By nyasatimes
Africa-Press – Malawi. Malawi’s largest public pension fund is sitting on a powder keg of mismanagement: K90.4 billion in unpaid pension contributions, K11.5 billion not credited to members, K4.9 billion paid out for a hotel project while the fund had no board, and a K463 million loss on a land deal in Lilongwe—all uncovered in a confidential regulatory probe into the Public Service Pension Trust Fund.
The explosive findings are contained in an interim examination report by the Registrar of Financial Institutions, which inspected the fund between 21 July and 1 August 2025 and discovered a troubling pattern of governance failures, financial opacity and questionable investment decisions at the institution that holds the retirement savings of more than 139,000 public servants.
The report warns that the weaknesses—if left unchecked—could threaten the long-term security of members’ pension savings.
Nine Months Without a Board
At the centre of the scandal is a governance vacuum that left the pension fund operating without a Board of Trustees from October 2024 to June 2025. During those nine months, the fund effectively ran without its legally required oversight body because the government delayed appointing its trustees.
In that period, major financial decisions were made without board scrutiny. Among them were payments totaling K4.9 billion linked to the construction of a luxury hotel project, approved while the governance structure required by law simply did not exist.
The regulator says the absence of trustees severely compromised oversight and risk management, allowing critical decisions to be approved by the Principal Officer.
The newly appointed board has now been instructed to review every transaction carried out during that period and report back by 31 December 2025.
K90.4 Billion Pension Debt
The report exposes a staggering level of unpaid pension contributions owed to the fund. As of June 2025, arrears stood at K90.4 billion. Under the law, employers must remit pension deductions within 14 days after the end of the month in which they fall due.
But the regulator says this requirement has been routinely ignored. Delayed remittances deprive pension savings of investment returns and attract penalty interest based on the policy rate set by the Reserve Bank of Malawi plus ten percent.
The regulator has now urged trustees to ensure that all arrears are recovered with the required penalties.
K11.5 Billion Not Credited to Members
Even more troubling is the discovery that K11.5 billion in pension contributions collected between 2023 and August 2025 had not yet been credited to members’ accounts. The delay arose because government payroll deduction schedules did not reconcile with the cash actually remitted to the fund.
This mismatch created a serious operational risk.
Members’ pension balances may not accurately reflect the contributions deducted from their salaries, raising the possibility of disputes when workers retire or exit the scheme.
No Audited Financial Statements for Four Years
The regulator also discovered that the pension fund has not produced audited financial statements since 2021. This violates provisions of the Pension Act 2023, which requires audited financial statements to be submitted within three months of the end of each financial year.
The absence of audited accounts makes it nearly impossible to verify the fund’s true financial condition. Even the draft audit for 2021 carried a qualified audit opinion, citing insufficient evidence on pension contributions and tax credits.
The fund has now been ordered to finalise and submit all outstanding audited financial statements by 31 January 2026.
Costly Mistake in Lilongwe Land Deal
Investigators also uncovered a troubling property transaction in Lilongwe. The pension fund bought land intended for future development at a cost of K1.4 billion.
But a subsequent independent valuation revealed that the land was worth only K937 million, leaving the fund nursing a K463 million loss. The regulator said the transaction was concluded without an independent valuation, meaning the fund relied entirely on the seller’s own estimate of the property’s value.
The report bluntly states that trustees acted negligently in approving the deal.
Billions Poured into Risky Hotel Project
The pension fund has also committed K43.93 billion to the construction of a hotel in Blantyre, managed by Old Mutual Investment Managers. But the project has been plagued by foreign currency shortages.
About 80 percent of the construction materials are imported, forcing the contractor to obtain dollars through forward exchange contracts offered by commercial banks. These contracts were priced at K2,500 to K3,500 per US dollar, far above the official market rate of K1,751 per dollar.
The regulator warned that the arrangement could dramatically increase the cost of the project and significantly reduce its expected investment returns.
Trustees Paid Illegal Honoraria
The report also revealed that trustees received K29.9 million in honoraria as of March 2025. But the payments violate provisions of the Pension Act 2023, which prohibits trustees from being paid fees from pension fund assets. Failure to comply with the law can attract penalties of up to K100 million.
The regulator has ordered the payments to stop immediately.
Rental Income Left Uncollected
The fund has also failed to collect significant rental income from properties it owns. At Able House, rental arrears reached K168.9 million, including K112.9 million owed by the Anti-Corruption Bureau. At PSPTF House, rental arrears totaled K265.5 million, with K247.1 million owed internally by the pension fund itself.
Investigators said the rent collection efficiency at Able House stood at only 7 percent, exposing the fund to liquidity risks.
Pension Records Kept in Excel
The operational systems of the pension fund were also found to be dangerously outdated. Despite managing records for over 139,000 members, the fund relies heavily on Microsoft Excel spreadsheets to store and manage member data.
The regulator warned that Excel-based systems are vulnerable to human error, manipulation and loss of data. Administration of the pension scheme is outsourced to Zamara Pension Services Company Ltd, while data is hosted at the NITEL data centre.
But backup logs from the data centre showed “0 files protected,” meaning the pension fund’s critical data was not being backed up at all.
Missing Members and Duplicate Records
Investigators also found serious flaws in the Past Service Liability schedule, which tracks benefits owed to workers from the earlier defined benefit pension scheme.
The review revealed that:
1,144 eligible members were missing from the schedule
six members had duplicate entries
The schedule is maintained manually in Excel and has never been independently audited, raising concerns about the accuracy of benefits paid to members.
Millions Spent on Failed Software
The fund also spent K169 million on an IT system developed by ICT Works to modernise its record-keeping. Despite approving the system after testing, it failed to work properly and eventually became unusable when its licence expired. The fund has since reverted to managing its operations using Excel spreadsheets.
Costly Actuarial Services Questioned
The regulator also questioned the value of actuarial services provided by Zamara Actuaries from Kenya.
The fund paid:
K165.3 million in 2023
K256 million in 2024
But the reports produced by the actuaries largely duplicated investment performance reports and delivered limited value, according to the regulator.
Pension Savings at Risk
While acknowledging that the pension fund has made some progress in diversifying investments, the regulator warns that the institution remains exposed to serious governance, financial management and operational risks.
Unless these problems are urgently addressed, the report cautions, they could undermine the financial stability of the fund and erode the retirement savings of thousands of public servants.
For the more than 139,000 members whose futures depend on the fund, the findings raise a stark and uncomfortable question: Who is really safeguarding their pensions?
Source: Malawi Nyasa Times
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