Private sector dominates pension payment defaulters

The Reserve Bank of Malawi (RBM) says the private sector has the highest number of pension contributions non-compliant employers, adding that it has instituted legal action against some institutions over the same.

RBM principal examiner for pension and insurance regulation, Shamiso Tsonga, said this in Lilongwe on Wednesday during her presentation at Nico Pension Seminar.

She said the payment non-compliance, which has resulted in 854 employers being in arrears, is one of the key challenges the central bank is facing in regulating pension management.

Said Tsonga: “The challenges we face are non-placement of employees on pension, the other is pension contribution arrears of which 854 employers are in arrears.

“Out of these, 828 are in the private sector and 26 parastatals.”

She said as part of regulatory actions, the RBM has launched legal action against 21 employers.

“A graduated approach is currently being pursued as follows; press release to remind all employers of their obligations, engage employers in dialogue, naming and shaming of non-complying employers.

“Imposing of administrative penalties in line with Section 75 of the Financial Services Act is another,” she said.

Tsonga said currently, the registrar of financial institutions has commenced legal action against 21 employers who were initially served with administrative penalties.

She said that the employers have been attributing their non-compliance to lack of knowledge about pension being mandatory while others say they fail to contribute due to economic challenges.

Nico Pension general manager Gerald Chima said the delayed payments affect the pensions administration and, by extension, the employees’ retirement package.

He said: “When the contributions are paid to us, our role is to make sure that they are properly allocated. The second issue is that they must grow. They can only grow if they are invested.

“The challenge with delayed payment of contributions is that that money never gets invested.  So, you end up with employees, at the end of their employment, with benefits that are not adequate to finance them in retirement.”