The National Pension Commission has continued to show transparency in its supervisory and regulatory roles as reflected by its activities reported in its annual report. Omobola Tolu-Kusimo writes.
For the first time, the National Pension Commission (PenCom), revealed a three-year annual account of all operators under its supervision, including Pension Fund Administrators (PFAs), Closed Pension Fund Administrators (CPFAs) and Pension Fund Custodian (PFCs).
PenCom made this known in its 2020 Annual Report obtained by The Nation.
Other disclosures in the report are PFAs Market Shares of RSA Funds with names of each PFA, pension portfolio among others.
Analyses of the report by the newspaper showed that the PFAs; CPFAs and PFCs generated combined earnings of N136.45 billion in the financial year ended 31 December 2020.
Further breakdown indicated that combined operating expenses incurred by the PFAs stood at N55.20 billion while profits before taxes (PBTs) amounted to N54.48 billion.
Also, the PFAs posted a combined Return on Assets of 30.07 per cent and a combined Return on Equity of 35.19 per cent, which indicated that the PFAs sustained their profitability in the year under review.
Total earnings stood at N109.68 billion in 2020, indicating an increase of three per cent when compared with the N106.70 billion recorded in 2019.
The commission in the report stated that the major source of income for the PFAs was fund management fees, which accounted for over 80 per cent of total income.
The six CPFAs on their part generated a total revenue (income and transfers from Sponsors) of N2.68 billion, which was a 7.58 per cent decrease compared to the N2.90 billion generated in 2019.
The major sources of revenue for the CPFAs were inflows from their sponsor companies, which constituted 55 per cent of their total revenue, while management fees and investment income accounted for 41 per cent and four per cent, respectively.
The CPFAs incurred a total expenditure of N2.74 billion and a combined profit of N52.38 million in the year ended 31 December, 2020, while operating expenses comprised mainly of staff costs, which accounted for over 69 per cent of operating expenses.
The PFCs generated a combined income of N24.09 billion, representing a 2.75 per cent decrease when compared with the N24.77 billion generated as at 31 December 2019.
The major source of income for the PFCs according to PenCom, was custodial fees, which constituted 80 per cent of their total income, while investment income and other income accounted for about 20 per cent of PFCs total income.
The PFCs incurred total operating expenses of N7.73 billion and a combined profit of N16.36 billion in the year ended 31 December 2020, which indicated a 12.61 per cent decline in the PFCs’ profitability when compared to the N18.72 billion recorded in December 2019.
Meanwhile, the combined paid-up capital of the PFAs stood at N31.46 billion, the CPFAs had N306.47million while that of the PFCs stood at N8 billion. Total Shareholders Fund (SHF) of the PFAs stood at N150.04 billion, indicating an increase of 19.79 per cent, when compared with the N125.25 billion reported as at 31 December 2019.
The Chairman of the commission, Dr. Oluremi Oyindasola Oni who was appointed by President Muhammadu Buhari along with other board members last year, expressed delight in presenting the annual report of the commission.
He said: “The report highlights significant developments in the pension industry as well as the activities of the commission. It also provides information on the industry during the period under review. The central theme that guides the commission’s activities over the years has been the need to ensure the prompt payment of retirement benefits and the promotion of a vibrant and sustainable industry that positively impacts the Nigerian economy.
“In recognition of the need to maintain the momentum of growth and development in the industry, Mr. President graciously appointed a Governing Board for the Commission to provide strategic direction and bring about effective leadership to bolster stakeholders’ confidence.
“In its continuing effort to promote sustainability of the industry, the commission issued amended Guidelines on Corporate Governance for Licensed Pension Operators, which came into effect in January 2020. The Guidelines aim to strengthen Corporate Governance practices and adoption of high ethical standards by licensed pension fund operators. The guidelines are based on internationally accepted principles of good corporate governance. Its requirements are consistent with the Nigeria Code of Corporate Governance provisions issued in 2018, the Pension Reform Act 2014, and other regulations and guidelines issued by the commission.
