Pension and saving culture on trial

It is said that Malawians lack a saving culture. Some save.

Economists argue that one can think of saving upon satisfying basic needs, especially food, shelter and clothing.

The economy is a major decider for citizens to save or not

The Pensions Act of 2011 mandates employers to put their employees on compulsory pension scheme with a registered pension administrator.

Since May 30 2011, most employers in the public and private sectors have put their employees on compulsory pension schemes. This has forced employees to save and many feel their money is being held for too long when they leave an employer.

Prior to 2011, employees leaving an employer were getting all their dues. This provided them business capital and some became employers and others built houses. Yet others used pension money while looking for other opportunities.

Not any longer.

The pertinent questions remain unanswered.  Has the Pension Act really instilled the saving culture in Malawians? Do you force citizens to save in an economy where most of them earn peanuts and live hand to mouth? Were citizens consulted adequately to understand how the Act will affect their lives? Were the age limits of early and late retirements put at 50 and 60 years old respectively realistic to the life expectancy of most Malawians? Was the Pension Act 2011 meant to save the interests of the few elite who are not subjected to it?

Any law needs to be scrutinised properly to serve the interest of the people it intends to serve.

The majority of the population in most developing countries, including Malawi, are the youth aged 18-39 years.

It is this age that is active when it comes to investments, innovations and self-employment. It is, therefore, frustrating that although the life expectancy for Malawi fluctuates between 39-50 years, the retirement age is put at 60 years.

Most of the youth today shall either be too old to invest or dead before the money is counted into their hands.

The conditions of employees to access their money prior to 60 years of age are punitive.

They do not offer employees substantial amounts of their savings. The 20 years of service condition only gives the employee 40 percent of the savings, so is the early retirement condition at 50 years.

The 60 years of age condition allows the employee to get 40 percent lump sum and 60 percent as annuities for life.

The other condition is no better. Employees get five percent of their contribution upon staying jobless for six months.

Lastly, pensioners get the savings when incapacitated.

The conditions are not favourable for investment since the money is held by the pension administrator till the pensioner is too old or ill to access it and use it profitably.

People can invest at different ages, but it is viable to invest when one is full of ideas and energy.

Paying huge sums of money in pension benefits when someone is too old is not doing justice to the pensioner.

The Act needs to be revised before it creates the vicious cycle of unemployment.

Unsurprisingly, government has only heeded to review the Pension Act this year because of the punitive clauses which civil servants have always resisted  since its inception six years ago.

Among civil servants, the Pension Act is selectively applying to those aged 35 years and below, while the older civil servants continue with the old procedures of calculating pension benefits.

Forcing citizens to save when economic hardship, low life expectancy and poor environment for investment are not resolved is a mockery to the citizenry who will toil to save and never come to enjoy the fruits.

The Pension Act needs to be revised to reflect the many realities facing Malawian workers both in government and private sector. n