The pensions sector has topped financial consumer complaints lodged to the registrar of financial institutions in 2020, data from the Reserve Bank of Malawi (RBM) show.
According to the 2020 RBM Annual Report, the sector registered 235 complaints, which is almost half of the 486 complaints received in the financial sector.
The analysis shows that the insurance sector registered 142 complaints, microfinance and financial cooperatives 23 while the banking sector had 82 and the capital markets sector two.
In its report, RBM says the complaints in the pensions sector were due to non-remittance of pension contribution by employers, followed by requests for discretionary approvals to receive retirement benefits in full against regulatory requirements.
Reads the report in part: “Other complaints related to employers refusing to facilitate processing of payment of pension benefits with pension administrators due to outstanding loans or fraud related dismissals and disagreements.”
The bank said it also received complaints relating to delays by both employers and pension administration companies in processing pension benefits.
According to RBM, 206 complaints were successfully resolved compared to 320 complaints in the preceding year.
As part of the initiative to curb misconduct of non-remittance of pension contributions, RBM last month engaged employers with pension contribution arrears and gave them 21 days from June 21 to settle their arrears or face court action.
Currently, pension contribution arrears stand at K26.9 billion from 999 employers out of 3 073 employers under the national pension scheme.
The Pension Act 2010 makes pension funds remittances mandatory and employers are mandated to enrol their employees on a pension scheme.
Under the law, employees contribute a minimum of five percent while employers are mandated to remit 10 percent of the employees’ monthly gross salary which aggregates to 15 percent monthly.
In an earlier interview, Employers Consultative Association of Malawi executive director George Khaki admitted that most employers are struggling to remit pension funds, citing difficult and challenging operating environment.
He said: “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.”
RBM chief examiner responsible for pension and insurance supervision Paul Nyirenda is on record as having said the central bank undertook a number of initiatives to try to have employees remit pensions but did not yielded any good results.
He said: “By not remitting the pensions, the employers are committing a criminal offense deterring economic growth.”
Meanwhile, the Ministry of Finance, through the RBM, has drafted the Pension Act (Amendment) Bill which if approved will see employers who defy the Act provisions facing up to K100 million fines while controlling officers risk long jail terms.
The Bill seeks to amend the Pension Act 2010 (Act No. 6 of 2011) to address implementation challenges, enhance the Registrar’s supervisory oversight over entities regulated under the Act and remove discrepancies in the Act.
To ensure that employers adhere to submission of pension contributions, the Amendment Bill also empowers the Minister of Labour to enforce compliance.
The ministerial action may include written warning and compensating persons who have suffered loss because of the contraventions.