The Nation Newspaper

Category: Pension

  • Pennsylvania pension-fix impasse punishes investors

    Pennsylvania, which shoulders one of the biggest pension burdens among United States, is bucking the wave of local governments trimming the benefits. Its bondholders are paying the price.

    Since 2011, seven of the 10 states with the nation’s largest retirement liabilities as measured by Moody’s Investors Service have cut the costs. Pennsylvania, ranked eighth, has made no progress in that span, after lawmakers last year failed to pass Republican Governor Tom Corbett’s proposal to curb the expense.

    In the $3.7 trillion local-debt market, the state may see its relative borrowing costs double within two years and its credit grade weaken without a fix, said Adam Mackey, head of munis at PNC Capital Advisors LLC. In 2013, Pennsylvania bonds fared worse than those of Massachusetts, which has credit grades one step higher, data compiled by Bloomberg show. Obligations of Illinois, which last month broke an impasse to bolster its pensions, outperformed both states last quarter.

    “We don’t want Band-Aids,” said Mackey, who helps oversee $6.5 billion in munis, including Pennsylvania debt, from Philadelphia. Pennsylvania “needs to legislatively get some stuff done” on pensions or it may see its AA credit grade drop three levels, he said.

    Growing hurdle

    Financing retiree benefits is a deepening challenge for localities nationwide as they recover from the 18-month recession that ended in 2009. States’ median pension-funding ratio fell to 69 per cent in 2012, from about 83 per cent five years earlier, according to data compiled by Bloomberg.

    The payments are taking money from needs such as schools, according to a January 14 report from a privately funded panel of budget analysts led by former Federal Reserve Chairman Paul Volcker and ex-New York Lieutenant Governor Richard Ravitch.

    Pennsylvania’s unfunded liability is set to grow by 38 per cent to $65 billion in 2018, according to state estimates. It has the eighth-highest pension burden as a percentage of revenue, at 105 percent, compared with the U.S. state median of 45 per cent, according to Moody’s. Massachusetts placed ninth.

    In trading last year, the extra yield that investors demand to hold Pennsylvania obligations fell by 50 percent, to about 0.14 percentage point at year-end, Bloomberg data show. That trailed the 77 percent decline for the Massachusetts spread, to 0.08 percentage point. Mackey at PNC Capital said he compares Massachusetts and Pennsylvania debt for relative value.

    2010 Changes

    Pennsylvania’s most recent pension changes, in 2010, extended the practice of paying less into the systems than actuarially required, according to Standard & Poor’s.

    Massachusetts in 2011 raised the retirement age for most workers to 60 from 55 and reduced benefits for new public-safety officers, according to data from the National Association of State Retirement Administrators.

    Corbett, 64, who is running for re-election this year, plans to discuss the need for action in his February 4 budget address, said Charles Zogby, budget secretary for the sixth-most-populous state.

    Zogby said he expects the Republican-controlled legislature will propose bills this year that shift new workers to a defined-contribution plan, similar to a 401(k), from the current plan that guarantees specific benefits.

    Ratings companies have cited pension funding as a concern, Zogby said.

  • Monetary policy boosts pension fund’s investment

    RETURNS on pension fund investment in treasury bills and deposits increased in the second quarter of last year, according to a report by the National Pension Commission (PenCom).

    Part of the report reads: “In pursuit of the restrictive monetary policy, the Cash Reserve Ratio (CRR), the Liquidity Ratio and net open position were maintained at the first quarter levels of 12 and 30 and one per cent to contain inflationary pressure on the economy.

    “The interest rate developments in the money market showed mixed results. While average savings deposit rate increased from 1.73 per cent in the first quarter to 2.04 per cent in the second quarter, all other rates on deposits of various maturities fell from a range of 5.05 – 8.39 to a range of 4.71 – 7.72 per cent.

    ‘’Following the increase in the prime and maximum lending rates in the quarter, the spread between the weighted average term deposit and maximum lending rates increased by 1.34 per cent to 17.98 per cent from 16.64 per cent.”

    The inter-bank segment of the money market witnessed some increases in the rates of some instruments. For example, the weighted average interbank call rate, which was 11.35 per cent as at the end of the first quarter increased by 0.34 per cent to close at 11.69 per cent in the second quarter. Similarly, the Nigeria Interbank Offer Rate (NIBOR) for the seven and 30-day tenors increased from 11.83 3 and 12.39 per cent in the first quarter to 12.19 and 12.46 per cent in the second quarter, it said.

