Employees owed K26.2bn in pension arrears—RBM
Employers are yet to remit about K26.2 billion in pension money to fund managers, a development the Reserve Bank of Malawi (RBM) has attributed to Covid-19 which has worsened companies’ performance.
The pension arrears of K26.2 billion recorded at the end of December 2020, has increased by about 7.3 percent from K24.4 billion within six months, according to the RBM 2020 Financial Stability Report.
The Pension Act 2010 makes pension funds remittances mandatory and under it, employers are mandated to enroll their employees on a pension scheme.
Under the law, employees contribute a minimum rate of five percent while employers are mandated to remit 10 percent of the employees’ monthly gross salary which aggregates to 15 percent monthly.
But the RBM report indicates that 1 027 employers continued to face challenges to remit pension funds as seen from the growing outstanding pension contributions as at December 2020.
In an interview on Sunday, Employers Consultative Association of Malawi (Ecam) executive director George Khaki admitted that most employers are struggling to remit pension funds, citing a difficult operating environment.
“Many employers have indeed not been able to abide by the provisions of the Pension Act because of the tough operating environment in the country. We do not condone this practice because a law is a law and needs to be followed.”
Malawi Congress of Trade Unions secretary general Dennis Kalekeni said it is unfortunate that employees are being deprived of the only social protection that they have.
He said: “What is more worrying is that the non-remitted contributions are increasing, which means the law continues to be broken.
“Our expectation is full compliance of the law as employees are being deprived of their investment since the money is not being invested in proper channels for retirement.”
Kalekeni said it is high time the regulator enforced the law.
RBM Governor Wilson Banda, who is also the registrar of financial institutions, said in the report that the central bank will continue to monitor the related risks in the pension sector and apply supervisory interventions where necessary.
“Supervisory actions will be balanced taking into account the negative impact that the Covid-19 pandemic has had on pension funds’ compliance efforts,” he said.
The Pension Act 2010 provides that all remittances should be made within 14 days after the month.
Financial market analysts say that if pension remittances are delayed, they affect the employees’ pension account through less investment incomes.
