The Nation Newspaper

Category: Pension

  • New pension bill will kick start mortgage financing, says PenOP

    Chairman, Pension Fund Operators Association of Nigeria (PenOp), Mr. MisbauYola has said the proposed mortgage financing by the National Pension Commission (PenCom) will take effect when the new pension bill is passed into law by the National Assembly.

    Yola said the proposed mortgage would enable pension contributors’ access part of their fund to own houses.

    Yola, who made this known at a briefing in Lagos, said the proposal is contained in the pension reform bill that is with the National Assembly.

    The Acting Director-General of the Commission, Mrs. Chinelo Anohu-Amazu, last year, said the commission was exploring the possibility of allowing contributors to utilise part of their Retirement Savings Accounts (RSA) balances to part-finance the acquisition of low-cost houses.

    She noted that when the initiative comes on stream contributors from states that are complying with the Contributory Pension Scheme (CPS) would leverage on it to own their homes.

    She said: “It is our expectation that when they eventually come on stream, these facilities would be availed to states that have fully implemented the scheme.”

  • Massachusetts probes 401(k) contribution delays

    The Massachusetts Securities Division is calling on 401(k) plan administrators to report how many companies have shifted to a lump-sum matching contribution once a year, a change that can undermine worker savings.

    The unit sent a letter to the 25 largest providers of 401(k) plans, requesting the number of employers who pay distributions at year-end, when the move was made from more frequent payroll periods and what workers are told about the potential consequences, the division said in a statement today.

    “Employers are seeing the opportunities they have to take advantage of the flexibility in the system to short-change participants,” William F. Galvin, Massachusetts secretary of the commonwealth and chief securities regulator, said in an interview. “If employers can get away with making changes that help their bottom line and no one is going to complain about it, they’re going to do it.”

    Companies across industries are squeezing 401(k) contributions by holding back on the amount and timing of their matching funds, making it harder for U.S. workers to save for retirement, Bloomberg News reported on Feb. 14. AOL Inc. (AOL) called attention to the practice earlier this month when Chief Executive Officer Tim Armstrong announced plans to make payments in one sum at the end of year, citing spiraling health-care costs including money spent on care for babies. The move touched off a controversy, Armstrong apologized and the company reversed its decision.

    Galvin said that AOL’s maneuvering and news reports including Bloomberg’s showing that the practice was more widespread influenced the division’s decision to open the inquiry.

    Missing Gains

    Companies save money by making lump-sum payments into 401(k) accounts at the end of the year or after, according to the Massachusetts statement. Employees miss out on gains on matching contributions that could accrue during the year and employer contributions may go into a declining market. Workers may also lose out if they leave the company before Dec. 31.

    The Standard & Poor’s 500 Index of stocks gained 30 percent in 2013. Equities declined 3.6 percent in January, when some employers who delay their matching contributions, such as JPMorgan Chase & Co., made their payment to workers. International Business Machines Corp. and Charles Schwab Corp. are among companies making annual payments, according to the statement.

     

    Fidelity, Vanguard

    The Securities Division requested that 401(k) providers submit the requested information by March 10, according to the statement. Firms that were sent a request include Boston-based Fidelity Investments, the largest administrator of 401(k) accounts; Vanguard Group Inc.; BlackRock Inc.; and T. Rowe Price Group Inc., according to the Securities Division.

    Vanguard declined to comment because it hasn’t received the letter, according to Linda Wolohan, a spokeswoman for the Valley Forge, Pennsylvania-based company. Fidelity spokeswoman Eileen O’Connor and Brian Beades, a spokesman for New York-based BlackRock, also declined to comment. Baltimore-based T. Rowe Price didn’t immediately have a response, said spokesman Bill Benintende.

    Galvin said the inquiry probably won’t result in legislative changes because of “dysfunction” in the federal government. He said he’s hoping the documentation will help workers have an impact on policies at their current jobs and raise the issue when employers try to make new hires.

    “If you make it competitive when they’re looking for employees, it will give employees the power of the marketplace,” Galvin said.

  • ‘There’s no feud between insurers, PFAs’

    ‘There’s no feud between insurers, PFAs’

    Pension Fund Administrators (PFAs) have said there is no feud between them and insurers, despite allegations of de-marketing levelled against some members on the sale of Programme Withdrawal (PW) and Life Annuity sold by the duo.

