Pension investment income declines 58%
Pension fund investment income dropped by 58 percent in the first half of this year to K246 billion due to the subdued performance of the Malawi Stock Exchange despite total assets increasing to K2.8 trillion, Reserve Bank of Malawi (RBM) data shows.
The central bank has attributed the reduction in investment income from K589 billion in June 2023 to the slump in the performance of the 16-counter stock market where most of the pension funds are invested.
Reads the RBM report in part: “The sector posted a drop in investment income mainly due to a decrease in unrealised gains, which fell to K115.4 billion from K493.2 billion and accounted for 46.9 percent of the total investment income
“The outturn reflected a slump in stock market performance year-over-year, which has since improved in the first half of 2024.”
On the downside, the sector faced challenges, particularly in the accumulation of pension contribution arrears, which rose sharply to K56.1 billion as of June 2024 from K35.4 billion in December 2023 and K31.2 billion in June 2023.
Pension sector experts say the increase in arrears is a worrying development as it increases credit risks and prevents pension fund managers from investing the funds to their members’ savings.
Insurance and pensions expert Eric Chapola said in an interview yesterday that pension funds are sacred and need to be invested in well secure vehicles, adding that MSE remains one of the best options for investment.
“Pension funds must be invested in such a way that pensioners should not lose out, in fact they must grow consistently,” he said.
Chapola, who recently retired as Nico Life Insurance Limited chief executive officer, said investing pension funds in infrastructure is valuable that many cities in the world have been built from pension funds.
“Maybe it is time to even think of offshore investments when the law permits,” he said.
On his part, Malawi Congress of Trade Unions president Charles Kumchenga decried the increasing pension arrears as worrisome to the membership, saying it threatens the retiring population on their pension benefits.
“On the non-remittance from employers, it is a sad issue and we have spoken against this for many years and we are urging the RBM to name and shame, but more importantly apply heavy fines to those employers that are not remitting,” he said.
Employers Consultative Association of Malawi executive director George Khaki attributed the rising non-remittance of pension funds to the worsening economic environment, which is affecting most employers business wise.
“We have been in contact with the regulator about this issue and we agreed that the situation has to be dealt with case by case,” he said.
However the RBM report indicates that total pension contributions, excluding transfers, rose to K120.8 billion from K93.4 billion in June 2023, bolstered by an increase in the national pension scheme membership to 617 188 from 572 579 over the review period.”
