The Reserve Bank of Malawi (RBM) has given employers 21 days to settle their pension contribution arrears or face court action.
RBM chief examiner responsible for pension and insurance supervision Paul Nyirenda issued the directive on Monday after visiting some firms in Blantyre that are not remitting pension deductions to fund administrators during the bank’s ongoing re-engagement exercise with the firms.
He said the development is worrying; hence, the bank’s decision to engage an extra gear.
Nyirenda said: “We did undertake a number of initiatives to try to have employees remit pensions but we have not yielded any good results.
“We have thus decided to take more serious measures because failure by employers to remit pension funds means that employees will lose out their pension benefits among others.
“By not remitting the pensions, the employers are committing a criminal offense deterring economic growth. Some of the infrastructure development in the country is done with pension money among other benefits.”
Currently, pension contribution arrears stand at K26.9 billion from 999 employers out of the 3 073 employers in the national pension scheme.
The Pension Act 2010 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 for some time now, RBM has been engaging the defaulters in dialogue, with little success.
The data from the RBM also shows that some employers have not been remitting employees’ pension contributions for up to nine years.
During the RBM team visit on Monday, one the defaulting companies Fargo Limited said the company is struggling to remit pension funds, citing the difficult operating environment.
Said the firm’s managing director Ahmed Sacraine: “The last few years have been tough but we made a decision to retain our staff even though sustaining them has been difficult. Suffice to say, at the moment we can see that things are looking up and we are confident that we can start catching up on the lost incomes.
“We had meetings with pension funds manager on the same and agreed that after computing all arrears we will come up with a payment plan on the same.”
Meanwhile, the Ministry of Finance, through the RBM has drafted the Pension Act Amendment Bill which, if approved, will see employers who defy the Pension Act provisions risking up to K100 million fines while controlling officers risk long jail terms.
The Bill seeks to amend the Pension Act 2010 (Act No. 6 of 2011) to address implementation challenges, enhance the Registrar’s supervisory oversight over entities regulated under the Act and remove discrepancies in the Act.