By Malawi Freedom Network-Official

The Reserve Bank of Malawi (RBM) has intensified enforcement of the country’s pension laws, warning employers that failure to provide mandatory pension and life insurance cover for workers could attract fines of up to K100 million, prosecution and, in serious cases, closure of businesses.

The warning comes as the central bank moves to strengthen compliance with the Pension Act of 2023, which requires employers to ensure that eligible employees are enrolled in pension arrangements and that contributions are remitted within the prescribed period.

In an official notice, Registrar of Financial Institutions and RBM Governor Dr George Partridge reminded employers that monthly pension contributions must be paid within 14 days after the end of each month.

Under the statutory arrangement, employees are required to contribute five percent of their pensionable earnings, while employers contribute 10 percent.

Employers who fail to remit contributions on time will also face penalty interest calculated at the RBM policy rate plus 10 percentage points per annum.

While the enforcement measures are intended to strengthen retirement security and protect workers and their dependants, governance expert Dr George Chaima says enforcement alone will not resolve the deeper problems affecting Malawi’s pension system.

Chaima argues that the success of the legislation will ultimately depend on whether institutions responsible for administering workers’ savings can deliver benefits efficiently, transparently and without unnecessary delays.

He said mandatory pension and medical-related deductions can be difficult for low-income workers to absorb in an economy where salaries are already under significant pressure.

“Our paychecks in this country are very meager and quite miserable; thus, any pension fund or medical scheme payment deducted still reduces the earning power of an employee at the end of the day. There is no immediate benefit,” Chaima said.

However, he stressed that this does not mean pension contributions are unnecessary.

Rather, he said, workers must be able to see a credible connection between the money deducted from their salaries and the protection promised by the law.

Life insurance protection questioned

Chaima also raised concerns over the mandatory life insurance component, particularly the ability of widows, orphans and other beneficiaries to successfully access benefits after the death of an insured worker.

He said public knowledge about claim procedures remains extremely low, creating the risk that families already dealing with bereavement could become trapped in lengthy administrative processes.

According to Chaima, the existence of an insurance policy does not automatically translate into meaningful protection if beneficiaries do not know where to lodge claims, what documents are required or how long institutions are expected to take to process payments.

“To be honest with you, there is no guarantee that orphans and widows may benefit much beyond probably the death legacy. Once anybody insured has died, maybe what they benefit is a coffin and transport to get the dead body home. But beyond that, it becomes a struggle,” he said.

He said similar difficulties have affected pension beneficiaries, with some retirees and dependants allegedly spending years pursuing payments that they believe are legally due to them.

“People have struggled. Their money has gone down the drain, and day by day, they visit the pension department or company but never do they get their money on time,” Chaima said.

He claimed that he knows people who have waited as long as two decades for pension benefits.

The concerns raise a broader question for regulators: whether stronger compliance by employers should be accompanied by equally strong accountability for pension administrators, insurers and other institutions responsible for safeguarding and paying out workers’ benefits.

Billions in workers’ savings

Chaima also pointed to another major dimension of the pension system—the large pool of capital created from compulsory contributions.

He said pension funds have the potential to become an important source of long-term domestic financing for Malawi, supporting sectors such as infrastructure, housing and agriculture while reducing excessive dependence on foreign borrowing.

But he warned that the opportunity comes with significant fiduciary responsibilities.

Workers, he argued, should not be expected to place their lifetime savings into investments whose financial and developmental value cannot be independently demonstrated.

He cited controversies surrounding major public-sector investments, including the Public Service Pension Trust Fund’s acquisition of the Amaryllis Hotel property, as examples of why pension investments require rigorous scrutiny.

“Investment comes along with returns. An investor who puts money into the government system, who is actually a taxpayer, ends up funding infrastructure which sometimes is not properly done,” he said.

Chaima said poorly managed investments can create a cycle in which additional public resources are required to repair or sustain projects that were not adequately designed or implemented in the first place.

For him, the central issue is therefore not whether pension funds should contribute to national development, but whether such investments are made under transparent rules, independent oversight and sound commercial principles.

Enforcement must be matched by accountability

The RBM’s warning represents an important step towards ensuring that employers do not evade their statutory responsibilities. Regular contributions are essential if workers are to accumulate meaningful retirement savings and if life insurance is to provide the intended protection to families.

But Chaima’s concerns highlight a second side of the equation: workers need protection not only from employers who fail to contribute, but also from institutional systems that delay, mismanage or inadequately explain their benefits.

Effective pension regulation therefore requires more than penalties.

It requires timely benefit payments, accessible claims procedures, transparent investment decisions, effective complaints mechanisms, accurate records and clear accountability throughout the pension value chain.

As the RBM tightens enforcement of the Pension Act, the test will ultimately be whether compliance translates into something workers can feel and rely upon—not simply deductions appearing on their payslips.

For millions of Malawians, pension contributions represent money set aside today in the expectation of greater security tomorrow. Ensuring that those savings remain protected, properly invested and accessible when needed will be central to determining whether the country’s pension reforms deliver on their promise.