Malawi’s Pension Funds Surge to K5.4 Trillion: A Game Changer for Business Growth and Investment

Key Business Points

• The pension sector in Malawi has seen a significant 54.4% increase in funds to K5.4 trillion as of June 2025, driven by strong investment income returns and improved total contributions.
• Pension arrears continue to rise, posing liquidity, credit, and funding risks, and compromising the ability of pension funds to pay member benefits on time, with arrears growing to K107 billion from K102.8 billion in December 2024.
• The Reserve Bank of Malawi is finalizing a directive to govern pension asset investments, aimed at reducing investment concentration and market risk, and promoting diversification of pension investments to mitigate identified risks.

The pension sector in Malawi has recorded a significant increase in funds, with a 54.4% jump to K5.4 trillion as of June 2025, according to the Reserve Bank of Malawi’s June 2025 Financial Stability Report. This growth is attributed to strong investment income returns and improved total contributions, which increased by 7.2% to K129.5 billion. The report also notes that pension membership has increased by 25% to 772,585, indicating a growing number of individuals contributing to pension funds.

However, despite this growth, pension arrears continue to pile up, posing a significant risk to the pension system. The report highlights that investment assets of the sector remain concentrated in listed equities and fixed income securities, which account for 85.5% of the total, exposing pension funds to market and sovereign risks. The rising arrears may result in some retiring individuals either failing to access their pension or receiving reduced benefits, which can strain public confidence in the pension system.

The Malawi Congress of Trade Unions (MCTU) president, Charles Kumchenga, emphasized that arrears affect the pension package of workers, with employees losing out on their savings when they retire or lose their jobs. He stressed that employers who fail to remit pension funds are committing a criminal offense. Employers Consultative Association of Malawi executive director, George Khaki, acknowledged that the development is a reflection of the economic environment, where employers are not generating enough revenues to meet their obligations.

Money market analyst Kondwani Makwakwa noted that the arrears are not only eroding worker confidence but also weakening the ability of funds to mobilize capital. Reserve Bank of Malawi Governor Macdonald Mafuta-Mwale earlier emphasized the need to utilize pension savings to transform the economy, adding that the central bank will work with the industry to diversify investments in the real sector. The Pension Act 2023, which replaced the Pension Act 2011, has reformed several areas, including governance of pension funds, early access of benefits, benefit design, and administration. As the pension sector continues to grow, it is essential for stakeholders to address the issue of rising arrears and work towards promoting a more stable and secure pension system, which can be achieved through "kujitolea kwa ufanisi" (effective commitment) from all parties involved.

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