Pension funds could double by 2025 to K2tn—RBM

Reserve Bank of Malawi (RBM) says it projects  pension funds to in the country to double from the current K1.02 trillion as of September 2020 to K2 trillion in 2025.

RBM principal examiner responsible for pension regulations Peter  Kambalame told journalists on Tuesday during a virtual training on pension that the current K1.02 trillion pension assets value represents 14.7 percent of nominal gross domestic product (GDP) and is an increase from a value of K74 billion in 2011.

He also told journalists, through his presentation titled Social and Economic Impact of the Pension Industry in Malawi that currently, quarterly pension contributions are averaging K27 billion and that pension assets have earned investment income of around K100 billion.

In the same vein, Kambalame reported that pension members have now increased to 466 920 in September 2020 from only 73 837 in June 2011, adding that over 2 995 employers are participating as at September 2020 from under 300 employers in 2010.

“So far 17 094 employees have accessed benefits under Section 65 [of the Pension Act of 2010] in 2020, and cumulatively from June 2011, over 127 929 employees have benefited from early  withdrawals…pension assets are, therefore, projected to hit K2 trillion in 2025 if the past is anything to go by,” he said.

The projected K2 trillion in pension funds would be a significant jump as it is almost an equivalent of the current 2020/21 National Budget, a first substantive financial plan for the Tonse Alliance government is worth K2.2 trillion.

The Pension Act 2010 makes pension funds remittances mandatory and under it, 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.

However, despite efforts by the central bank to enforce timely remittance of pension contributions, non-remittance of pension funds by employers continues to rise, a situation that has continually dismayed workers.

Earlier in his presentation titled Walk through into Pension Act 2010, Pempho Kusani of Old Mutual agreed that Covid-19 pandemic has affected the pension industry as employer contributions have been hit but hailed the regulator, RBM, for being vigilant during these turbulent times.