The amended Pension Act of 2023 rolled out on April 1 with various changes meant to benefit employees, including stiffer penalties for employers defaulting on remittances of pension deductions.
In an interview in Lilongwe yesterday on the sidelines of a meeting to sensitise pension trustees to some key changes in the new Pension Act, Old Mutual Pension Services general manager Tawonga Manda said most companies were not doing well on remittances.
“But those [the companies] are being engaged by the pension administrators and the Reserve Bank of Malawi [RBM] to make payment plans to remit the contributions,” he said.
Under the new law, companies which default in remitting members’ contributions risk getting a penalty of up to K150 million.
Speaking on enforcement measures, RBM chief examiner responsible for life insurance and pension funds Kaluso Chihana observed that they were previously focusing much on administrative actions.
He said: “If you look at the sections that were providing for that, they simply said an employer who is not complying, the registrar will impose administrative penalties as provided for in the Financial Services Act.
“And the Financial Services Act only applies to financial institutions as opposed to employers. This is where we had a challenge.”
Chihana said the registrar will now have the mandate to take to court employers flouting the law.
He also said the new law took into consideration the fact that pension is occupational based, but has made provisions for the informal sector.
Said Chihana: “In Malawi, over 80 percent of the people are working in the informal sector and when you look at the way the pension law was designed, it was an occupational based Act.
“This meant that we only provided for employees that are working in the formal sector. Hence, this law has made provision for employees that are working in the informal sector to be able to participate in saving for retirement as well.”
Other notable changes in the Pension Act 2023 include the reduction of the waiting period from six to three months, if members want to access their pension benefits after leaving employment.
People can also access up to 50 percent of their pension benefits if they have five years or less to their retirement.
On his part, executive secretary in the Office of the Ombudsman Alinafe Malunga said the changes will be helpful, particularly on the issue of accessing funds after three months of employment termination and the issue of getting a lump sum five years before retirement date.
But on the issue of getting funds five years before retirement, he warned that people must make sound decisions as there are some risks.