    Furthermore, the primary market segment for the auctioning of government’s securities showed that Treasury Bills (NTBs) of 91,182 and 364-day tenors, amounting to N1,000.50 billion, N1,752.99 billion and N1,000.50 billion, were offered, subscribed to and allotted.

    The bid rates ranged from 8.50 to 15.02 per cent, for the 91-, 182- and 364-day tenors, while the stop rates ranged from 10.30 to 11.79 per cent. However, the total amount of NTBs offered and the level of subscription for all the tenors showed an impressive patronage of government securities at the primary market as the volume of subscription outstripped total amount offered by 75.21 per cent.

    The foregoing indicated positive real returns on pension fund investment in treasury bills and deposits of various tenors during the quarter under review given the headline inflation rate of 8.40 per cent.

    Meanwhile, the bond market witnessed some improvements in the second quarter of last year as the total amount offered, subscribed to and allotted stood at N285.00 billion, N607.05 billion, and N285.00 billion.

    Thus, the level of subscription was 113 per cent in excess of the total amount offered. The increased investment in FGN Securities could be explained by investors’ confidence in the bond market and the relatively high yield on these securities relative to money market instruments.

    Activities in the stock market however showed mixed results as reflected in some stock market performance indicators.

    The volume of traded shares decreased from 31.80 billion shares in the first quarter to 26.5 billion shares in the second quarter, representing a decrease of 16.60 per cent.

    Similarly, the number of deals decreased from 383,014 in the first quarter to 380,946 deals, representing a decrease of 0.54 per cent.

    However, the value of traded shares increased from N254.98 billion in the first quarter to close at N336.59 billion in the second quarter, representing an increase of 32.01 per cent. The banking sector stocks were the most actively traded with a volume of 12 billon shares valued at N110.50 billion in 87,743 deals.

    Other stock market performance indicators revealed mixed results as market capitalisation decreased from N15.22 trillion in the first quarter to N15.80 trillion, representing a decrease of 3.80 per cent. However, the NSE All-Share Index increased from 33,536.25 in the first quarter to 36,164.31 as at the end of the second quarter, representing an increase of 7.84 per cent, the report stated.

  • Mu’azu’s exit may slow down PenCom

    Mu’azu’s exit may slow down PenCom

    here are uncertainties over the direction of the National Pension Commission (PenCom) following the withdrawal of its newly appointed Chairman Adamu Mua’zu by President Goodluck Jonathan to head the Peoples Democratic Party (PDP).

    The Senate had in December confirmed the appointment of the former Governor of Bauchi State as chairman of the Commission and Acting Director-General (DG), PenCom, Chinelo Anohu-Amazu (Southeast).

    Other commissioners also appointed were Omotowa Gilbert (Northcentral); Mohammed Abubakar (Northwest) and Adesojo Olaoba-Efuntayo (Southwest).

    Expectations were high that events will pick up this year following the appointment of Mu’azu and the commissioners .

    The Nation investigation revealed that the newly appointed commissioners were getting set for their inauguration this week before the announcement of Mu’azu as PDP Chairman.

    The commissioners were also to unveil their work plan for the year after their inauguration.

    Another shocker in the Commission stable is the speculation that President Jonathan has okayed the appointment of Mrs. Nellie Mayshak from the Southsouth geo-political zone as the chief executive of the commission. This would bring to an end the protest that followed the appointment of Mrs Anohu-Amazu as a substantive DG of PENCOM. Mrs. Anohu-Amazu still has some years to notch-up before she could assume the headship of PenCom.

    The delay in the appoint a substantive chief executive for PenCom following the expiration of the tenure of the pioneer DG of the commission, Mr. Ahmad Muhammed in December 2012, has also stalled the implementation of many of PenCom’s programme, as there has not being a board in place.

    The young pension industry, which boosts of over N3.7 trillion pension contributions has witnessed a lull. The pending Pension Bill at the National Assembly is also making it difficult for the commission to function properly.

    Officials of the commission who spoke with The Nation on condition of anonymity, who were in high hopes that activities would fully kick off as at Monday morning were, however, jolted by the news before noon.

