CHAPTER 55:02
PENSION ACT

ARRANGEMENT OF SECTIONS

   SECTION

PART I
PRELIMINARY

   1.   Short title

   2.   Application of the Act

   3.   Interpretation

   4.   Objectives of the Act

   5.   Application of the Financial Services Act

PART II
CONTRIBUTORY NATIONAL PENSION SCHEME

   6.   The Contributory National Pension Scheme

   7.   The National Pension Fund Administrator

   8.   Designation of Government or other agency for some duties of the Pension Administrator

PART III
MANDATORY PROVISIONS

   9.   Obligation of employer

   10.   Minister’s power to exempt

   11.   Trustees to establish separate accounts

   12.   Minimum contribution rates

   13.   Taxation

   14.   Pension benefits to be transferable

   15.   Life insurance policy

PART IV
REGISTRATION AND LICENSING

   16.   Pension schemes and umbrella funds to be registered and trustees licensed

   17.   Registration criteria for restricted funds

   18.   Registration criteria for unrestricted funds

   19.   Registration criteria for umbrella funds

   20.   Notice of registration to Commissioner of Taxes

   21.   Investment managers, custodians, administrators and pension brokers to be licensed

   22.   Licensing and registration procedure

   23.   Licensing on a “class” basis

PART V
REQUIREMENTS FOR TRUSTEES, INVESTMENT MANAGERS, ADMINISTRATORS, CUSTODIANS, PENSION BROKERS AND ACTUARIES OF PENSION FUNDS AND UMBRELLA FUNDS

Division 1
Trustees of Pension Funds and Operations of Umbrella Funds

   24.   Trustees, operators and directors to consent to appointment

   25.   Composition of trustees

   26.   Equal representation rule

   27.   Additional independent trustees and additional independent directors

   28.   Advisory committees

   29.   Rules for appointment of member representatives

Division 2
Investment Managers, Administrators, Pension Brokers, Custodians and Actuaries of Pension Funds and Umbrella Funds

