“Government securities as a second largest asset, class, accounted for 31.1 percent of the investment portfolio,” RBM says.

The central bank adds that in nominal values, equity grew by K166.5 billion to K838.0 billion from the June 2022 position while government securities increased by K85.1 billion to reach an aggregate of K515.7 billion.

Other investment asset classes representing the remaining 18.4 percent included proportions in property, unlisted equity, unlisted debt, cash, fixed deposits and other investments.

However, RBM has noted that pension arrears remained high and a major concern in the sector.

Additionally, the central bank says exposure to inherent risks such as market, credit and inflation risks persisted during the period under review.

“Asset concentrations were still evident in the sector. Thus, volatility in equity prices and interest rates continued to pose threats to the industry.

“For some pension funds, lack of alternative investment avenues delayed asset diversification while other pension funds are yet to spread into all of the available investment asset classes and in line with investment policies,” the report says.

Over the years, commentators have argued that Malawi has not taken full advantage of the growing pensions purse to accelerate the development of the country.

Speaking during a panel discussion at the 2023 National Development Conference, Old Mutual Malawi Managing Director Edith Jiya said government is already tapping into pension funds which have some exposure in the Treasury bill and bonds market.

Jiya said for Malawi to have sustainable economic development, the country needs a very focused plan on how it ultilises the pension funds.

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