    One official said: “The commissioners will be inaugurated before Friday and they are ready with their work plan which they will disclose after their inauguration.

    “We are expectant that activities will pick up soon once they disclose their work plan.” This is not to be again.

  • Canada Pension hires ex-Citadel Manager for Asia Equity Push

    Canada Pension Plan Investment Board, the country’s largest retirement fund, hired a former Citadel LLC manager in a push to expand investments in publicly traded stocks in Asia.

    Agus Tandiono joined in Hong Kong on January 6 as a senior fund manager, said Mark Machin, Hong Kong-based head of international investment at the pension also known as CPPIB.

    He is one of the first two employees on the global corporate securities long-short equity team in Asia, Machin said.

    CPPIB, which has returned an annualised 6.8 percent over a decade through September 30, plans to find more active investment opportunities in the next few years, Machin said at a conference in Hong Kong in June.

    In Asia, where the pension invests C$27.2 billion ($25 billion) of its C$192.8 billion in assets, equity investments have largely been tracking indexes, he said.

    CPPIB plans to build a small team in Asia for active equity investments, Machin said. These investments refer to those that do not track benchmark indexes.

    Tandiono will focus on active equity investment in Asia outside of Japan, he said. Prem Samtani, who previously worked on different CPPIB initiatives across Asia, will lead similar investments in Japanese stocks.

    CPPIB manages retirement savings for 18 million people in every Canadian province except Quebec. Its Asia investments may reach C$80 billion by 2030, Machin said at the conference last year. Improved China market investability and other changes may further boost the amount to C$150 billion by then, he added.

    Tandiono left Citadel, where he was a Hong Kong-based fund manager, when the Chicago-based hedge-fund company founded by Kenneth Griffin cut six Asian equity jobs and moved oversight of such investments back to Europe and the U.S., Katie Spring, its spokeswoman said in July last year.

    Tandiono and Samtani report to Machin, who is also president of CPPIB’s Asia business, and David Yuen, who joined the pension fund’s Toronto office in 2012 to lead the team.

  • Bonds captivate $16tr of pensions

    Bond buyers stung by the first losses in more than a decade can look to pension funds from companies such as Ford Motor Corporation for a measure of redemption.

    Ford’s $64 billion pension is piling into bonds to reduce risk and lock in higher interest rates after a surge in yields and the biggest stock gain since 1997 sliced its funding shortfall by about half. The second-largest American automaker, which boosted debt investments to about 70 per cent of its U.S. plan assets last year from 55 per cent in 2012, is now looking to boost that allocation to 80 percent.

    “Companies are now getting on the bandwagon,” Ford Treasurer Neil Schloss said in a January 9 telephone interview from the company’s headquarters in Dearborn, Michigan.

    U.S. pensions, which control $16 trillion, shifted out of equities and into bonds in the third quarter at the fastest rate since 2008, data compiled by the Federal Reserve show. The plans were more willing to own stocks after the Fed dropped its target interest rate close to zero and pushed down yields to record lows with its bond buying to support the U.S. economy crippled by the financial crisis.

    After the 30 percent rally in the Standard & Poor’s 500 Index brought the biggest corporate pensions on the verge of closing shortfalls for the first time since before the crisis, they’re now pouring back into fixed-income assets to lower risk as the Fed’s move to taper stimulus causes yields to rise.

    Renewed pension demand may help temper further losses in bonds after debt securities from Treasuries to corporate debentures and emerging-market government notes fell an average of 0.31 per cent last year in the first decline since 1999, index data compiled by Bank of America Merrill Lynch show.

    Yields on benchmark 10-year Treasuries surged to 3.05 per cent this month, the highest since July 2011 and more than double the record low of 1.38 per cent set July 2012. The yield fell to 2.84 per cent, a three-week low on an intra-day basis, at 12:24 p.m. in New York.

    The selloff pushed up yields on the longest-maturing investment-grade company bonds, which pensions buy to fund future liabilities, by 0.82 percentage point last year to 5.33 percent. The annual increase was the first in five years and left yields at the highest level on a year-end basis since 2010.

    “It’s a very large source of demand” from the pension funds, Jeffrey Gundlach, chief executive officer of DoubleLine Capital LP, which manages $49 billion, said in a telephone interview from Los Angeles. “It puts a ceiling on interest rates, particularly corporate bond rates.”

