Employers, union tussle over pension funds
Despite efforts to enforce timely remittance pension contributions, non-remittance of pension funds continues to rise, a situation Malawi Congress of Trade Unions (MCTU) has described as worrisome.
According to latest Reserve Bank of Malawi (RBM) figures total pension contributions amounting to K20.2 billion were outstanding by the end of 2019, a significant rise from K13.1 billion reported in 2018.
The Pension Act 2010 however 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 according to the 2019 Financial Institutions Supervision Report, 1 027 employers from the private sector had outstanding pension contributions as at December 2019.
MCTU secretary general Dennis Kalekeni said in an interview on Tuesday expressed concern over the development, calling on authorities to act and review some provisions in the Act.
He said: “Failure by employers to remit pension funds means that employees will lose out their savings when they retire because pension funds will be minimal or not available.
“By not remitting the pensions the employers are committing a criminal offense because they deduct the funds from employees which it is reflected on monthly pay slips but fail to remit the same to pension fund administrators.”
He said the central bank has the powers to take to task employers to comply with the Pension Funds Act but expressed concern that it was failing, adding that naming and shaming is meaningless when results are not coming as intended.
In a separate interview, Employers Consultative Association of Malawi (Ecam) executive director George Khaki admitted that most employers are struggling to remit pension funds, citing difficult and challenging operating environment.
Said Khaki: “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.”
Last year, RBM stepped up efforts to enforce timely remittance on pension contributions, which included the ‘name and shame’ strategy to deal with non-compliant institutions.
Meanwhile, RBM Governor Dalitso Kabambe, who is also the registrar of financial institutions, has said the central bank will continue taking more stringent measures to curb the misconduct.
