Employer Action Code: Act
A new mandatory national pension system (NPS) was established in 2011 that requires both employee and employer contributions. The legislative framework is still being developed, and parliamentary action is still being announced. The Malawi pension legislation is amalgamated from different jurisdictions and is now under review to ensure that it is locally sustainable. Even so, the government regulator has made it clear that employers have been responsible for compliance since the June 2011 effective date for the core legislation.
The objective of the mandatory NPS, created under the Pensions Act of 2011, is for all employers to provide retirement and life insurance benefits for their employees. Previously, there was no public pension system. The government’s favorable tax policies encouraged employers to provide private pension plans on a voluntary basis. Currently, there are approximately 400 private plans.
Under the new system:
Implications for Employers
Although the infrastructure to administer the act is not fully functional, the Registrar maintains that the act in its current form is active and enforceable. The Regulator has also begun the process of developing self-monitoring mechanisms to ensure compliance with the legislative requirements.
Employers should review their benefit arrangements to ensure compliance with the new system as follows:
- For employers that already have a pension plan, ensure the mandatory contribution requirements are met.
- For employers without a plan, choose a vehicle for the required contributions.
- If necessary, make retroactive contributions, including interest for late payments.
- Ensure employees are covered for the minimum life insurance benefits.
- Determine a schedule of payments to fund the accrued termination indemnities.