Retirement from employment contract, just like death, is one reality of life many people dread to imagine.
But, if truth be told, a day comes when very person in formal employment has to call it quits and go home to rest upon attaining the recommended age in the Employment Act.
In Malawi, people retire from the age of 50.
Suffice to say, there are exceptions to the rule for those working on short-term performance-based contracts whose durations vary from three to four or five years. Such employees can work beyond the stated ages and get their gratuity at the end of the contract.
Stories have been told of people faking their dates of birth in a bid to work beyond their “best before date” in employment. Some have openly asked for more time to build or complete their retirement home.
Examples abound of pensioners or retirees who become destitute faster than they retired.
In contrast, there are also examples of pensioners or retirees who still enjoy a comfortable lifestyle after making their contributions to the economy.
Many in the second group saved and planned for the rainy day; hence, they can still afford to live in a decent house in town or their home village, watching news and other programmes on television and indeed driving personal vehicles to visit family and friends.
Priorities and investment choices have been the key determining factor in many instances.
Nowadays, there is a wide range of investment avenues through which one’s money can grow by earning handsome interest.
For a start, one can open a savings account with the many commercial banks. However, when making such long-term investments through banks, it is important to familiarise oneself with the charges to avoid getting a rude awakening after a good chunk of your “savings” have been eaten up through service charges/fees.
Dividends from shares in listed companies, unit trusts, bonds and indeed extra investments to one’s contributory pension scheme have a huge potential to make one afford a cup of tea with milk (wamkaka) or indeed a local chicken (road-runner) served with rice in their retirement.
In one recent entry, I asked the question: What do we know about pensions? Many of us understand pensions generally to be a retirement savings plan where one saves part of their income today to use on a rainy day, especially when one is in the “sun set” years of life.
In Malawi, there is the new Pensions Act which came into effect on July 1 2011 and effectively made pensions mandatory.
To many people in formal employment, pension is about their employer deducting a portion of their monthly pay and putting the same in a pension fund. However, few know that they can also make voluntary contributions to the same fund over and above the five percent or so their employer deducts them. Such voluntary arrangements have the potential to boost one’s credit in a pension fund, thereby retiring with a decent purse.
In a bid to feast on greener pastures—which sometimes may not be as greener—many people change jobs frequently. In some cases, people switch jobs after making contributions for three or five months. We tend to ignore such contributions as negligible. However, under the Pensions Act, one can transfer the seemingly little contributions to the new employer’s fund. Ignoring the same sees, their contributions will be stuck with administrators as dormant funds.
It is never too late to start investing and planning for retirement. If you are 40, you still have 10 years to an early legal retirement or 15 years depending on when you plan. n