Malawi pension funds grow by 63.6 %

The number of pension funds grew by 63.6 percent to 1 457 by end of 2012 from 890 in 2011, indicates a recent Reserve Bank of Malawi (RBM) report.

RBM, in the June Financial Stability Report, said that assets of the pension sector grew by 36 percent to K101.7 billion in 2012 from K74.8 billion in 2011.

Similarly, total number of pension members increased significantly from 102 505 members recorded in 2011 to 156 936, representing an increase of 53.1 percent.

“It is expected that the growth in pension funds and members will continue to increase as the Registrar enforces compliance. The increasing growth is attributed to contributions coming in from new pension funds, investment returns and lump sum transfers by employers of severance due entitlements,” reads the report in part.

Malawi commenced the Pension Act in June 2011which which requires mandatory contribution by both employer and employee.

Experts have so far attributed the growth in the number of funds to the mandatory pension which was introduced a mandatory pension regime to all employers.

However, the World Bank’s 2013 Doing Business Report noted that Malawi introduce a mandatory pension scheme which apparently has a negative implication to business costs.

Outlook for the sector is expected to continue to improve as higher interest rates on the money market improve the profitability of the sector.

However, RBM notes that concerns still remain on limited investment avenues for the increasing funds flowing in from pension contributions.

RBM notes that negative media reports decreased within the period however they still remain an issue as the Pension Act has been characterised with negative publicity owing to misconceptions on motives of the Pension Act.