Pension contribution arrears have jumped by 80 percent to K144.5 billion in five years from K27.5 billion in 2021, highlighting employers’ continued remittance defaults and growing risks of workers getting little retirement packages.
Data contained in the Reserve Bank of Malawi (RBM) Financial Stability Report for December 2025 confirm the situation despite the central bank’s efforts to enforce compliance of the Pension Act of 2023.
At K144.5 billion, the arrears represent 41 percent of the K352 billion contribution and two percent of the total pension assets at K8.4 trillion, according to the RBM.
The central bank further said the rise in pension arrears exposes some funds to material credit risk.
In an interview on Tuesday, Employers Consultative Association of Malawi executive director George Khaki, while indicating that the development is a reflection of the economic environment where businesses are not generating enough revenues to meet their obligations, said the Pension Act must be respected.
He said: “In turn businesses are barely surviving and unable to meet their statutory obligations. However, this is unfortunate. Firstly, the law has to be respected irrespective of the challenges the businesses are encountering.
“Secondly, it means that the employees will be worse off when they reach retirement age because the retirement funds may be not enough to support them.”
Khaki encouraged employers with pension arrears to engage their workers, inform them of the situation and agree on how the arrears will be settled.
Malawi Congress of Trade Unions president Charles Kumchenga said in an interview on Tuesday that arrears affect the pension package of workers.
He said employees are losing out their savings when they retire or lose their jobs because the pension funds they contributed are not available.
“We have a lot of policies on pensions, but one wonders why the same is not being implemented. By not remitting the pensions, employers are committing a criminal offence because they deduct the funds from employees, but fail to remit to pension fund administrators,” said Kumchenga.
The RBM report, which reported that the pension assets grew by 57 percent to K8.4 trillion in December 2025, indicated that another concern facing the sector is concentration risk as 76.9 percent of the assets are invested in equity, surpassing the 60 percent regulatory limit.
The central bank said level of equity concentration has exceeded the 60 percent regulatory limit prescribed under the Financial Services Directive 2025, increasing vulnerability to equity market corrections and signalling increased compliance risk among pension funds.
Reads the report : “High concentration in listed equities exposed pension funds to market volatility, which is compounded by limited diversification opportunities and investment capacity gaps among trustees of isolated pension funds.”
Life and Pensions Association of Malawi president Lilian Moyo, in an interview, described the sector’s performance as outstanding, noting that it reflects a profound advancement in financial maturity despite fears of concentration risk.
She said the sector has showcased its ability to mobilise and amplify national savings on a substantial scale, which is indispensable for Malawi’s economic transformation.
Moyo, who is also Vanguard Life Assurance Company Limited chief executive officer, said: “Nevertheless, this significant performance raises a structural concern. With 76.9 percent of assets heavily concentrated in equities, the sector is increasingly vulnerable to market fluctuations.
“What propelled exceptional returns during an upswing could exacerbate risks during a downturn. This is not merely a short-term issue but a strategic challenge.”
RBM spoke sper son Boston Maliketi Banda was not immediately available for comment on Tuesday, but the central bank said in the report that efforts to strengthen supervisory oversight to address key sector vulnerabilities, with a focus on enforcing compliance with the Financial Services Directive, 2025.
The RBM said these efforts will target the mitigation of credit risk through enhanced monitoring and recovery of contribution arrears.
In 2022, when the arrears hit K24 billion, the central bank stepped up efforts to enforce timely remittance of pension contributions, which included taking legal action against employers with pension contribution arrears.
Current total membership rose to 750 253 from 645 191 over the same period, mainly following the incorporation of 168 previously non-compliant pension funds into the pension regulatory framework, according to the report.