    The Pension Managers, who spoke under the auspices of the Pension Fund Operators Association of Nigeria (PeNop) at a briefing in Lagos, said they are looking at areas of collaboration and work as partners, and not as competitors.

    Programme Withdrawal (PW) is a product offered by PFAs and regulated by the National Pension Commission (PenCom) while annuity is offered by life insurance firms regulated by the National Insurance Commission (NAICOM).

    Under the PW pension is paid over an expected lifespan until the Retirement Savings Account (RSA) balance runs out. Whenever the retiree dies, the beneficiary under a will, or Letter of Administration, is paid enbloc the balance in the RSA.

    Life Annuity, on the other hand, pays pension for life with a minimum guaranteed payment period of 10 years. If the retiree dies within the guaranteed payment period of 10 years, the surrender value of the remaining amount within the period shall be paid as lump sum to the estate of the retiree or named beneficiary.

    The issue of de-marketing over the products has caused tension between the pension managers and insurers in the past. The insurers complained that PFAs were discouraging retirees and pensioners on their lists from buying life annuity products, alleging that some of them spread lies about annuity products and make wrongful insinuations about the safety of life annuity funds.

    On the other hand, the PFAs were, however, not happy that PenCom is collaborating with the National Insurance Commission (NAICOM) to promote life annuity as an alternative to programmed withdrawals as prescribed by the Pension Act. Some also believe insurers do not act professionally in their bid to make the retirees buy their product.

    PeNop Chairman, Mr. Misbau Yola, said at the event that insurance firms accused marketers of misinforming retirees about either procuring programme withdrawal or annuity.

    He explained that they are required to inform the retirees at the point of retirement on the option available to them, saying but it is up to the retiree to decide which option to take.

    He said: “After we give this information to the retirees, they think about it and take their decision. Unfortunately, the insurance marketers believe that because we are the ones that interface with these retirees, we sell our own product rather than theirs.

    “But, of course, we are not to specifically sell their product, but we will not de-market their product and we actually do not do that. A lot of retirees have been moving from our own product which is the PW to life annuity. Those who choose annuity and subsequently discovered they would be better off with Programme Withdrawal, cannot come back because they are not allowed to do so based on how the product is structured. PW withdrawal, on the other side, is flexible and retirees can decide they want to change to annuity.

    “As an association, we are fervently looking at possible ways of how we can understand ourselves better so that they can actually understand that we are partners in progress and not competitors in this regard. We, as an industry, do not de-market the annuity option. The relationship is cordial, all we do is advise the retiree on available options to think and make a choice.”

    Section 4 of the Pension Reform Act, 2004 provides that an employee can on retirement, make withdrawals from his Retirement Savings Account (RSA) in the form of a programmed monthly or quarterly withdrawal based on his life expectancy or buy life annuity from a life insurance firm.

    Yola said the retiring worker can withdraw a lump sum from the balance in his RSA provided that the amount left in the account after the withdrawal is enough to fund a life annuity, or programmed withdrawals of not less than 50 per cent of his annual remuneration at the date of retirement.

    Also, a retiree, who had opted for programmed withdrawal is free to change to life annuity, using the balance in his programmed withdrawal account to buy life annuity from a life insurer but he cannot change from life annuity to programmed withdrawal, he added.

  • 81 firms implement Group Life for workers, says PenCom

    81 firms implement Group Life for workers, says PenCom

    Eighty-one institutions have implemented the compulsory Group Life Insurance Policy (GLIP) in the country as at the end of the third quarter of last year, as against 54 in the second quarter, representing an increase of 50 per cent.

    According to a report made available by PenCom, financial institutions maintained their lead on compliance their number moved from 14 to 23.

    Acting Director-General of National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu said the Commission has intensified its compliance and enforcement activities with particular reference to the provisions of Section 9 (3) of PRA 2004, which requires employers to maintain life insurance policy in favour of their employees for a minimum of three times the annual emoluments of the employees.

    She said: “The number of institutions that submitted evidence of compliance with the GLIP increased from 54 in the second quarter to 81 in the third quarter.

    “The number of institions that complied in Education is four, Construction is eight, Oil and Gas is five, Manufacturing is three, Hospitality is two, Government Agencies, two, Commercial is eight, while other institutions recorded 26.’’

    She said the Commission received 467 applications for the issuance of compliance certificates, of which 401 were issued, while 66 applications were turned down due to various inadequacies.

    She listed these inadequacies as issues bearing on non-remittance of pension contributions for the appropriate period and non-provision of Group Life Insurance Policy for their employees.

