New pension law draws mixed views

The Pension Act of 2022 passed in Parliament on Thursday has drawn mixed views with some industry players arguing that some clauses require delicate balance.

The new law has, among others, reduced employees’ wait period for proceeds from six months to three months and allows one to claim 50 percent of total contributions with five years to retirement age.

It will also see retirees getting 50 percent of their contributions, including interest upon retirement, a revision from 40 percent in the Pension Act of 2010.

Speaking in an interview on Sunday, Life Insurance and Pensions Association president Stain Singo described the new law as a balancing act, saying some clauses, though essential, could affect some industry players as well as the employees.

He said: “There were comprehensive consultations on this and, as a service industry, we were consulted by both the regulator and members of Parliament. We are glad that most of the things we proposed have been considered.”

Singo said issues such as penalties need to be looked into to avoid killing businesses and that the funds withdrawn could also affect development.

He said: “Though the penalties are essential as they could enhance compliance, the thing we should ponder is the K150 million penalty for defaulters because we could be increasing the problems of the employers who in essence fail to remit because they are strained financially.

“Pension assets have grown over the years and are crucial for the touted infrastructure development,” he said.

Employers Consultative Association of Malawi executive director George Khaki said the law addresses the concerns that were raised by employees, but added that the revised penalties for defaulters could stifle businesses.

“We welcome the amendments, but we are of the view that penalties for defaulters are too high.

“These should be looked at in the context of employers currently owing pension arrears in excess of K29 billion and trying to ensure that this unwarranted trend is reversed,” he said.

Khaki said they hope that when looking at individual cases, authorities will also take into consideration the current economic environment which is not favourable for businesses and employment creation.

Malawi Congress of Trade Unions president Charles Kumchenga said the law will go a long way in addressing employers’ concerns.

“It has been a long time coming and we are glad that burning issues specifically on the time taken for one to access their dues after losing their job have been relooked. What we need now is urgent implementation,” he said.

It has also put K150 million as penalty for companies that do not remit pension contributions and defaulting companies risk being closed.

However, the law has maintained clauses in the Pension Act of 2010 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.

Over the years, 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, the Reserve Bank of Malawi said pension contribution arrears stood at K27 billion.