IN THE INDUSTRIAL RELATIONS COURT OF MALAWI

PRINCIPAL REGISTRY

MATTER NO. IRC 10 OF 2003

BETWEEN:

JERE…………….….……..………………………………………………. APPLICANT

AND

LEVER BROTHERS (MW) LTD……………...…… ……..…………RESPONDENT

CORAM: R. Zibelu Banda (Ms), Chairperson

Jere; of Counsel for the Applicant
Katundu; of Counsel for the respondent
Respondent; absent
Chinkudzu; Court clerk

ORDER FOR PENSION BENEFITS

Background
On 13 September 2005 the Deputy Chairperson of this court ruled that the respondent
used the applicant’s last salary as the final pensionable pay. The court held that this was
incorrect as it did not tally with the definition of final pensionable pay as contained in the
respondent’s pension rules. The court therefore found that the respondent incorrectly
calculated the pension benefits of the applicant by not using the correct final pensionable
pay of the applicant. The respondent, the court ruled, ought to have projected the
applicant’s salary to his 60th birthday in service. Any ambiguity arising out of the
agreement on these calculations could not be construed to the applicant’s disadvantage.

Following this ruling the matter was set down on 7 March 2006 for assessment of the
correct pension benefits. At this hearing the parties’ legal Counsel were advised to follow
the ruling of 13 September 2005 and come up with the correct pension calculations in
written submissions. The applicant’s legal Counsel made written submissions which this
court adopts as there were no contradictory submissions from the respondent’s Counsel.

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Pension calculations
The applicant retired on Normal Retirement Age of 60 years
The pension Formula given in the Lever Brothers Malawi Pension Rules is:
• Pensionable service x 1 2/3 % of Final Pensionable Pay
In this instance, the pension Formula is:
• Pensionable Service to Age 60 x 1 2/3% x Final Pensionable Pay

Therefore, first project the Pensionable Pay through to 60 years (i.e. year 2002) in order
to compute the Final Pensionable Pay.

1. Projection of Pensionable Salary (Basic Salary)

A logical and statically sound method has to be used in projecting the basic salary
from 1997 to 1998, 1999, 2000, 2001 and 2002 ( my 60th year). For the 4 years prior
to ceasing service, my annual salary progression was as follows:

Year Salary Increase p.a.

1993 52,320.00 -
1994 71,483.00 37%
1995 103,997.00 46%
1996 141,852.00 36%
1997 194,053.00 37%

This average of 39% p.a. is the correct incremental factor to be used in projecting salary
through to year 2002 when I would have attained 60 years of pensionable service.
However, allowing for any rounding off margins of error, a projection factor of 38.75%
only is used.
Monthly No. of Total
Salary months salary
1998 Jan-Mar 1998 16,171.00 X3 48,513.00

1998 Apr-Mar 1999 @ 38.75%increase 22,437.26 X12 269,247.12

1999 Apr-Mar 2000 @38.75% increase31, 131.70 X12 373,580.40
2000 Apr-2001 @38.75% increase 43,195.23 X12 518,342.76
2001 Apr-Mar 2002 @38.75% increase 59,933.38 X12 719,200.56
2002 Apr-Mar 2002 @38.75% increase 83,157.56 X4 332,630.24

TOTAL K2,261,514.08

NB: The last column is to merely show how much basic salary I would have earned
during period Jan1998 – July 2002 (which is when I would attained 60 years). To this
must be added housing allowance at 40%. All this was traded in for the Normal
Retirement Package.

