MPs amend pension law

Parliament yesterday passed the Pension Act of 2022 which has reduced employees’ wait period for proceeds to three months and allows one to claim 50 percent of total contributions with five years to retirement age.

The new law will also see retirees getting 50 percent of their contributions, including interest upon retirement. Previously, under the Pensions Act of 2010, retirees could only access 40 percent.

The Pension Act of 2022 also provides for the establishment of a National Pension Scheme for mandatory and voluntary participation.

However, the new law has maintained clauses in the current Pension Act compelling every employer to put every employee on pension scheme and that each employee contributes five percent of earnings while employers put in 10 percent, totalling 15 percent.

Tabling the Bill in Parliament in Lilongwe yesterday, Minister of Finance and Economic Affairs Sosten Gwengwe said the Bill sought to repeal the Pension Act and replace it with a new legislative framework that addresses implementation, legal and regulatory challenges in the pension sector.

He said the Bill also sought to enhance coverage by introducing voluntary schemes as well as strengthening compliance and supervisory oversight by Registrar of Financial Institutions over entities in the pensions sector and improve coordination for accessing pension benefits.

The minister said: “The Pension Act was promulgated in 2011 to ensure that every employer provides pension for every employee employed, ensure that every employee receives pension on retirement or death benefits on their deaths, promote safety, soundness and prudent management of pension funds and have national savings and support economic growth and development.

“In 2014, the Act was amended to provide more time for government to comply with the Act and to allow registration of pension funds by the Registrar of Financial Institutions, among others.”

The Pension Act of 2022, through the voluntary scheme, also gives room to any other person wishing to be on pension scheme to join. A person can belong to the mandatory scheme and voluntary scheme.

Faced with increasing default among employers, the new law has put K150 million as penalty for companies that do not remit pension contributions. Further, the companies will also risk being closed.

The waiting period was among the contentious issues, especially for employees who had lost jobs. However, instead of six months, they will now be able to access 100 percent of what they contributed within three months.

On the other hand, those that have retired can access 50 percent of the total contributions, including interests accumulated.

An employee can also access pension five years before retirement. Under this arrangement, the employee will have access to 50 percent of the contributions purportedly to help them prepare for retirement.

The Bill received support from both the government and opposition sides.

In his submission, opposition Democratic Progressive Party spokesperson on the Bill Ralph Jooma said no party can say no to such a law that aims at promoting the welfare of Malawians.

“Today, we are nullifying the current pension regime and replace it with a regime that even us in the opposition believe it is a better law,” he said.

Jooma, who is Mangochi Monkey Bay legislator, said the new law might not address everything, but it has tackled challenges experienced. He said the new law further gives flexibility to employee and employer to agree on contributing more than the five percent for employee and 10 percent for the employer.

United Democratic Front spokesperson on the Bill Lilian Patel emphasised that Malawians have been waiting for such a law. She said pensioners have been facing challenges to access their money.

Leader of the House Richard Chimwendo Banda said the introduction of K150 million penalty for employers that default will ensure that Malawians benefit from pension.

He added that having employers remitting pension contributions will also help promote development as the money is invested in projects.

Employees have been lobbying for changes in the Pension Act to enable them access a bigger share. During consultations last December, employees pushed for an increase in the lump-sum access from 40 percent to 70 percent and to allow access before retirement.

Early this year, Reserve Bank of Malawi said pension contribution arrears stood at K27 billion from 999 employers out of 3 073 on the National Pension Scheme.