It is also worthy of note that the Commission recorded several milestones such as the commencement of the RSA Transfer as provided in Section 13 of the Pension Reform Act 2014, allowing RSA holders to transfer their RSAs once every 365 days (12 calendar months). In addition, the commission was awarded the ISO/IEC 27001:2013 Certification due to the implementation of a robust Information Security and Management System.
The Director-General, Aisha Dahir-Umar while giving account, said the 2020 annual report details the progress made in implementing the commission’s mandate and strategic objectives.
She noted that the year under review was indeed unique in the sense that the commission’s Corporate Strategy Plan 2015 –2020, which primarily set-out to achieve the registration of 20 million contributors and deliver measurable impact on the economy, terminated at the end of the year. “It was also the year that the COVID-19 Pandemic caused disruptions in Nigeria and across the globe. Despite the unprecedented challenges of the pandemic, the commission deepened technological innovation as it sought to navigate through the challenges engendered by the pandemic.
“The deployment of the RSA Transfer System is a key innovation achieved during the period. I am happy to note that in partnership with all our stakeholders, we have built a solid and resilient institution that is well-positioned to continue to lead the Nigerian pension industry well into the future”.
Speaking on the industry, she said the commission’s activities were slowed by the restrictions imposed by the Federal Government due to the pandemic.
She said, nonetheless, the focus remained on expanding coverage of pensions to critical segments of the economy like the informal sector, and having a measurable impact on the Nigerian economy through investments in the real sector. “Indeed, the industry made significant progress in our quest to expand coverage of pension during the year as total membership of the pension schemes increased by 3.60 per cent from 8,949,536 recorded in 2019 to 9,271,665 in the period under review. This growth resulted from concerted efforts of the commission and the pension fund operators to ensure improved compliance by the public and private sector employers with the PRA 2014 and the growing acceptance of the Micro Pension Plan by the informal sector.
“In a similar vein, the Net Assets Value of Pension Funds recorded a growth rate of 20.45 per cent from N10.22 trillion in 2019 to N12.31 trillion as at 31 December 2020. The major sources of growth were contributions, income earned on fixed and variable income securities, and price appreciation of equities and bonds. The funds were invested in different asset classes comprising Federal Government of Nigeria (FGN) securities, States Government Securities, Ordinary Shares, Corporate Debt Securities, Local Money Market Instruments, Supranational Bonds, Mutual Funds, Infrastructure Funds, and Private Equity Funds.
“Pension fund assets were predominantly invested in FGN securities, however, the industry’s allocation to this asset class had declined to 66.64 per cent of total portfolio value compared to 71.90% as at 31 December 2019.”
On regulatory and supervisory framework, she said: “In the wake of the COVID-19 Pandemic, the Commission suspended its scheduled routine on-site examinations of pension operators and scaled up regulatory and supervisory oversight. We adopted enhanced off-site monitoring of the activities of operators by requiring additional reporting and increasing the frequency of reporting by operators.
“The Commission conducted an off-site review of pension arrangements in seven states and noted gaps in the states’ implementation of the CPS. Furthermore, a virtual examination of the Pension Transitional Arrangements Directorate (PTAD) was conducted to ascertain the level of implementation of their mandate. It is noteworthy that during the period, PTAD paid a total of N89.85 billion to FGN retirees who retired prior to July 2007 under the old Defined Benefits Scheme.
“The Commission issued Pension Clearance Certificates to 20,936 private sector organizations that met the requirements, while 463 applications were rejected due to the failure of the applicants to meet the stipulated requirements. The sum of N1.42 billion was recovered from 79 defaulting employers. This brought the total recoveries made from the inception of the exercise in 2012 to 31 December 2020 to N18.27 billion.
“Following the Court of Appeal Judgement of 30 April 2020, the Commission ended a nine-year regulatory intervention in First Guarantee Pension Limited (FGPL). Consequently, the affairs of the PFA were handed over to the shareholders, with a new Management team duly constituted”, she maintained.
