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Pension Act, 2011 -Practical Issues. RESERVE BANK OF MALAWI. National Pension Scheme. Comprises National pension fund Any other pension fund licensed Administration National Pension Administrator Any other licensed pension fund administrator Investment Management Licensed

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national pension scheme
National Pension Scheme
  • Comprises
    • National pension fund
    • Any other pension fund licensed
  • Administration
    • National Pension Administrator
    • Any other licensed pension fund administrator
  • Investment Management
    • Licensed
    • Portfolio managers
registration of pension funds
Registration of Pension Funds
  • Previous practice
  • Types of pension funds envisaged under the Act – difference with provident fund
  • How will registration be done
  • Restricted pension schemes, Unrestricted pension schemes, Umbrella funds
  • Defined benefit schemes, Defined contribution schemes, Hybrid Schemes
pensionable emoluments
Pensionable emoluments
  • Act, defines pensionable emoluments as guaranteed wages and other earnings, but not including personal investment income, capital gains, or provision from employers in the form of houses or motor vehicles
  • Two elements to consider
    • Emoluments have to be guaranteed to be paid without any pre-conditions attached
    • Entitlements to a particular position as a privilege of holding that position
exemptions
Exemptions
  • Criteria laid out in the Pension Act, section 10
  • Expressly exempted by the Minister - Government Notice No. 32 lists the following as exempted;
    • Seasonal employees
    • Tenants
    • Expatriate employees with a valid Temporary Employment Permit
    • Members of Parliament in their capacity as such
    • Domestic workers
  • Section 86(3) – employees with three years to retirement, does not apply to everyone
exemptions1
Exemptions
  • Application of Employment Act
  • Grace period
  • International companies with global policies (pension and insurance)
contract employment
Contract Employment
  • Not exempted
  • Act does not prohibit employment of staff on contract employment
  • Those with running contracts as at 1st June, 2011 encouraged to negotiate
  • Gratuity may still be paid at the wish of the employer contributing to both pension and gratuity, or alternatively reduce gratuity by pension contribution
minimum contribution rates
Minimum Contribution Rates
  • From 1st June 2011 to 31st December, 2012
    • Employer 7.5 percent
    • Employee 5.0 percent
  • From 1st January 2013
    • Employer 10.0 percent
    • Employee 5.0 percent
  • In both scenarios, employer may elect to contribute more than minimum prescribed rate or all contributions
s91 pension severance
s91 – Pension & Severance
  • Why have section 91?
  • Immediately to be done – calculations in section 91
  • Whose account is severance entitlement payable?
  • Severance entitlement in Pension Act vs severance allowance in Employment Act, why have both?
  • Which schedule to use when calculating severance entitlement/allowance
  • NGOs
taxation
Taxation
  • Implementation of section 13 deferred
  • Offers maximum possible benefit
  • Current model considered too excessive to encourage savings
  • EET Model preferred
  • Currently engaged government
principles of preservation and portability
Principles of Preservation and Portability
  • Preservation
    • Restricting access to given conditions
    • Closely connected to income replacement ratio
  • Portability
    • Transferability of pension funds
    • Flexibility of pension system
    • Enhance performance – need to control risk taking to avoid potential losses to members
        • Investment limits
        • Legal liability for losses
other issues
Other issues
  • Group life insurance
    • Who should take it between employer and pension fund?
    • Should it always be with an insurance company
  • Nomination of beneficiaries
  • Principal Officer – answerable to the trustees
  • Pension not to be pledged as collateral – how to deal with previously pledged pension
  • Setting retirement age – building in incentives
contact details
CONTACT DETAILS

The Director

Pension and Insurance Supervision Department

Reserve Bank of Malawi

10 Hannover Avenue

PO Box 565

Blantyre

Tel : 01 820 444 or 01 820 299

Fax: 01 832 222

Email: pisu@rbm.mw

Web: www.rbm.mw