Income earned from investments of pension funds grew to K301 billion in 2022 compared to K227.5 billion during the preceding year, a report from Reserve Bank of Malawi (RBM) has shown.
The report, taking account of different sub-sectors in the financial services sector, indicates that unrealised gains amounted to K186.7 billion, representing 62.0 percent of investment income.
It says interest income was recorded at K69.0 billion from K65.3 billion in 2021, while dividend income was recorded at K27.3 billion from K21.9 billion in 2021 and rental income was at K2.9 billion from K3.0 billion in the prior year.
“The sector’s investment return for the review period was 20.1 percent, and was marginally below the average annual inflation of 20.9 percent. However, the investment return was higher than the return recorded in the previous year,” the report reads.
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The increase has been a trend since 2019 when the income was at K106.7 billion, then moved to K129.6 billion in 2020 and increased to K227.5 billion in 2021, then to K301 billion last year.
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Economist Edward Chilima said the earnings might have been dwarfed by rising inflation.
“For the investing firms, this is good news but we need to assess real benefits to the pensioners themselves, which, in my view, are negatively affected by the rowing inflation rate and much also considering the long time it takes pensioners to access their money,” Chilima said.
As of September this year, pension funds sat at K2.3 trillion, according to the central bank.
Pension funds’ assets are assets bought with contributions to a pension plan for the exclusive purpose of financing pension plan benefits.
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The June 2023 Financial Stability Report released on Tuesday says the pension sector recorded growth in both pension contributions and investment income during the first six months of the year to June 2023, with growth in total assets seen at K0.7 trillion compared to K112.1 billion as at June 2022.
The report further notes that investment assets of the pension sector were largely skewed towards listed equities and government securities at 60 percent and 25 percent, respectively.
In nominal values, listed equities amounted to K1.3 trillion, while government securities amounted to K564.4 billion as at the review period.
Other investment asset classes representing the remaining 15 percent included proportions in property, unlisted equity, unlisted debt, cash, fixed deposits and other investments.
