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Home Business Business News

RBM to take on pension defaulters

by Martha Chirambo
06/02/2018
in Business News, Editors Pick
2 min read
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The Reserve Bank of Malawi (RBM) has started engaging employers that delay to remit pension deductions to fund administrators to bring sanity to the pension industry.

As of November last year, unpaid pension arrears peaked at K7.4 billion, according to RBM spokesperson Mbane Ngwira, who said some companies take up to six months without remitting which is against the Pensions Act 2010.

In an interview on Sunday, Ngwira expressed concern over the rising default figure.

Ngwira: No company taken to task

“We have been engaging companies on this [default] and we have looked at what causes this and what measures can be taken to solve this.

“As at now, no company has been taken to task, but the Pension Act puts an obligation on employers to remit the deductions,” he said.

After the enactment of the Pension Act, RBM figures show that pension funds have grown from K59.5 billion in 2010 to K450 billion in June 2017.

During the same period, the number of employees on pension has doubled from 102 505 to 259 743, figures show.

Nico Life Insurance Company Limited, one of the pension fund managers, has faulted most employers for failing to remit pension contributions to fund administrators.

Speaking on Friday in  Mzuzu, the company’s chief executive officer Eric Chapola said failure to remit the funds puts at a disadvantage withdrawn employees when they want to access their funds.

“It is sad when the members come to us to claim their pensions, they find out that their principal officers were not remitting the funds for over six months.

“The delay in remitting the funds denies fund members interests that should have been earned. We are, therefore, asking principal officers to remit the money in time according to the law,” he said.

To this effect, Chapola said the company has introduced an online portal where its fund members can track their funds in real-time and find out if money is being remitted to the administrators.

Employers Consultative Association of Malawi (Ecam) executive director Beyani Munthali could not be reached for comment. We wanted to find out from what his organisation is doing to ensure that companies are remitting pension funds.

In July 2011, Malawi adopted the Pensions Act of 2010 which introduced a mandatory contributory pension scheme to build national savings.

Among others, employees are expected to contribute a minimum of five percent while employers 10 percent of the employee’s monthly gross salary.

The funds are then invested in government securities, corporate bonds, real estate, among other investments, to ensure growth because the return on investment is credited to their accounts.

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