Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe has asked private sector companies that are defaulting pension funds remittances to pay up with interest or face the law.
In his capacity as registrar of financial institutions, Kabambe has published names of 610 private companies that have not been remitting pension funds deductions from their employees in a bid to force remittances.
In a statement issued yesterday, Kabambe said RBM is seriously concerned with the non-remittance of the pension contributions as it negatively affects the accumulation of retirement savings for pension members.
Kabambe has since given the companies up to November 30 to clear pension contribution arrears, warning RBM will consider further action to enforce compliance if the companies do not comply.
He states: “The Registrar of Financial Institutions has the mandate to enforce compliance with the Pension Act, 2010. Section 61 of the Pension Act 2010 requires employers to remit to a trustee of a pension fund both employer and employee pension contributions within fourteen days from the end of the month the contributions fall due. Employers are, therefore, once again reminded that non-remittance of pension contributions to a pension fund is an offence under the Pension Act, 2010.”
Kabambe further warns eligible employers that have not yet placed their employees on the National Pension Scheme that they risk prosecution when found.
Weeks ago, the Malawi Congress of Trade Unions (MCTU), an umbrella body of workers in the country, also threatened to drag employers to court if they continue not to comply with the Pension Funds Act by remitting pension funds to administrators.
The Pension Funds Act makes pension funds remittances mandatory and under it, employers are mandated to enroll their employees on a pension scheme.
Employees are expected to 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.
MCTU president Luther Mambala said failure by employers to remit pension funds means that employees will lose out on savings when they retire because the funds will be minimal or not available.
He said it also deprives employees of their bonuses because pension administrators invest the funds and the profits become bonuses for employees.
As such Mambala warned of legal action if the Reserve Bank of Malawi (RBM) as a regulator fails to enforce the law to ensure employers pay the funds. The central bank has previously listed 18 parastatals that have not been remitting pension funds amounting to K5.6 billion for six years.