   30.   Investment managers, pension brokers, custodians and administrators to be bodies corporate

   31.   Appointment of investment managers, pension brokers, custodians and administrators to be in writing

   32.   Appointment of principal officer

   33.   Individuals not to act as investment manager, pension broker, custodians or administrator

PART VI
REQUIREMENTS FOR FUND RULES OF PENSION FUNDS AND UMBRELLA FUNDS

   34.   Pension fund rules to be enforceable

   35.   Pension funds to be held on trust

   36.   Statutory covenants for pension funds

   37.   Statutory covenants for umbrella funds

   38.   Consistency of statutory covenants

   39.   Statutory covenants bind directors of trustee

   40.   Damages for breach of statutory covenants

   41.   Fund rules regarding indemnities, liability and advice

   42.   Trustee directors may be indemnified

   43.   Pension fund trustees not to be subject to direction

   44.   Pension funds benefits to be portable

   45.   Exercise of discretion in respect of pension funds

   46.   Restriction on requirement for approval of trustee’s decisions by employer

   47.   Restriction on amendments to fund rules

PART VII
PRUDENTIAL AND OTHER REQUIREMENTS FOR THE OPERATION OF PENSION FUNDS AND UMBRELLA FUNDS

   48.   Matters that Registrar’s directives may cover

   49.   Investment management agreement not to exclude liability for negligence

   50.   Provision of information in an investment management agreement

   51.   Pension fund assets to be invested at arm’s length

   52.   Restriction on employer assets

   53.   Financial assistance to pension fund members

   54.   Trustee or investment manager not to acquire assets from members or associates

   55.   Trustee not to borrow pension funds

   56.   Investment outside Malawi

   57.   Complaint resolution mechanism for pension funds

PART VIII
GIVING INFORMATION TO FUND MEMBERS AND BENEFICIARIES

   58.   Fund information and member information

   59.   Information for prospective members, applications for membership in respect of unrestricted funds

   60.   Trustee of pension funds to give information to members

PART IX
CONTRIBUTIONS AND INVESTMENT RETURNS

   61.   Employer to remit contributions promptly

   62.   Credit to member accounts for defined contribution funds

   63.   Debits to member accounts

PART X
PENSIONS AND OTHER BENEFITS

Division 1
Payment of Benefits

   64.   Conditions for payment of benefits in respect of pension funds

   65.   Early payment of benefits

   66.   Immediate vesting of contributions for pension funds

   67.   Pension fund benefits to be paid as annuities

   68.   Commutation of annuities into lump sums

   69.   Payment of benefits upon member leaving Malawi permanently

   70.   Death benefit nominations

   71.   Payment of death benefits

   72.   Death of an employee

Division 2
Protection of Benefits

   73.   Benefits not to be attached

   74.   Effect of bankruptcy

   75.   Benefits not to be assigned or pledged

PART XI
MISCELLANEOUS PROVISIONS

   76.   Missing employees

   77.   Significant adverse effects to be notified

   78.   Payment to employers restricted

   79.   Victimization of trustees

   80.   Rule against remoteness of vesting

   81.   Protection for discharging obligations

   82.   Contravention of this Act, regulations or directives

   83.   Jurisdiction of the Industrial Relations Court

   84.   Regulations

   85.   Non-application of theEstates Duty Act and any other law relating to deceased estates

PART XII
TRANSITIONAL, ARRANGEMENTS

   86.   Transitional

   87.   Existing schemes

   88.   Restricted pension fund

   89.   Payment of contribution arrears

   90.   Registrar’s oversight

   91.   Accrued severance liability

6 of 2011
G.N. 13/2011

An Act to make provision for mandatory pension, and for matters relating to the supervision and regulation of pension funds and umbrella funds, and for matters connected therewith and incidental thereto

[1ST JUNE 2011]

PART I
PRELIMINARY

1.   Short title

   This Act may be cited as the Pension Act.

2.   Application of the Act

   (1) Unless expressly exempted by the Minister in writing, with the approval of the Cabinet, this Act shall apply to every employer and employee in Malawi.

   (2) The Government, in its capacity as employer, shall be exempt from compliance with the provisions of this Act, provided that such exemption shall only be for a period not exceeding twenty-four months from the date of commencement of this Act.

3.   Interpretation

   (1) In this Act, unless the context otherwise requires—

   “administrator” means a person who, as a business, provides data management, specialist technical services to pension funds or umbrella funds, by arrangement with the trustee or operator of the funds concerned;

   “advisory committee”, in relation to a pension fund, means a board, committee or other body that—

   (a)   is established by or under the fund rules; and

   (b)   has the function of advising the trustee of the fund about issues relating to the fund that a member or an employer has raised;

   “annuity” means the exchange of a capital sum for a regular income benefit, which may or may not increase at a predefined level or according to an appropriate index, payable for the remaining life of the recipient;

   “beneficiary”, in relation to a pension fund, means an individual who is, in accordance with the fund rules, entitled to a benefit from that fund;

   “child” in relation to a member, means a child of the member, regardless of the circumstances of the birth of the child and includes an adopted child, and an unborn child in the womb of its mother;

   “close relation” means spouse, brother, sister, parent, child, child of the spouse, aunt, uncle, grandparent, and the spouse of any of these;

   “corporate trustee” means a trustee that is a body corporate;

   “defined benefit fund” means a pension fund other than a defined contribution fund where under the fund rules a member’s benefits are calculated, wholly or in part, by reference to any or all of the following—

   (a)   the amount of the fund member’s remuneration at the date on which benefits are payable or a specified earlier date;

   (b)   the amount of the fund member’s remuneration averaged over a specified period before the date on which benefits are payable; or

   (c)   an amount specified in the fund rules;

   “defined contribution fund” means a pension fund that is not a defined benefit fund where under the fund rules a member’s benefits on retirement has a value equal to the value of—

   (a)   the contributions paid by the member and by the employer in terms of the fund rules that determine the rates of both their contributions at a fixed rate;

   (b)   less such expenses as the trustees determine should be deducted from the contributions paid;

   (c)   plus any amount credited to the member’s account upon the commencement of the member’s membership of the fund or upon the conversion of the category of the fund to which the member belongs from a defined benefit fund to a defined contribution fund or upon the amalgamation of the fund with any other fund, other than amounts taken into account in terms of section (d);

   (d)   plus any other amounts lawfully permitted, credited to or debited from the member’s individual account, if any,

as increased or decreased by fund investment return;

