Frequently asked questions
This is a fund into which a sum of money is added during an employee’s period of employment and from which payments are drawn to support the person’s retirement from work in the form of periodic regular payments.
Pension ensures a steady regular income during retirement when a member no longer gets a salary. Pension will make up for the low incomes to sustain the member in their remaining lifetime. Pension can also offer security to family members in the event of death of the member.
There are many different ways to put money away for pensions and the most popular one is through contribution to pension funds.
The Pension Act, 2010, established the National Pension Scheme where all pension funds registered by the Registrar of Financial Institutions belong to. If you are employed, it is mandatory for your employer to place you on a registered pension fund under the Scheme.
You can also elect to make voluntary contributions with Continental’s Unrestricted Pension fund.
If you belong to the mandatory pension scheme, an employer is supposed to send pension contributions to a pension fund every month and within fourteen days that the contribution became due. Minimum prescribed rates as follows:
- Minimum employee contribution deducted from your salary- 5 percent
- Minimum employer contribution towards your pension pot – 10 percent
An employer or employee may choose to make contributions higher than the minimum prescribed rates.
**Any contributions made to a pension fund are invested
Your pension fund is required to provide you with a member statement every year. In some cases, there are online portals where you can check your pension pot balance at any time. Please Contact your pension fund trustee or pension administrator if you do not receive regular updates about your pension pot.
Monthly pension income at retirement depends on the value of your pension pot and the prevailing pension factors at retirement. For proper retirement planning, constantly engage your pension administrators for projections at retirement and advice on how to adjust your retirement strategy if projections are insufficient.
- When you reach the retirement age of your employer and respective pension fund: – a cash lumpsum of up to forty percent of the pension pot is paid upon retirement while the remaining amount is paid as monthly pensions from an insurance company. If the pension pot is below prescribed thresholds by the Registrar, a member may access full pension pot at once.
- Retirement based on total and permanent disablement from carrying out office functions – mode of payment is as above.
- Retirement based on twenty years continuous employment with the same employer- same mode of payment as above
- When you leave employment under any circumstance and are unemployed for a continuous period of six months or more, you can only access employee contributions plus investment income thereof. The balance is preserved to be accessed when you reach retirement age.
- The member is about to leave or has left Malawi permanently
- The member has died- payment is made to the member’s nominated beneficiaries
Note: Benefits from pension funds under the National Pension Scheme are tax free and so are annuities purchased from accumulated pension savings under the Scheme.
- Make sure the right person gets your money by depositing your beneficiary nomination form with the trustee of your pension fund. It is important to keep your nominations up to date, otherwise if you die without any nomination, trustees of your pension fund will be responsible to distribute your pension pot.
- Pension pot is paid according to the nomination form. Under the mandatory scheme, the pension pot at death comprises accumulation pension benefits plus life insurance cover if you die while in employment. Beneficiaries are paid lumpsums except where there is a minor (below eighteen years of age). In the case of minors, money is held by the trustee; the guardian withdrawals periodic upkeep allowance for the minor and the balance is given to him/her upon reaching majority age of eighteen years.
When an employee changes employment, the pension pot is supposed to be transferred to the pension fund of the new employer for continuity. If you have pension pots in more than one pension fund, combine your pension pots together. This makes it easier to manage your savings. It saves time and effort too.
Pension benefits cannot be assigned, transferred, charged, or pledged or collateralized: Section 73 of the Pension Act, 2010.
Pension benefits at retirement are paid as annuities or programmed withdrawals. However, a member has as option to commute up to forty percent as a cash lumpsum while the rest is paid as annuity or pension. In cases where the pension pot is below the thresholds prescribed by the Registrar of Financial Institutions, a pension member may access the pension pot at once as a lumpsum. Thresholds are prescribed in the Registrar’s Directives.
An annuity is a contract between an individual and an insurance company. In exchange for the premium that is paid by the individual, the insurance company agrees to make guaranteed payments according to the terms of the contact.
Payment by the pension fund of regular income payments from the date of retirement to an age specified by the Registrar.
- The right type of product (e.g annuity/programmed withdrawal)
- Personal needs should also be considered.
Inform oneself responsibly, and carefully read the documents presented to you in order to understand the content and characteristics of the annuity product offered
An employer can contact Continental Pension Services company to place employees on a pension fund.