Revisit pension law—MCTU

The MCTU has asked Malawi President Joyce Banda’s government to review the Pensions Act as amended last year to accommodate issues of employee protection.

Malawi Congress of Trade Unions (MCTU) secretary general (SG) Robert Mkwezalamba, in a written response to a questionnaire on Thursday, argued the previous administration rushed the bill through Parliament after deliberately removing some clauses initiated by the workers during consultations.

Mkwezalamba pointed out that the law—which was passed in Parliament and duly assented to by the late former president Bingu wa Mutharika—had, among other things, rephrased a section which stipulated 20 years of service as grounds for one to start accessing benefits.

Said Mkwezalamba: “MCTU was behind the introduction of a mandatory Pensions Act. The problem now and by the time of adoption was that government and other employers had a hidden agenda and deliberately removed some clauses we had agreed on and even rushed the bill to the National Assembly.

“As such, the starting point should be a review of the clauses the workers and employers still had on the bill before it was enacted. Secondly, the need to address the implementation challenges that have been observed so far.

“Thirdly, [there is] need for concerted efforts to ensure that civil servants who will be joining the scheme next year do not lose the benefits they are currently enjoying with the pay-as-you-go system.”

Mkwezalamba said apart from reviewing the law, there is also need for further assessment to ensure that an ordinary worker who joins the pension scheme would benefit.

The MCTU SG said there is need to increase the take-home package for the workers because if an employee in the civil service gets K15 000 (about $60) per month, as that worker retires after 20 years, he or she would receive less than K200 000 (about $800) “which would be peanuts to sustain life”.

Said Mkwezalamba: “Besides, there are many areas of reform we want as MCTU. The immediate challenge by government is to ensure that a worker has access to some income to enable him or her to make investments such as build a house and other ventures so that the pension funds realised by age 70 really go towards meeting his or her daily needs.”

In the 2012/13 national budget, Finance Minister Ken Lipenga said Section 13 of the Pensions Act will now be made effective as amended to the effect that contributions by the employees will be net of taxes and contributions by the employer will be deductible up to 15 percent of the employee’s annual salary, whereas earnings from the pension investments will be taxed at a reduced rate of 15 percent.

Lipenga said the pension benefits that accrue to the pensioner will be exempted from taxes to ensure that he or she has adequate disposable income at retirement.

Meanwhile, speaking at the International Labour Organisation (ILO) conference in Geneva, Switzerland, Mkwezalamba said governments should adopt the Social Protection Floor (SPF) which is a policy framework promoting strategies that provide essential services and basic income security for all.