Tough pension penalties

E

mployers who defy the Pension Act provisions will face up to K100 million fines  while controlling officers risk long jail terms once the National Assembly passes amendments to the legislation which has already passed the drafting stage, Nation on Sunday has established.

 Meanwhile, workers’ representatives have supported the draft though they fear government may not be able to fully enforce the provisions once they are operationalised.

 The penalties are contained in the Pension Act Amendment Bill which the Ministry of Finance, through the Reserve Bank of Malawi (RBM), has drafted and has since been submitted to the Ministry of Justice for review and approval.

 “This 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,” the introductory part of the draft.

The draft Bill has 64 clauses which pronounce amendments, repeals and replacements.

To ensure that employers adhere to submission of pension contributions, the Amendment Bill empowers the Minister of Labour to enforce compliance. Section 9 sub-section 4 has been drafted to suit this narrative.

It reads, in part: “Where the minister responsible for Labour is satisfied on reasonable grounds that a person has contravened the provisions of this part, the minister responsible for labour may take enforcement action.”

The ministerial action may include written warning and “compensating persons who have suffered loss because of the contraventions”.

Sub-section 5 of Section 9 stipulates that the minister of Labour may take the employer to court on behalf of employees who have suffered loss as a result of the employers contravention of the Act.

The fines, which are placed in sub-sections 7 and 8, which read,  in part: “The monetary penalty prescribed under sub-section (4) shall be up to one hundred million kwacha or an amount equivalent to the financial gain generated or the loss suffered as a result of the contravention, whichever is greater.

 “A person who fails to comply with an enforcement action taken by the minister responsible for Labour in terms of sub-section (3) shall on conviction, be liable to—in the case of an individual—a fine of K10 million or an amount equivalent to the financial gain generated or the loss suffered due to the non-compliance and to imprisonment for four years.”

The Bill also seeks to reduce the waiting period for a member to access employee portion of pension benefits. Section 65 of the Pension Act spells out that, in terms of early payment of funds, one can only access the funds after producing proof that he has been jobless for six months.

But the Bill, once approved, would empower an employee to access the benefits after contributing for 10 years even when he or she is still working.

The proposed Section 15E sub-section 3 reads: “A member who has been part of a voluntary pension scheme for a period of not less than 10 years may access his benefits as a lump sum.”

Malawi Congress of Trade Union (MCTU), which has a membership of over 45 000 workers, has hailed the Bill as important to workers as it grants them liberty to access the funds as they wish.

“We are pleased with this because workers will not have to wait until they retire to access their money. So, this is a positive step,” MCTU president Charles Kumchenga said in an interview on Thursday.

He, however, expressed fears that government may not be able to enforce some of the resolutions it has penciled in the Bill.

“Most of the proposals look good in as far as supporting the worker to enjoy in as far as pension benefits are concerned. Our only worry is that government may fail to enforce them. History tells us we are good at formulating policies and not implementation,” he said.

Employers Consultative Association of Malawi (Ecama) executive director George Khaki also hailed the Bill, saying it will improve pension funds management.

 “The Bill talks about creation of an authority to be looking at the enforcement of the Pension Act. We know that at the moment there are some employers that are not complying with the provisions in the Act. This leads into workers going home poor.

“The authority [which will be operating under the Labour Ministry] will help to enforce compliance. This will be good for both the worker and employer,” he said.

Khaki said the employers do not have reservations over the punitive penalties the bill has outlined against the non-complying employers.

“I wouldn’t say there are gains and losses for the employers because we were part of the consultation when the bill was being formulated,” he said.

The Minister of Justice directed this paper to the Finance Ministry when asked when it projects the bill to be tabled in Parliament for debate.

The Ministry of Finance spokesperson Williams Banda had not responded to our questionnaire as we went for press yesterday.