By William Kumwembe:
Pension money has been perceived, at least by many, as a stipend from the point of one’s retirement through to the last mile in life.
Mostly, the funds are used during one’s latter days to meet time’s pressing needs as revenue streams shrink.
But at 33 years old, slightly above the half-mark of the mandatory retirement age of 60, Lilongwe-based Ezekiel Lifa felt he had no other option but to dip into his retirement savings earlier.
The law permits him. But life’s happenings pushed him to the edge of the cliff.
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After working for just about two years as project officer with a non-governmental organisation in the administrative capital, Lifa had a date with fate, he says.
His five-year contract, which was to end in 2025, was terminated in 2023 following an abrupt end of the project.
Lifa was not just destitute, but felt like he was thrown into the abyss of uncertainty as, at the time, he had been diagnosed with a spinal cord tumor and just underwent surgery.
“That meant having frequent medical check-ups. Considering the time I had been sick and the procedure I underwent, it meant my entire medical scheme-allocated funds were drawn and I had to use my own money for further treatment,” he narrates.
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Lifa was left with no option but to vie for an earlier withdrawal of his pension money for survival, part of which, he says he invested in agribusiness as a sustainable source of income as he hunts for another job.
He bought a piece of land, on which he is producing groundnuts at a commercial scale and invested some of his dues in goat farming.
He says he had been religious in following up on, updating and maintaining, his pension account, such that it took him just seven working days to access his money.
“The money came at a time I was not working and was not feeling okay. I had nowhere to go, in terms of getting funds, and the pension money came handy. Over the years, I have been ensuring that I keep record of my account movement and keep updated on issues pertaining to it,” he says.
If it were not for the changes to provisions of the Pension Act of 2022, which replaced the old Pension Act which was passed just some 12 years earlier, Lifa, like many who are in a similar predicament, would have waited longer.
The new law, which came into force on March 1 2023, reduced employees’ wait period for proceeds to three months and allows one to claim 50 percent of total contributions with five years to retirement age.
Previously, one could claim 40 percent.
The objective of the law is twofold; to ensure that every employee in Malawi receives retirement and death benefits as, and when, due; and foster agglomeration of national savings in support of economic growth and development of the country.
Within nine months after enactment of the new law, the number of employees that are on pension has increased by about 30,000, according to figures from industry regulator, the Reserve Bank of Malawi (RBM).
Pension fund administrator Old Mutual Pension Services says more members are now well equipped and understand what is expected of them in line with provisions of the new law, evidenced by the growth in membership base.
In a written response to a questionnaire, Old Mutual Pension Services General Manager Taonga Manda said the market has seen an immediate jump in early retirement withdrawals.
“The market is also yet to see the introduction of voluntary pension products to enable the achievement of one of the new Pension Act objectives; that is, to increase pension penetration even to the informal market,” he says.
President for Industry umbrella body, the Life Insurance and Pension Association of Malawi Lilian Moyo says provisions of the law have brought immense excitement to members, with high expectation that, as the industry grows, so will members’ financial literacy.
“Suffice to say that, due to economic pressures, we continue to see members withdrawing early but this should improve as the economy improves. As members become more aware, our view is that they ought to have proper retirement plans before seeking access to funds to avoid moral hazards,” she said.
RBM Chief Examiner for Life Insurance and Pension Funds Kaluso Chihana says conditions are a bit more open now for people to access pension funds, a move that can be equated to dangling a carrot before the donkey.
“We have seen increased engagement between the public and us. And that was suggesting that the message was getting across. In terms of compliance, the biggest challenge we have is the absence of a register for employers.
“For now, some of the benefits we see are the options for accessing funds being much wider. If an employee is out of employment, they have to pay less because now they only have to wait for three months before they can access their contribution. But at the same time, those who have five years or less before retirement are also able to access up to 50 percent of their contributions,” he said.
