Pension arrears up 80% to K144bn

Pension contribution arrears have jumped by 80 percent to K144.5 billion in five years from K27.5 billion in 2021, highlighting employers’ continued remittance defaults and growing risks of workers getting little retirement packages. Data contained in the Reserve Bank of Malawi (RBM) Financial Stability Report for December 2025 confirm the situation despite the central bank’s efforts to enforce compliance of the Pension Act of 2023. At K144.5 billion, the arrears represent 41 percent of the K352 billion contribution and two percent of the total pension assets at K8.4 trillion, according to the RBM.

The central bank further said the rise in pension arrears exposes some funds to material credit risk. In an interview on Tuesday, Employers Consultative Association of Malawi executive director George Khaki, while indicating that the development is a reflection of the economic environment where businesses are not generating enough revenues to meet their obligations, said the Pension Act must be respected. He said: “In turn businesses are barely surviving and unable to meet their statutory obligations.

However, this is unfortunate. Firstly, the law has to be respected irrespective of the challenges the businesses are encountering. “Secondly, it means that the employees will be worse off when they reach retirement age because the retirement funds may be not enough to support them.” Khaki encouraged employers with pension arrears to engage their workers, inform them of the situation and agree on how the arrears will be settled.

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Malawi Congress of Trade Unions president Charles Kumchenga said in an interview on Tuesday that arrears affect the pension package of workers. He said employees are losing out their savings when they retire or lose their jobs because the pension funds they contributed are not available. The RBM report, which reported that the pension assets grew by 57 percent to K8.4 trillion in December 2025, indicated that another concern facing the sector is concentration risk as 76.9 percent of the assets are invested in equity, surpassing the 60 percent regulatory limit.

The central bank said level of equity concentration has exceeded the 60 percent regulatory limit prescribed under the Financial Services Directive 2025, increasing vulnerability to equity market corrections and signalling increased compliance risk among pension funds. Reads the report : “High concentration in listed equities exposed pension funds to market volatility, which is compounded by limited diversification opportunities and investment capacity gaps among trustees of isolated pension funds.” Life and Pensions Association of Malawi president Lilian Moyo, in an interview, described the sector’s performance as outstanding, noting that it reflects a profound advancement in financial maturity despite fears of concentration risk.

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