    She explained that Section 9 (3) of the Pension Reform Act 2004 requires every employer to which the Act applies, to maintain Life Insurance Policy in favour of the employee for a minimum of three times of the annual total emolument of the employee.

    Mrs Anohu-Amazu said: “For the purpose of establishing uniform set of rules, guidelines and standards in relation to the application of the provisions of Section 9 (3), the following minimum guidelines shall apply. The employer shall fully bear all costs in relation to procurement of this policy, and this shall be in addition to, and separate from, the contributions to be made by the employer to each employee’s Retirement Savings Account, as required by the Act.

    “The Life Insurance Policy shall be effected through the purchase of a Life Policy issued by a Nigerian Registered Insurance Company, licensed and authorised to conduct Life Insurance Business by National Insurance Commission (NAICOM) under the Insurance Act 2003.”

    She said for ease of administration, a consortium of eligible insurance firms, as determined in paragraphs 3.1 and 3.2 of this guideline, shall be constituted for providing life insurance cover for employees of the Federal Government.

    ‘’Employers in the private sector shall be at liberty to engage the service of any insurance company or group of insurance companies, which satisfies the eligibility criteria in paragraphs 3.1 and 3.2 of these guidelines,” she added.

     

  • California pension boosts rates

    The California Public Employees’ Retirement System, the largest in the United States public pension, will begin phasing in higher contribution rates to account for the increased costs of retirees living longer.

    The board of the $282.5 billion fund voted yesterday to boost the state’s annual allocation to $5 billion over three years, from $3.8 billion now. Local government increases were postponed for two years.

    The vote represents a partial victory for Governor Jerry Brown, a 75-year-old Democrat, who urged the board to reflect the increased costs of increased longevity in three years. Cash-strapped local governments won a delay to help build a cushion before the higher payments kick in.

    “We have to be as aggressive as we possibly can without causing significant fiscal stress for our most challenged participants,” said Christopher McKenzie, executive director of the League of California Cities, who argued for a delay on behalf of municipalities.

    Local governments may see costs rise as much as five per cent of payroll for typical state employees and as much as nine per cent of payroll for those in public-safety jobs, such as police and firefighters, at the end of a five-year phase-in, Calpers said in a statement.

    “No one likes to pay more for pensions, but ignoring their true costs for two more years will only burden the system and cost more in the long run,” Brown said Feb. 5 in a letter to Calpers.

    By 2028, men who retire at 55 are projected to live 2.1 years longer and women 1.6 years longer, boosting the state’s costs by $1.2 billion a year, or 32 percent, the governor said.

  • TD’s Clark to get $2.2m Lifetime Pension

    Dominion Bank (TD) Chief Executive Officer Ed Clark will get a lifetime yearly pension of C$2.49 million ($2.23 million) after stepping down as head of Canada’s largest lender by assets.

    According to Bloomberg, Clark, 66, is set to retire November 1 after leading the Toronto-based bank for almost 14 years. As part of his employment agreement, Clark’s pension payout will continue “unreduced” to his surviving spouse for her lifetime following his death, the firm said in a filing yesterday with Canadian regulators.

    The pension was determined using the yearly average of Clark’s highest consecutive 36 months’ salary and a percentage that became fixed in October 2010, when his pension benefits were frozen with no further accruals, according to the filing. The firm’s “supplemental executive retirement plan” was closed to new members in 2009, the filing shows.

    “This is a compensation element that has been decreasing in prevalence,” said Joe Sorrentino, Managing Director at Steven Hall & Partners LLC, a New York-based consulting firm. “When it was put in place it was pretty common practice, but over time we’ve seen the decline in these types of programs.”

    Clark joined Toronto-Dominion in 2000 after it acquired Canada Trust’s parent CT Financial Services Inc., where he was president and CEO. Since taking over the top job in 2002, he’s spent more than $25 billion on U.S. acquisitions to build a network of branches stretching from Maine to Florida.

    Royal Bank of Canada (RY) CEO Gordon Nixon, the country’s highest-paid bank head, is entitled to a maximum annual pension of C$2 million at age 65, according to a January 31 filing by the Toronto-based bank.

    Annual pension benefits payable as of year-end were C$1.68 million, the filing said, and disclosures don’t say if his pension is transferable to a spouse. Nixon, 57, will retire Aug. 1 after 13 years leading Royal Bank.

