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Key issues that shaped contributory pension scheme in 2018

Prospective retirees at Pencom’s 2018 pre-retirement workshop

Key issues shaped the Contributory Pension Scheme (CPS) in Nigeria in 2018: rise in the value of pension assets under management, the introduction of the Multi-Fund Structure, new guidelines for Micro Pension Plan and increased surveillance to check non-remittance of pension contributions by employers.

Checks also showed that it was not all rosy for the nation’s apex pension regulatory agency, the National Pension Commission (PenCom) in managing the pension industry in the country in 2018.

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Daily Trust takes a look on the key issues that shaped the pension industry this year.

In about 12 years, the value of pension fund assets under management has grown from N265 billion in 2006, which was the year of actual commencement of investment activities by the Pension Fund Administrators (PFAs), to over N8.35 trillion as at the end of September, 2018.

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Data sourced from PenCom showed over 8 million people have Retirement Savings Accounts (RSAs) and of the over 8 million existing RSAs, 4.69 million of them belong to workers in the private sector while 3.59 million belong to workers in the public sector as at the end of September, 2018.

This year, PenCom released a set of guidelines to drive the implementation of the Micro Pension Plan (MPP) aimed at incorporating the informal sector into the CPS.

In November 2018, the Acting Director General of PenCom, Mrs. Aisha Umar-Dahir, said the implementation of the MPS would start by the first quarter of 2019.

As at the end of September 2018, 70.70 per cent of pension fund investments are in federal government securities deemed as the safest securities in the investment guidelines issued by PenCom to PFAs. Data sourced from PenCom show that of the 70.70 per cent, 51.84 per cent is invested in bonds while 18 per cent in treasury bills.

Analysis of the level of implementation of contributory pension scheme (CPS) has shown that many states are reluctant in the full implementation.

Details sourced from PenCom showed that less than 10 states have complied substantially with the contributory scheme as at August, 2018 while many are still either at the level of domesticating the legal framework or are still unable to implement the law already in place.

The payment of accrued pension right has been irregular even as PenCom revealed that the Commission has cumulatively paid N689.15 billion as the accrued pension right for retirees from July, 2007 to September, 2018 but many retirees are yet to get their accrued right.

There is still substantial flouting of the pension reform law in remitting contributions on timely basis even though the law stipulates a 2 per cent penalty on unremitted funds.

PenCom had set up a taskforce to enforce compliance and in April 2018, it reported that employers were forced to pay over N6 billion in penalties for deducting funds from employees’ salaries and not remitting them to their retirement accounts.

Multi-fund structure versus return on investment

PenCom announced full implementation of the multi-fund structure this year in which PFAs are now allowed to invest the funds of younger contributors into more risky securities, including equities, real assets and private equity.

Expert say the innovation will improve returns on investment of pension fund assets an give more value to contributors.

Meanwhile, the transitional management running PenCom came under intense scrutiny and attacks this year, including a motion passed by the House of Representatives On November 28, 2018 to investigate the management for unduly creating impasse in the matter of appointment and resumption of duty of members of the Board of the Commission.

Umar-Dahir had since refuted the allegations in a memo to staff of the Commission.

A credible source informed Daily Trust that the absence of board in PenCom has been at the centre of the attacks.

In April 2017, Umar-Dahir assumed office as the Acting Director General of the dissolution of the erstwhile management of the Commission headed by Chinelo Ahonu-Amazu by President Muhammadu Buhari on April 13, 2017.

Arguments for and against the exit of Ahonu-Amazu from PenCom led to two cases instituted at the Federal High Court, Abuja by individuals and organisations, challenging the legality of her disengagement and nomination of, first, Mr. Aliyu Abdulrahman Dikko (from North-West) and, later, Mr. Funsho Doherty (from South-West).

It was argued that should Ahonu-Amazu’s disengagement remain, her replacement must come from the South-East zone.

Controversy surrounded Ahonu-Amazu’s appointment as company secretary and legal adviser on a director level, despite the fact that she lacked the requisite experience for that office and grade as stipulated in the Public Service Rules.

She served as director in the agency until December 2012, when she was appointed by the President Goodluck Jonathan administration as acting director.

The controversial amendment of the Pension Reform Act to lower the qualifying experience for appointment as director-general of PenCom was done in 2014, which paved way for Anohu-Amazu’s appointment as substantive director-general consummated in October 2014.

On her replacement, sources argued that where the whole team was disengaged, it does not require a lawyer to realise the illogicality of the argument that the next director-general must necessarily come from the South-East. The argument would have been valid had there been an occasional vacancy in PenCom created by the exit of any individual member of the executive team.

A duly constituted board approved by the Senate is likely to ease the burden of the management in PenCom and spur growth in the pension industry in 2019.

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