Employees risk losing out on their pension investment as some employers are not remitting the same to insurance companies with arrears hitting as much as K7.4 billion, it has been learnt.
Reserve Bank of Malawi (RBM), which is the registrar of financial institutions and Nico Pension Limited, a subsidiary of Nico Life Insurance Company, have since expressed concern over the tendency of not remitting pension, saying it is bound to inconvenience employees.
RBM principal examiner for policy and regulation Peter Kambalame said it is a must for organisations to remit their employees’ pension contributions but some are defaulting which has seen unpaid arrears hitting K7.4 billion.
He said pension is an employee’s investment for the future and when employers do not pay, the employees will lose out on their investment.
Kambalame said according to the Pension Act, companies risk being punished for defaulting the payments, adding that the law provides that apart from the arrears, companies have to pay a penalty of 32 percent of the arrears defaulted.
“If the employers do not pay arrears, they will have to pay interest. Apart from arrears, the employer has to pay interest at the bank rate plus 10 percent,” he said.
As a result of the pension contributions since the law was passed, contributions have reached K450 billion up from K59 billion in 2010, according to RBM, and the number of contributors have jumped from 70 000 to 260 000.
Nico Life Insurance chief executive officer Eric Chapola said there are many complaints and inquiries on administration of pension and some employees are suing companies over pension issues.
He said some principal officers that are responsible for sending contributions to Nico Pension tend to forget that by not sending the money, they too are depriving themselves the pension benefits.
“If these contributions are not with us, the employees that will retire firstly will get less than will have received; secondly, they are missing out on investment interest.
“So, these funds with us they are invested in various form so that we maximise on the returns so that when people go into retirement they must at least manage the same life style when they were working,” said Chapola.
To help address the issue of defaulting, he said Nico Pension has introduced an online system that will enable employees check their contributions and the benefits accumulating.
He said with such system, employees will be able to take employers to task if they do not make contributions.