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Malawi’s pension industry recorded impressive growth in 2024, with assets rising to K3.8 trillion, representing a 29.7 percent increase from 2023, according to the Financial Institutions Annual Report 2024 released by the Reserve Bank of Malawi (RBM).
The report shows that the pension fund now makes up 28.9 percent of the country’s gross domestic product (GDP), which stands at about K19 trillion. This places the pension sector among the biggest sources of long-term domestic capital for the economy.
However, behind this strong headline growth, there are worrying challenges. Contribution arrears by employers have piled up to K28.5 billion. The central bank has warned that such arrears are a serious risk to both the security of workers’ retirement savings and the stability of the pension system itself.
Membership in pension schemes remains low despite the growth in total assets. Only 543,309 contributors are currently registered, out of an employed population of more than four million. This figure reflects weak employer compliance and gaps in enforcement of pension regulations, according to the RBM.
RBM has pledged to tighten supervision in order to force employers to remit pension contributions on time. The regulator also urged pension administrators to strengthen governance and management structures to safeguard workers’ funds.
The report further highlights how the funds are being invested. Nearly half of all pension assets—49 percent—are now parked in government securities, showing a heavy reliance on treasury instruments. Around 19 percent of the funds were invested in equities, giving support to the 16-counter Malawi Stock Exchange and helping listed companies access much-needed long-term capital. The rest of the money was spread across bank deposits, property, and offshore assets to reduce risks and maintain value.
Analysts believe the arrears remain a key weakness in the system. Money market analyst Kondwani Makwakwa told local media that failure by employers to remit contributions damages confidence among workers. He warned that the problem also reduces the pool of funds available for investment in the wider economy.
“When employers don’t submit pension contributions on time, it really shakes employees’ confidence and affects the benefits they are supposed to get,” Makwakwa said. “Pension funds also end up with less money to work with, which limits capital mobilisation, reduces demand for bonds and development projects and can even create instability in the financial system.”
He advised that while RBM should enforce compliance, penalties against defaulters should be applied gradually. “Big fines could make struggling businesses worse, maybe causing them to lay off workers or even close,” he added.
Economist Steve M’modzi said the impressive asset growth shows that Malawi has untapped wealth within its borders but is failing to channel it into productive ventures.
“Malawi appears trapped in the narrative that it is a poor country. These funds now need to be put into real productive sectors that can generate extra income while improving people’s welfare,” he explained. “For example, tackling food insecurity through investments in agro-processing would cut food-driven inflation and create resilience.”
M’modzi further suggested that pension funds could also drive innovation in areas like health and skills development, which would boost productivity and long-term growth.
Another economist, Lesley Mkandawire, argued that pension resources should be increasingly invested in infrastructure, particularly in real estate. “Real estate is one area that should be considered as it creates both returns and long-term economic value,” he said.
RBM Governor Macdonald Mafuta-Mwale had earlier stressed that pension savings must be used to transform Malawi’s economy. He said the central bank would continue to work with the pension industry to diversify investments into the real economy while also allowing some offshore investments to maximise opportunities.
The Pension Act 2023, which came into effect in March 2023, is also expected to shape the sector’s future. It replaced the Pension Act 2011 and introduced reforms in governance, benefit design, administration, and rules around early access of retirement savings.
For now, Malawi’s pension sector stands as both a success story and a challenge. While the size of the funds shows that domestic capital is growing, arrears, low compliance, and limited coverage remain hurdles to building a more inclusive and effective retirement system that supports both workers and the national economy.