    Ali Duncan Martin, a Toronto-Dominion spokeswoman, and Royal Bank’s Jason Graham didn’t have an immediate response to questions about the CEO pensions.

    Pensions started to fall out of fashion in the late 1990s and early 2000s, after drawing more scrutiny from shareholders, Sorrentino said.

    “We saw some pretty large payouts in pensions and retirement benefits and those big numbers drew the ire of investors and was a focus of the press,” he said. “It’s also pretty costly to have these types of programs in place, so from a cost-cutting perspective that was definitely something that was a reason to curtail their usage.”

    Surviving Spouse

    The ability to transfer pensions to a surviving spouse used to be fairly typical, though transferring the full amount is “more generous” than usual, Sorrentino said.

    Many large U.S. banks have curtailed defined-pension plans with only some long-term employees grandfathered. Goldman Sachs Group Inc. (GS) froze its plan in 2004 and named executive officers haven’t accrued benefits since 1995, according to the New York-based lender’s 2013 proxy statement. Morgan Stanley (MS) froze its plan in 2010, while Charlotte, North Carolina-based Bank of America Corp. stopped offering additional compensation credits for employees in its plan in 2012, according to the firms’ proxies.

  • 299 Lagos retirees get N1.2b pension

    299 Lagos retirees get N1.2b pension

    The Lagos State Pension Commission (LASPEC) has credited N1.2 billion to 299 retirees, being an amount accruing to the state before the Contributory Pension Scheme (CPS) took off in 2007.

    This is coming at a time that the state government contributed a total of N47.4 billion monthly.

    The amount include the 7.5 per cent deduction from the salary of every worker, and the counterpart 7.5 per cent contribution by the state into the Retirement Savings Accounts (RSAs) with the state’s approved Pension Fund Administrators (PFAs).

    Out of the contribution, it has paid N22.7billion to 4,199 workers that retired in the state under the CPS.

    LASPEC Director-General, Mr. Adekunle Hussain made this known during the 10th bond presentation to the retirees.

    He said the commission has remained resolute in ensuring that every employee is equipped with the necessary knowledge about the CPS before quiting the service.

    He said: “The Lagos State government has continued to set the pace for stakeholders in the pension industry. We can proudly say without mining words, that Lagos has confirmed its leadership status as the only state in Nigeria to have paid up to this sum of N22.7billion to 4,199 retirees, who retired from the public service from inception of the CPS till date.”

    The Head of Service, Lagos, Mrs. Oluseyi Williams said the Office has continued to intensify efforts at ensuring that workers continue to live well in retirement.

    She said the state has continued to wax stronger and maintained its leadership position in the CPS, particularly in issuing bond certificates to retirees.

    She urged the retirees to live within their means.

    The Commissioner for Establishment, Training and Pensions, Mrs. Florence Oguntuase, said her ministry ensured that the retirees’entitlements were paid promptly.

    She advised the retirees to invest their money to enable them enjoy their lives.

  • CPS undersubscribed, says Premium Pension chief

    • Meets southwest retirees

    The Contributory Pension Scheme (CPS) is still undersubscribed despite recording about N4 trillion from inception till date, the executive Director, Operations and Services, Premium Pension Limited, Kayode Akande, has said.

    Akande, who spoke at the Customer/Retiree Interactive Forum in some states of the Southwest region, said only about six million Nigerians have registered under the scheme out of about 60 million people that have one form of employment, or another.

    Notwithstanding this, he noted that the scheme is growing and assuming its pride of place in the socio-economic landscape of the country.

    He called on stakeholders to support the scheme, adding that it enables the long term investible funds to grow the economy.

    He described the new scheme as secure, and that the law that sets it up, which is also under review at the National assembly, has not left loopholes for corrupt practices.

    He noted that since the new scheme started almost a decade ago, there has not been cases of corruption and its objectives have almost been met without protest from pensioners.

    Speaking on the need to sensitise retirees and intending retirees on the scheme, Akande said the management of Premium Pension embarked on a tour to Ogun, Oyo and Osun states to assess the success and challenges of the company in particular, and the CPS in general.

    He said: “The tour is periodic and meant to show us how the retirees are doing in retirement after many years of service. The forum held in between the tour, also served to educate intending retirees on what they should do in the months leading to their final disengagement from work to facilitate the receipt of their gratuities and pension in good time.

