Pension contributions rise
Monthly pension fund contributions rose to an average K2 billion in September 2013 from K0.7 billion in December 2011 according to the Reserve Bank of Malawi (RBM) recent report.
The central bank has, however, said employees must be proactive to check if their monthly contributions are being remitted.
RBM December 2013 Financial Stability Report released last week adds that assets of the pension sector grew to K110.7 billion in September from K101.7 billion in December 2012 attributing the growth to an increase in contributions and favourable investment returns.
The assets grew by 36 percent to K101.7 billion from K74.8 billion between 2012 and 2011.
RBM, in the report, also explained that the increase in the monthly contributions was due to an increase in compliance by employers and employees to the Pension Act and the general increase in employee’s income.
But some experts have expressed fears about employers defaulting their monthly remittances, which may ultimately affect the employers when they retire.
RBM spokesperson Mbane Ngwira, in a telephone interview on Wednesday, said pension fund administrators are supposed to take up the issue whenever there is a default in remitting the contributions.
He added that apart from this, employees themselves should take up a proactive role to check if their pension contributions are being remitted.
“If an employer does not remit pension contributions then the administrator must report to the registrar—the RBM governor. RBM also does spot checks to see if employers are remitting pension contributions,” said Ngwira.
According to the RBM report, investment income from pension funds was recorded at K38.1 billion for the nine months ended September 2013 with unrealised gains from fair valuation of property and equity investments accounting 69 percent of the total income. The funds also had income from interest revenue.
The central bank has also noted that the main risk of the pension sector remains concentration risk due to limited long term investment options but the registrar is championing the formulation of strategies and implementation plan for the development of the capital market in Malawi.
According to the report investments in equity represents the highest share of pension fund assets at 42 percent, government securities and fixed deposits at 26 percent and 18 percent, respectively.
Malawi commenced the Pensions Act in June 2011 which requires mandatory contribution by both employers and employees. Employers must contribute 10 percent of salary and employees must contribute five percent of their salary.
