Reserve Bank of Malawi (RBM) says it will claim K5.7 billion pension fund arrears from 789 private sector firms that have not been remitting pension deductions.
RBM spokesperson Mbane Ngwira said in an interview on Wednesday that as of December 2018, the private sector had arrears amounting to K5.7 billion, representing 56 percent of total defaulters dating back to the time the Pensions Act came into effect seven years ago.
He said: “We started negotiations way back and we have given them up to June to clear these arrears. They are giving varied excuses for not remitting the funds, but to a larger extent some claim to have not remitted the funds due to harsh economic conditions.
“However this may not be acceptable since all companies are working under the same conditions and the economy is on a recovery path.”
The Pensions Act 2010 requires employers to remit to a trustee of a pension fund both employer’s 10 percent and employee’s five percent pension contributions within 14 days from the end of the month the contributions fall due.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) spokesperson Millie Kasunda in an interview said the private sector lobby group has not done a research or any engagement with its members to understand reasons for defaulting.
But Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe described the situation as worrisome, saying it puts at risk employees’ money as it means they will not get pension funds during retirement.
Said Kalilombe: “This is serious as it puts employees at risk if funds are not remitted. This means that insurance companies are not recognising the receipts and most likely they may not get the benefits.”
The move by RBM comes months after it named and shamed 18 government parastatals that have not been remitting pension funds for about six years.
The Act gives powers to Registrar of Financial Institutions to take to court and punish every institution that fails to comply. n