Alliance Capital Limited says it is encouraging to note that Malawi government is set to roll out the long awaited pension fund for civil servants.
In his published weekly market review, Alliance Capital Chief Executive Officer Christian Majavina said the move will have positive impact on the capital market and the economy as a whole.
A pension fund is established by an employer to facilitate and organize the investment of employees’ retirement funds contributed by the employer and the employee.
Majavina said the pension fund is a common asset pool meant to generate stable growth over the long term and provide pensions for employees when they reach the end of their working years and commence retirement.
“The government being the main employer is also required by law to set up a pension fund. The current pension system only makes provision of pension packages to civil servants who are given upon retirement and government provides the resources from the national budget pension allocation. It is encouraging to note that all is now set for the roll out scheduled for next month,” Majavina said.
He said pension fund assets have long investment horizons, are professionally managed by the private sector and are invested in diversified portfolios; they contribute to financial markets’ stability and liquidity.
“Because of their long investment horizon, public pension assets are an important source of funding for venture capital the seeds of future economic growth and productivity improvement,” said Majavina.
He said public pension benefits generally are distributed in the form of regular benefit payments, the economic stimulus they provide is ongoing.
“Most retired workers live in or near the same area as they worked. Since public employees live in virtually every city and town in the nation, this stimulus reaches virtually every city and town of every state in the nation.
“It’s important to remember that the key reason for setting any pension fund is to enable retirees to live out their older years in dignity, but with prudent management pensions can be engines of economic growth and help maintain economic stability and curtail poverty,” Majavina said.
In Malawi, government enacted Pension Act 2010 which become effective on 1 July 2011 to ensure that every employer to which this Act applies, provides pension for every employee and that every employee receives retirement and supplementary benefits as and when due.
The government also aims at promoting the safety, soundness, and prudent management of pension funds that provide retirement and death benefits to members and beneficiaries, and fostering consolidation of national savings in support of economic growth and development of the country.
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