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Pension contributions in Malawi are required by law for employers covered by the country's pension legislation.
Businesses hiring employees in Malawi need to understand how the pension system works and what they must do to meet their legal obligations.
Whether you are setting up a business in Malawi or hiring employees through an Employer of Record (EOR), here is what you need to know.
Yes. Under Malawi's Pension Act, 2023, employers covered by the law must ensure that eligible employees belong to a pension fund.
Section 14 of the Pension Act requires an employer, in addition to making pension contributions, to maintain a life insurance policy from a licensed life insurer in favour of the employee.
The minimum cover must be equivalent to the employee's annual pensionable emoluments.
This means pensions are not simply an optional employee benefit. Employers must follow the legal requirements, even though pension funds are managed through external providers.
Malawi's Pension Act sets minimum contribution rates for employers and employees.
The minimum rates are:
Together, these contributions make up a minimum of 15%.
Employers and employees can agree to higher contribution rates, subject to the legal requirements.
Contributions are calculated on the employee's pensionable emoluments, rather than necessarily on every component of total remuneration.
The Pension Act, together with the Pension (Pensionable Emoluments) Directive, 2025, determines which earnings are included or excluded.
The Act defines pensionable emoluments broadly as guaranteed wages and other earnings, excluding personal investment income, capital gains and employer-provided houses or motor vehicles.
Employers should therefore review the employee's salary structure and employment contract when determining the pensionable amount.
Employers must arrange for pension contributions to be paid into the appropriate pension fund. They cannot simply keep these contributions within the business.
A pension fund holds and manages money contributed towards employees' retirement benefits. The fund operates through a trustee, who is responsible for managing the fund in line with the law and its rules.
Employers pay their contributions, along with the amounts deducted from employees' salaries, to the fund's trustee or as the trustee directs.
Employers must remit both the employer contribution and the applicable employee contribution to the pension fund within the statutory deadline. Generally, contributions must be paid no later than 14 days after the end of the month in which they became due.
Employers that fail to comply may face enforcement action and penalty interest on overdue contributions.
The Registrar of Financial Institutions has broad enforcement powers under the Pension Act, so employers should ensure contributions are calculated and remitted within the statutory deadlines.
Although pension contributions are required by law, employers need to arrange for those contributions to be managed through an appropriate pension fund.
This involves working with organisations that provide pension services.
Malawi's pension system includes several types of organisations, each with a different role.
A pension fund holds money contributed towards employees' retirement benefits. Employers must ensure that eligible employees belong to an appropriate fund under the mandatory occupational pension scheme.
Trustees are responsible for overseeing the pension fund and managing its assets in the interests of its members. Employers pay contributions to the trustee or as the trustee directs.
Pension administrators help manage the administrative side of a pension fund. Their work can include maintaining member information and providing other specialist services to support the fund.
Investment managers look after the investment of pension fund assets. Custodians provide services relating to the safekeeping of those assets. These are separate roles within the pension system.
Malawi's Pension Act sets requirements for pension funds to appoint qualified service providers, subject to the applicable rules and regulatory approval.
Employers need to ensure that they have an appropriate pension arrangement in place and know where contributions must be paid. Depending on the fund's arrangements, an external provider may handle parts of the administration or investment process.
However, using an external provider does not remove the employer's legal responsibility to ensure that the required contributions are paid correctly and on time.
The Registrar of Financial Institutions supervises pension funds and pension service providers in Malawi. It also monitors employer compliance with the Pension Act.
Employers have several responsibilities when it comes to pension contributions. These include:
Employers should also understand how their chosen pension arrangement works and ensure that contributions reach the correct destination.
The Registrar of Financial Institutions oversees Malawi's pension sector and monitors whether employers follow the relevant rules.
Businesses hiring employees in Malawi need to include pension contributions in their payroll processes and employment costs.
They must know how much they need to contribute, how much to deduct from employees' salaries and when payments are due. They also need to ensure that contributions are paid into the appropriate pension fund.
This can be challenging for international businesses that are unfamiliar with Malawi's employment and pension requirements.
An Employer of Record (EOR) can help businesses manage local employment and payroll requirements, including the administration of pension contributions. The exact responsibilities will depend on the employment arrangement and the services provided.
Understanding Malawi's pension rules helps businesses plan their employment costs and meet their legal obligations.
If this article raised questions or highlighted areas you’d like to understand better, let’s talk.Our team can walk through the details, implications, and practical considerations for your business.
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