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In today's world people often move between jobs, and sustained saving during one's working lifetime is the only way to secure financial wellbeing. The preservation of retirement benefits from a previous employer should be a first priority. There are two options available in the pension fund product range – the Defined Contribution Scheme (DC) and the Defined Benefit Scheme (DB).
What is Defined Contribution Scheme?
- Member and Employer contribution rates are fixed as a percentage of salary.
- Accumulated contributions are increased with interest to date of retirement.
- Benefit funded by accumulated credit.
- For more info on the Pension Fund Products please visit your branch or call +265 891 002 010.
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What is Defined Benefit Scheme?
- Member contributions are fixed / employer contributions fluctuate
- Actuarial valuations mandatory once every 3 years
- Benefit is based on salary towards retirement, pensionable service and predetermined accrual rate (e.g. 2%)
- Allows for the incorporation of spouses and children's benefits
- Not recommended in inflationary environments
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Pension Fund Act - Change in legislation
A new piece of legislation has been passed by government that aims to address current implementation challenges in the pension sector; enhance coverage of the pension sector; and strengthen compliance and supervision over entities operating in the pension sector.
The primary objectives include:
- Ensure that every employer to which this Act applies provides pension for every person employed by that employer;
- Ensure that every employee in Malawi receives retirement and death benefits as, and when, due;
- Promote the safety, soundness and prudent management of pension funds or provident funds.
The secondary objectives focus on promoting voluntary savings for retirement and fostering agglomeration of national savings in support of economic growth and development of the country.
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