    “Workers need to submit all the necessary documents and information to their Pension Fund Administrators (PFAs) months before the date of their retirement to enable them to receive their pension and gratuity immediately after retirement.”

    Chairman, Board of Trustees, Association of Contributory Pensioners of Nigeria, Mr. Adesanya Agbomeji, who spoke during the tour, said the CPS was working, saying they have been receiving their gratuities and pension on time.

    A retiree, Rasaq Lawal, also said payment had been regular.

  • PenCom recovers N3b from erring employers in Q3

    The National Pension Commission (PenCom) has recovered about N3billion from defaulting employers.

    The amount represents the principal contribution of N2.87 billion and interest penalty of N183.61 million.

    The figure was made in the third quarter of last year by agents appointed by the Commission to ensure erring employers whose liabilities were established, remit outstanding pension contributions and interest penalties into the RSAs of their employees.

    Under the period under review membership of pension schemes increased from 5,693,936 at the end of second quarter to 5,796,979 at the end of the third quarter, representing an increase of 1.81 per cent.

    According to PenCom’s Acting Director-General, Mrs. Chinelo Anohu-Amazu, the increase was largely due to Approved Existing Schemes (AES) and Retirement savings Accounts (RSA) memberships that increased by 2.63 and 2.1 per cent, adding that the membership of Closed Pension Fund Administrators (CPFA) also increased marginally by 0.05 per cent.

    She said: “Total RSA registrations for both public and private sectors showed that total RSA registrations increased by 2.1 per cent. The public sector dominated total RSA registrations with a total figure of 2,987,967, thereby accounting for 52.16 per cent of total registrations.”

    She said the private sector also witnessed an increase in RSA membership, as total registrations increased from 2,652,626 in the second quarter, to 2,740039 in the third quarter, representing an increase of 3.30 percent.

    “In all, the private sector accounted for 47.8 per cent of total RSA registrations at the end of the quarter under review. This could be seen as the product of stricter regime of sanctions for non-compliance with the Pension Reform Act, 2004 and the efforts of Recovery Agents”.

    Mrs. Anohu-Amazu explained that the analysis of the age distribution of RSA holders showed that those in the age category of between 30 and 40 accounted for the highest proportion of contributors in the third quarteby 35.11 per cent.

    While said those in the age category of 40 years and below accounted for 68.38 per cent of RSA contributors, suggesting that pension funds are veritable sources of long term funding of various developmental projects in the country, such as infrastructure and housing development, she added.

    On RSA registration by Pension Fund Administration’s (PFA) market share, she said the ranking of PFAs by number of registered contributors has shown increases in the shares of the top three, five and 10 PFAs in the third quarter, as the shares increased from 45.44, 62.39 and 87.3 per cent in the second quarter to 46.68, 63.78 and 87.77 per cent, While the share of the bottom three and five PFAs decreased marginally by 0.01 per cent.

     

  • UK Markets Watchdog to probe competition in pension sector

    The Financial Conduct Authority said it would investigate the sales practices in the pension industry to better understand why retirees don’t seek out better deals and switch providers.

    Pensioners could boost their income by an average of seven percent, equivalent to 71 pounds ($118) a year, if they switched their provider to find a better annuity deal, the FCA said, citing a survey of 25 firms. Around 80 percent of people could get a better deal, the FCA said in an e-mailed statement. The market “is not working well for consumers” the FCA said.

    “The need to get an income in retirement unites us all,” Martin Wheatley, the FCA’s chief executive officer, said in an e-mailed statement. “But once you’ve bought an annuity you can’t change your mind.”

    The FCA, set up in April to police U.K. markets, has the power to make rules for financial markets where a lack of competition affects consumer rights. The Office of Fair Trading last year settled a probe into fees charged by firms in the 275 billion-pound market for defined contribution workplace pensions, requiring them to audit pension plans and strip out unfair charges.

    For most people getting the right annuity could mean the equivalent of an extra 1,500 pounds in savings so we need to understand why they aren’t shopping around and switching,” Wheatley said.

    An annuity is a financial product that provides a regular income in exchange for a lump sum. U.K. rules allow retirees to take a quarter of their pension in tax-free cash while the rest must be converted into an annuity.

    “The low levels of switching, despite the clear benefit in doing so, and lack of options for people with smaller pots are both key factors in the FCA commissioning a market study,” the FCA said.

    The final results of the FCA’s competition study will be published later this year, the regulator said, and may lead to recommendations on how to improve competition among market participants.