Pension assets on the rise, hits K202bn
The increase in pension contribution and income investments has pushed up the pension sector assets by 16 percent to K202 billion at the http://mwnation.com/wp-admin/post-new.phpend of June 30 2014, the Reserve Bank of Malawi (RBM) has said.
The total assets, according to the RBM Financial Stability Report (FSR), have jumped from K174 billion in September 2013, but the report said the main risk of the pension sector remained concentration risk due to limited long-term investment options.
“Mismatch of assets and liabilities also posed a risk as a sizable amount of investments were in short-term instruments whilst liabilities were of a long term nature,” said the report dated June 2014, covering the period September 2013 and March 2014.
The pension assets are fast increasing after the enactment of Pension Act of 2011 which came into force on June 1 2011, and mandates both employees and employers to contribute to the fund.
The FSR said investment in equity represented the highest share of pension fund assets at 59 percent followed by government securities and fixed deposits at 17 percent and 13 percent respectively.
In the period, there was a decrease in holdings of government securities and fixed deposits in favour of equities, largely attributed to the sound performance of the stock market.
The report said investment income stood at K34.8 billion, representing income to investment assets ratio of 18 percent.
“The main source of investment income was unrealised gains from fair valuation of property and equity investments which accounted for 82 percent of the total income. Income from interest revenue contributed K5.3 billion translating to 15.29 percent of the total investment income,” said the report.
The report said pension contributions continued to improve as the average monthly contributions increased to K2.6 billion from K2 billion in the previous quarter.
This was triggered by an increase in pensionable emoluments normally expected at the beginning of each year as well as more employers complying with the provisions of the Pension Act.
In the foreword to the report, RBM Governor Charles Chuka said in the coming months, it is expected that Malawi’s financial system will largely remain healthy and sound.
“The expected outcome is on account of favourable macroeconomic prospects and the continued implementation of best practice risk management policies,” he said.
Chuka said inflation outlook for the coming months is also favourable, largely on account of an expected drop in food prices and a relatively stable exchange rate.
The RBM has since said it will continue to formulate strategies for the development of the capital market in Malawi, with the aim of deepening the market to increase investment options which will also benefit the pension sector.