   “dependant” in relation to a member, includes a spouse and a child of the member;

   “director” shall bear the same meaning ascribed to that term in the Financial Services Act;

   “employee” means—

   (a)   a person who offers his services under an oral or written contract of employment, whether express or implied; or

   (b)   a person who performs work or services for another person, including the Government and other public institutions, for remuneration or reward on such terms and conditions, that he is, in relation to that person, in a position of economic dependence on and under an obligation to perform duties for, that person more closely resembling the relationship of employee than that of an independent contractor;

   “employee contribution” means a contribution to a pension fund made by the employee, including a contribution deducted by the employer from the employee’s remuneration where the employer is under an obligation to remit the amount concerned to the trustee of the fund;

   “employer” means—

   (a)   any person, or undertaking, corporation, company, public authority or body of persons who or which employs an employee and include heirs, successors and assignees of the employer; and

   (b)   in relation to a pension fund, means a person who employs a member and who is liable, under the fund rules, to make employer contributions to the fund in respect of the member;

   “employer asset” includes—

   (a)   an asset acquired from an employer or an associate of an employer;

   (b)   rights under a lease of fund assets to an employer or an associate of an employer; and

   (c)   a loan to, or rights acquired by the provision by the trustee of financial accommodation of any kind to an employer or an associate of an employer,

but does not include assets that are securities issued by or guaranteed by the Government;

   “employer asset percentage”, for a pension fund, means the percentage calculated using the following formula—

where employer assets are those invested in the equity or debt, listed or unlisted, of the employer, or any other financial commitment of the employer to the fund;

   “employer contribution” means a contribution to a pension fund made by an employer in respect of an employee, excluding employee contributions, fees and other charges;

   “employer representative”, in relation to a group of trustees of a pension fund or the board of directors of a corporate trustee of a pension fund, means a member of the group, committee or board nominated by—

   (a)   the employers; or

   (b)   an organization representing the interests of employers;

   “equal representation rule” means the rule referred to in section 26 (1) or (2);

   “fully funded” in relation to a pension fund, means that the financial obligations to the pension fund’s members, creditors and service providers are fully covered by the assets held in the fund’s name, as confirmed in the case of a defined benefit fund by the valuation conducted by an actuary as at the effective date of the funding assessment;

   “fund assets” of a pension fund or an umbrella fund means property of any kind held by the trustee or operator of the fund in that capacity;

   “fund information”, in relation to a pension fund, means information about—

   (a)   the fund’s investment strategy;

   (b)   the fund’s investment performance and financial position;

   (c)   fees and charges payable by, or borne by, members or beneficiaries in relation to the fund;

   (d)   the rights and entitlements of members or beneficiaries under the fund rules and otherwise in relation to the fund;

   (e)   the obligation of members to pay contributions under the fund rules; and

   (f)   the obligation of employers to pay contributions under the fund rules and to provide life insurance under the requirements of this Act,

or as specified by Registrar’s Directive;

   “guaranteed wages” means basic wages excluding overtime and bonuses;

   “independent director”, in relation to a corporate trustee of a pension fund, means a director of the corporate trustee who is not—

   (a)   a member;

   (b)   an employer;

   (c)   an associate of an employer;

   (d)   an employee of an employer or of an associate of an employer;

   (e)   in any capacity, a representative of a trade union, or other organization representing the interests of one or more members; or

   (f)   in any capacity, a representative of an organization representing the interests of one or more employers;

   “independent trustee”, in relation to a fund, means a trustee of the fund who is not—

   (a)   a member;

   (b)   an employer;

   (c)   an associate of an employer;

   (d)   an employee of an employer or of an associate of an employer;

   (e)   in any capacity, a representative of a trade union, or other organization representing the interests of one or more members; or

   (f)   in any capacity, a representative of an organization representing the interests of one or more employers;

   “investment management agreement” means an agreement between the trustee of a pension fund or the operator of an umbrella fund and an investment manager, for the investment of fund assets that for the purposes of the agreement, are under the control of the investment manager;

   “investment manager” means a person who, as a business, invests fund assets of pension funds or umbrella funds by arrangement with the trustees or operators of the funds concerned;

