U NDERSTANDING P ENSIONS - T HE M ALAWIAN CONTEXT Rationale and Policy Objectives RESERVE BANK OF MALAWI

RBM OUTLINE What is pension? Reforming pensions Objectives of the Pensions Act

RBM W HAT IS P ENSION ? In simple terms; Income for retirement Online Oxford Learner’s Dictionary; An amount of money paid regularly by a government or company to somebody who is considered to be too old or too ill/sick to work Merriam-Webster online dictionary; Fixed sum paid regularly to a person, as Wage Gratuity granted (as by a govt) as a favour or reward One paid under given conditions to a person following retirement from service or to surviving dependents

RBM W HAT IS P ENSION ? … CONT ’ D So, typical features of a pension must include: An element of service/work (self employment) Retirement from service through any of the following fragilities; Too old Too ill/sick Death Given conditions Regular payment Clearly, pension focus is on security in retirement Other financial products to meet different needs Only possible if the context is set right through pension reform

RBM R EFORMING P ENSIONS Reform objectives range from any of the following: Social security - increase coverage and benefits; address the growing fiscal burden; strengthen supervision, regulation, governance etc. taxation Experience of other countries taken into account Situation was worse for Malawi Severance allowance in Employment Act, 2000 Pension Act, 2011 Mandatory National Pension Scheme

RBM O BJECTIVES OF P ENSION A CT Section 4 of Pension Act, 2011 states the following as objectives; 1. ensure that every employer to which this Act applies provides pension for every person employed by that employer; 2. ensure that every employee in Malawi receives retirement and supplementary benefits as and when due; 3. promote the safety, soundness and prudent management of pension funds that provide retirement and death benefits to members and beneficiaries; and 4. foster agglomeration of national savings in support of economic growth and development of the country