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 2. Computation of Pension

Based on the new figures as computed in 1 above, calculation of final Pensionable Pay
can be done as follows:

2.1 Salary Earnings for the last 3 years (36 months) to retirement

Aug 1999 31,131.70 Aug 2000 43,195.23 Aug 2001 59,933.38

Sep 1999 31,131.70 Sep 2000 43,195.23 Sep 2001 59,933.38
Oct 1999 31,131.70 Oct 2000 43,195.23 Oct 2001 59,933.38
Nov 1999 31,131.70 Nov2000 43,195.23 Nov 2001 59,933.38
Dec 1999 31,131.70 Dec 2000 43,195.23 Dec 2001 59,933.38
Jan 2000 31,131.70 Jan 2001 43,195.23 Jan 2002 59,933.38
Feb 2000 31,131.70 Feb 2001 43,195.23 Feb 2002 59,933.38
Mar 2000 31,131.70 Mar 2001 43,195.23 Mar 2002 59,933.38
Apr 2000 43,195.23 Apr 2001 59,933.23 Apr 2002 83,157.56
May 2000 43,195.23 May 2001 59,933.38 May 2002 83,157.56
Jun 2000 43,195.23 Jun 2001 59,933.38 Jun 2002 83,157.56
July 2000 43.195.23 Jul 2001 59,933.38 Jul 2002 83,157.56
TOTAL K1,819,227.10

2.2 Calculation for Final Pensionable Pay

Total Pay for the last 3 years K1,819,227.10
Pensionable Pay average (divide by 3) K606,409.03/ annum
Pensionable Pay average (divide by 12) K50,534.09/month

(NB: K606,409 (K50,534.09) is the Final Pensionable Pay)

2.3 Calculation of Retirement Pension

Pensionable Service to age 60: 27 years 8 months

Final Pensionable Pay: K50,534.09 x 12 = K606,409.03 p.a.

PENSION FORMULA

27.67 X 1/60 X 606,409.03 = K279,655.62 p.a.

COMMUTE 1/3 OF PENSION TO LUMP SUM

Lump sum 1/3 x 279,655.62 x 13.037 ( actuarial factor) = K1,215,290.10

Pension 2/3 of 279,655.62 = K186,437.10 p.a.

PENSION INCREASE
01/01/1999 40% = K186,437.10 X 1.40 = K261.011.94
01/07/2000 16% = K261,011.94 X 1.16 = K302,773.85

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 2.4 Calculation of pension Received up to March, 2006

Monthly NO. of Total

Pension months pension

Jan –Dec1998 3,180.58 X12 38,166.96

Jan 1999-Jun 2000@ 40% increase 4,452.81 X18 80,150.58
Jul 2000 –Oct 2001@ 16% increase5,165.26 X16 82,644.16
Nov 2001- Mar 2006@ (Adjustment)8,074.06 X53 427,925.18

TOTAL K628,886.88

2.5 Calculation of pension based on new Rates to March 2006

Monthly No of Total
Salary months pension

Jan-Dec 1998 15,536.42 X12 186,437.04

Jan 99 –Jun 2000 @ 40%Increase 21,705.99 X18 391,517.82
Jul 2000- Mar 2006 @Increase 25,231.15 X69 1,740,949.35

Total K2,318,904.21

2.6. Pension Shortfall being Claimed

Total Pension on New Rate K2,318,904.21

Less paid monthly up to 3/2006 K628,886.88
Less arrears paid 31/10/2001 K113,170.00

K742.056.88 K742,056.88
K1,576,847.33

3. PENSION 1/3 COMMUTATION TO LUMP SUM

(as calculated in 2.3 above)

Lump sum K1,215,290.10
Less paid on 31/12/1997 K248,791.00
Less paid on 31/10/2001 K140,105.00
K388,896.00 K388,896.00

TOTAL CLAIM K826,394.10

4. PENSION CLAIM SUMMARY

4.1 LUMP SUM ARREARS K826,394.10

4.2 PENSION ARREARS K1,576,847.33

TOTAL K2,403,241.43

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ORDER
The court orders that the respondent pay the applicant a sum of MK2 403 241-43
comprising lump sum arrears of MK826 394-10 and MK1 576 847-33 being pension
arrears. If any, lawful deductions may be made on the sum. The order is with immediate
effect as this claim has been pending for far too long.

Made in open court this 5th day of April 2006 at BLANTYRE.

Rachel Zibelu Banda

CHAIRPERSON