   “legal personal representative” means—

   (a)   in relation to a deceased person, the executor of the will or administrator of the estate of that person; and

   (b)   in relation to a person under a legal disability, the trustee or manager of the estate of that person appointed under law;

   “lifetime flat annuity” means an annuity payable for the remaining lifetime of the recipient without increases;

   “loan” includes the provision of credit and any other form of financial accommodation, whether or not enforceable, or intended to be enforceable, by legal proceedings;

   “member”, in relation to a pension fund, means a person who is, in accordance with the fund rules, a member of the fund;

   “member account”, or “member’s account” means an account established under section 11;

   “member information”, in relation to a member of a pension fund, means information about the nature and extent of the member’s entitlements under the fund rules and otherwise in relation to the fund;

   “member representative”, in relation to a group of trustees of a pension fund, a policy committee of a pension fund or the board of directors of a corporate trustee of a pension fund, means a member of the group, committee or board nominated by the members;

   “most representative organization of employees” means the most representative organization of employees enjoying the right of freedom of association;

   “most representative organization of employers” means the most representative organization of employers enjoying the right of freedom of association;

   “national pension fund” means the national pension fund contemplated under section 6 (2);

   “National Pension Scheme” means the Contributory National Pension Scheme established under section 6(1);

   “nomination” means a nomination made by a member under section 70;

   “operator”, in relation to an umbrella fund, means the trustee of the trust;

   “Pension Administrator” means the National Pension Fund Administrator appointed under section 7;

   “pension broker” means a person who as a business, provides consulting or advisory services to pension schemes or funds, including claims assistance, where required;

   “pension fund” means—

   (a)   a pension scheme that is an indefinitely continuing trust whether as a restricted or unrestricted fund and includes a defined contribution fund or a defined benefit fund or a hybrid of the two; or

   (b)   an association of persons established with the object of providing annuities or lump sum payments for members or former members of such association upon their reaching retirement dates, or for the dependants of such members or former members, upon the death of such members, or

   (c)   a business carried on under a scheme or arrangement established with the object of providing annuities or lump sum payments for persons who belong or belonged to the class of persons for whose benefit that scheme or arrangement has been established, when they reach their retirement dates or for dependants of such persons upon the death of those persons;

   “pension scheme” means a scheme the primary purpose of which is the provision of retirement benefits to a member of the scheme on his retirement from any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged, whether or not it also provides for benefits to be paid in other circumstances (for instance, on the death or disablement of a person), but does not include—

   (a)   a contract of insurance; or

   (b)   a contract of employment merely because it provides for payments to be made on termination of the contract;

   “pensionable emoluments” means guaranteed wages and other earnings, but not including personal investment income, capital gains or provision from employers in the form of houses or motor vehicles;

   “principal officer” means the principal officer of a pension fund or umbrella fund appointed under section 32;

   “programmed withdrawal” means the payment by the fund of regular income payments during the remaining life of the member from the date of retirement or the date at which an annuity is purchased;

   “Registrar” means the Registrar of Financial Institutions appointed under the Financial Services Act, or a specialist registrar for pension funds, as may be defined in any modifications to the Financial Services Act;

   “Registrar’s directive” means a directive issued under this Act or the Financial Services Act;

   “restricted fund” means a pension fund the rules of which restrict membership of the fund to officers and employees of a specified employer and its related bodies corporate;

   “retire”, in relation to a member, means attain the retirement age specified in the rules of the fund at which retirement is to take place, or meet any of the other conditions specified in the rules to take retirement;

   “retirement age” means the age stipulated in the rules of a pension fund, which shall be between fifty years and seventy years, or as may be prescribed by the Minister for the purposes of this Act;

   “scheme” means any plan, proposal, action, course of action, course of conduct, agreement, arrangement, understanding, promise or undertaking, whatever its legal form, whether express or implied and whether or not enforceable or intended to be enforceable;

   “scheme rules”, in relation to a pension fund or an umbrella fund, means the rules contained in a trust instrument, other document or legislation, or combination of them governing the establishment or operation of the fund;

   “self-employed individual” means any person who is running a business on his own as a sole trader, whether he has employed any other person or not;

   “service retirement” means a minimum of twenty years of continuous service by an employee with one employer;

