Employers speak on pension arrears
Employers Consultative Association of Malawi (Ecam) has attributed the rising pension’s contribution arrears to the tough economic environment fueled by the Covi-19 and general economic slowdown.
Ecam executive director George Khaki said this on Wednesday in view of the December 2021 Financial Stability Report which is showing rising pension contribution arrears.
According to the RBM publication, which is the central bank’s biannual assessment of the financial sector’s performance shows that as pension membership has been on the rise over the years, increase in the contribution arrears continue to rise too.
The report shows pension contributions amounting to K27.2 billion were outstanding by the end of 2021, a rise from K22.9 billion reported in by end June 2021.
But Khaki while acknowledging that situation is worrying especially for employees as this affects their pension money that they get when they retire said employers are struggling in view of the tough economic environment.
“Our comment generally is that despite the challenges employers are obliged to follow the Pension Act. In cases where they have genuine problems we urge them to discuss and agree with RBM on how best the struggling companies can begin to reduce the arrears owed,” he said.
Khaki called on the government to put in place measures that promote business growth and recommend the removal VAT on pension administration fees which make the cost of providing pension unaffordable and ultimately hurts the employees.
On his part, MCTU president Charles Kumchedwa said the development is worrying to the union calling on authorities to act on the development promptly and review some provisions in the Act.
“Failure by employers to remit pension funds means that employees will lose out their savings when they retire because pension funds will be minimal or not available.
“By not remitting the pensions the employers are committing a criminal offense because they deduct the funds from employees which it is reflected on monthly pay slips but fail to remit the same to pension fund administrators,” he said.
The Pension Act 2010 however makes pension funds remittances mandatory and under it, employers are mandated to enroll 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.
Meanwhile, RBM governor, Wilson Banda, who is also the registrar of financial institutions, has indicated that the bank will continue to monitor the related risks in the pension sector and apply supervisory interventions where necessary.
“The registrar will not relent in its effort to pressure defaulting employers into complying. Otherwise, going forward, there may be slow down in the sector’s growth owing to protracted pandemic effects,” he said.
