Reserve Bank of Malawi (RBM) has threatened to commence legal action against employers with pension contribution arrears after the expiry of the 21-day ultimatum given late last month.
RBM spokesperson Onelie Nkuna, in a response to an e-mailed questionnaire on Wednesday, said after the 21 days the bank will engage the Pension Administrators to provide status of arrears for each employer that was given an administrative penalty.
She said: “For those employers that would not have cleared the arrears, the bank will commence legal action to force compliance,” she said.
Nkuna was, however, quick to mention that meanwhile, a number of employers have written the Registrar with payment plans which the Bank is reviewing but could not give the exact figures.
On June 21 2021, RBM raided companies which have not been remitting pension deductions to fund administrators as part of the bank’s ongoing re-engagement exercise with the firms.
Then, pension contribution arrears stood at K26.9 billion from 999 employers out of the 3 073 employers that are in the national pension scheme.
The Pension Act 2010, however, 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 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.
On his part, Employers Consultative Association of Malawi (Ecam) executive director George Khaki said it is pleasing that the registrar has given companies room to provide their repayment plan, saying employers are struggling to remit pension funds, citing the difficult and challenging operating environment.
Said Khaki: “Many employers have indeed not been able to abide by the provisions of the Pension Act because of the tough operating environment in the country. We are, however, pleased to note that the registrar of the financial institution has provided room for us to come up with a repayment plan and we will strive to comply with that.”
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 face 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.
To ensure that employers adhere to submission of pension contributions, the Amendment Bill also empowers the Minister of Labour to enforce compliance.
The ministerial action may include written warning and compensating persons who have suffered loss because of the contraventions.