Limited pension coverage for the elderly—IL0 data

Majority of people above retirement age in Malawi are not receiving a pension, International Labour Organisation (ILO) data show. The data, contained in the Danish Trade Union Development Agency, show that only 8.9 percent of older persons above retirement age were receiving pension, far below the southern Africa average of 82 percent. However, the coverage is an increase from 2016’s 2.3 percent.

The low coverage, which comes on the back of the dominance of the informal economy, at 93 percent of the workforce, comes at a time ILO projects Malawi’s elderly population to rise from five percent in 2022 to nine percent by 2050. In an interview yesterday, economist Velli Nyirongo observed that the low pension coverage means that majority of workers are ageing without structured retirement savings as they rely on daily income for survival rather than long-term security. He said for the working class, this positions retirement less as a period of rest and dignity and more as an extension of economic vulnerability.

Said Nyirongo: “Informal employment typically lacks mandatory contributions, employer matching and regulatory oversight which create a cycle in which old-age poverty is not an exception, but an almost predictable outcome. “Without adequate pension coverage, older citizens will likely depend on family networks, continued informal work or limited State support. In a context where demographic pressures are intensifying, this dependency ratio will strain already fragile household finances.” He said without deliberate reforms, the working class faces a retirement landscape characterised by insecurity rather than protection.

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According to ILO, only 18 percent of vulnerable persons are covered by social assistance, against the region’s 51 percent while only 12 percent of poor persons are covered by social protection systems. Meanwhile, the Pension Act 2023 mandates the registrar of financial institutions to register and inspect employers and streamline the provisions on early payment of benefits with a member who has five years or less to retire accessing their pension benefits. In April last year, Reserve Bank of Malawi (RBM) announced plans to establish a Pensions Compliance and Support Department within the office of the Registrar of Financial Institutions to support a core priority of ensuring that all employers meet their obligations under the Pension Act 2023 and that all pension contributors are treated fairly and transparently, according to the law.

The department was also touted to proactively monitor employer compliance, conduct inspections, investigate cases of delinquency and take corrective or legal action where necessary. RBM spokesperson Boston Maliketi Banda was yet to respond to our questionnaire as we went to press. However, former RBM Governor MacDonald Mafuta-Mwale had said the bank would start conducting public education campaign considering that the better informed the public is, the stronger and more sustainable the pension system will be.

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