1. P ENSION A CT, 2011 - P RACTICAL I SSUES RESERVE BANK OF MALAWI 1

2. RBM N ATIONAL P ENSION S CHEME Comprises National pension fund Any other pension fund licensed Administration National Pension Administrator Any other licensed pension fund administrator Investment Management Licensed Portfolio managers

3. RBM R EGISTRATION OF P ENSION F UNDS 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

4. RBM P ENSIONABLE 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

5. RBM E XEMPTIONS 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

6. RBM E XEMPTIONS Application of Employment Act Grace period International companies with global policies (pension and insurance)

7. RBM C ONTRACT E MPLOYMENT Not exempted Act does not prohibit employment of staff on contract employment Those with running contracts as at 1 st 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

8. RBM M INIMUM C ONTRIBUTION R ATES From 1 st June 2011 to 31 st December, 2012 Employer 7.5 percent Employee5.0 percent From 1 st January 2013 Employer 10.0 percent Employee5.0 percent In both scenarios, employer may elect to contribute more than minimum prescribed rate or all contributions

9. RBM S 91 – P ENSION & S EVERANCE 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

10. RBM T AXATION Implementation of section 13 deferred Offers maximum possible benefit Current model considered too excessive to encourage savings EET Model preferred Currently engaged government

11. RBM P RINCIPLES OF P RESERVATION AND P ORTABILITY 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

12. RBM O THER 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

13. RBM QUESTIONS

14. RBM 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.mwpisu@rbm.mw Web: www.rbm.mwwww.rbm.mw