Pension regulation in Malawi: Defined benefit fund or defined contribution fund?

Abstract

This article examines and comments on the provisions in the Pension Act, which make it mandatory for every employer and employee to contribute towards a pension fund in Malawi. It discusses the provisions that govern the exemption of certain employees from the Pension Act. The article examines Section 15 of the Pension Act, which compels every employer to maintain a life insurance. The article argues that the Pension Act promotes defined contribution funds and offers four reasons for this contention, which are: the prescription of minimum contributions to be paid into the fund; the ease of portability of benefits; the legislative establishment of individual accounts; and the provision of tax incentives to employees. The article observes that due to that fact that the Pension Act makes it expensive to operate a defined benefit fund, Malawi is likely to see the demise of these types of fund. © 2012 Macmillan Publishers Ltd.