   “spouse” means a person’s husband or wife in relation to a marriage recognized under section 22 (5) of the Constitution;

   “statutory covenant” means a covenant set out in or prescribed under section 36 (1) or section 37 (1);

   “totally and permanently disabled”, in relation to a member, means permanently incapable, through infirmity of mind or body, from engaging in his business, trade, profession, vocation, calling, occupation or employment or in any other business, trade, profession, vocation, calling, occupation or employment for which he. may be trained or fitted;

   “trustee”

   (a)   in relation to a pension fund with only one trustee, means the trustee of the fund appointed in accordance with the instrument creating the pension fund;

   (b)   in relation to a restricted fund where there is a group of individual trustees, means all of the trustees appointed in accordance with the instrument creating the restricted fund, acting together;

   “umbrella fund” means a collective investment scheme as defined in the Securities Act, whose rules provide that only trustees of pension funds or operators of umbrella funds may be members of the scheme;

   “unrestricted fund” means a pension fund whose rules do not restrict membership of the fund to officers and employees of a specified employer and its related bodies corporate;

   (2) Subject to subsection (1) and except where a contrary intention appears, words and expressions used in this Act shall bear the same respective meanings as they have in the Financial Services Act.

   (3) Without limiting the ordinary meaning of “operate”, a person operates a pension scheme or an umbrella fund if the person—

   (a)   establishes or administers the scheme or fund;

   (b)   induces or attempts to induce a person to be a member of the scheme or fund or to make payments by way of contribution to or investment in the scheme or fund; or

   (c)   accepts or makes payments in connexion with the scheme or fund otherwise than as a member or beneficiary of the scheme or fund.

   (4) A provision included in the fund rules of a pension fund to avoid a breach of a rule of law against remoteness of vesting shall not prevent the fund from being treated as an indefinitely continuing fund for the purposes of the definitions of “pension fund” in subsection (1).

4.   Objectives of the Act

   The objectives of this Act are to—

   (a)   ensure that every employer to which this Act applies provides pension for every person employed by that employer;

   (b)   ensure that every employee in Malawi receives retirement and supplementary benefits as and when due;

   (c)   promote the safety, soundness and prudent management of pension funds that provide retirement and death benefits to members and beneficiaries; and

   (d)   foster agglomeration of national savings in support of economic growth and development of the country.

5.   Application of the Financial Services Act

   This Act shall apply in addition to the Financial Services Act.

PART II
CONTRIBUTORY NATIONAL PENSION SCHEME

6.   The Contributory National Pension Scheme

   (1) There is hereby established a contributory National Pension Scheme (in this Act otherwise referred to as the “National Pension Scheme”) for the purpose of ensuring that every employee in Malawi receives pension and supplementary benefits on retirement.

   (2) The National Pension Scheme shall comprise—

   (a)   a national pension fund to be established under this Act, by the Minister, by Order published in the Gazette; and

   (b)   other pension funds licensed under this Act.

   (3) Every employer shall make provision for every person under his employment to be a member of the National Pension Scheme.

7.   The National Pension Fund Administrator

   (1) There is hereby established a National Pension Administrator (in this Act otherwise referred to as the “Pension Administrator”).

   (2) The Pension Administrator shall be a body corporate with perpetual succession and a common seal capable of suing and being sued in its corporate name and with power to do or perform all such acts and things as a body corporate may by law do or perform.

   (3) The principal object of the Pension Administrator shall be to—

   (a)   act as an administrator for the National Pension Scheme; and

   (b)   set up and manage the national pension fund.

   (4) There shall be a Board of Trustees which shall be responsible for the administrative and management policy of the Pension Administrator.

   (5) The Board of Trustees shall consist of seven trustees appointed by the President on recommendation of the Minister, and shall include a representative from the most representative organization of employers, most representative organization of employees, and either the Secretary to the Treasury or the secretary responsible for labour, or the secretary responsible for economic planning.

   (6) A person shall not be appointed as trustee unless the Minister is satisfied that the person is a fit and proper person to hold the office of a trustee as defined by the Registrar, and qualified for the appointment by virtue of his qualification and experience in the following fields—

   (a)   financial markets and financial products;

   (b)   pension, insurance and social security;

   (c)   law;

   (d)   accounting; or

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