  • 9 operators fail risk management test

    9 operators fail risk management test

    About nine Pension Fund Operators have failed the risk management test conducted by the regulator, the National Pension Commission (PenCom), as well as non-adherence to corporate governance principles, The Nation has learnt.

    The test conducted during the second quarter of last year revealed cases of non-compliance, weak risk management and violation of the Code of Corporate Governance by some of the operators.

    In a report, the Acting Director-General (DG), PenCom, Mrs. Chinelo Anohu-Amazu, said the consultative philosophy in the regulation and supervision of the industry was maintained in the quarter, adding that the risk-based examination approach was intensified in order to promote transparency, provide early warning signals as well as encourage pension operators to regularly self-evaluate their positions.

    According to her, the Commission’s examination on nine operators revealed cases of delays in the payment of retirement benefits; un-credited pension contributions due to non-submission of appropriate schedules by employers and unresolved customer complaints.

    She added that the nine pension managers also failed to fill vacant management positions and did not implement any disaster recovery plans.

    As a result, the Commission forwarded letters to the concerned operators as well as monitored their efforts at resolving them, she said.

    She also disclosed that a review of the risk management reports submitted by the operators revealed that some faced operational risks associated with receipt of contributions without appropriate schedule, litigations, and non-funding of retirement savings accounts (RSAs) by employers.

    She said: “Accordingly, the Commission advised the concerned operators to strengthen their mitigating measures to avert the identified risk.”

    On the actuarial valuation by the Commission, Mrs Anohu-Amazu said the actuarial valuation reports on the Defined Benefit Schemes for the year ended December 31, 2012 were received.

    The reports showed that some of the schemes were under-funded and the affected scheme sponsors were directed to come up with funding arrangements to bridge the funding gap.

    The DG further said: “During the quarter, the commission received and reviewed 27 governance reports from licensed pension operators. The reports indicated violations of the code of corporate governance by some of the operators. The review further showed that some operators did not evaluate the performance of their Boards, Board Committees and individual Directors.

    “Similarly, in some cases, the number of Board meetings held were inadequate as against the minimum stipulated by the Code. In addition, some board members did not attend Board and Committee meetings regularly. Subsequently, the affected operators were advised through various letters to address the issues observed on non-compliance with the Code of Corporate Governance.”she said.

  • ‘New Pension Bill ‘ll change industry’

    ‘New Pension Bill ‘ll change industry’

    One of the bills that may receive attention from members of the National Assembly as they resume from recess is the Pension Reform Bill, 2013.

    The bill, which seeks to repeal the Pension Reform Act (PRA) 2004 and enact the Pension Reform Act 2013 is undergoing legislative process at the National Assembly.

    The Chairman, Senate Committee on Establishment and Public Services, Senator Aloysius Etokin told the The Nation on telephone that the committee will renew efforts to ensure speedy passage of the bill as soon as the National Assembly members resume.

    He assured Nigerians of a more regulated and stronger pension system.

    If the Bill is passed, it will bring changes to the pension industry.

    The PRA 2004 was only applicable to employers with five or more employees. But the 2013 bill will be applicable to employers with three or more employees.

    The total rate of contribution will increase from the current 15 per cent of monthly emolument being 7.5 per cent each by the employer and the employee to 20 per cent with a minimum of 12 per cent by the employer and a minimum of eight per cent by the employee.

    This section in the 2013 bill is one of the most crucial as it seeks to change the basis upon which employee’s monthly contribution is calculated. This is known as total emoluments in the proposed law as may be defined in the employee’s contract of employment but shall not be less than a total sum of basic salary, housing allowance and transport allowance. Monthly emolument simply means a total sum of basic salary, housing allowance and transport allowance.

    The implication of the new definition is that all employers and employees will have to pay more.

    For instance, a company with a salary structure in which basic housing and transport allowances account for about 50 per cent of the total compensation, the employees may have to make additional contributions of over 100 per cent of their current contributions while for the employer it could be over 200 per cent increase notwithstanding that the headline rates have only been increased by 0.5 per cent and 4.5 per cent for the employee and the employer.

    The scheme will also enhance the powers of the National Pension Commission (PenCom) in its regulatory and enforcement activities as well as enhance the protection of pension fund assets.

    It will unlock the opportunities for the deployment of pension assets for national development, review the sanctions regime to reflect current realities; and provide for the participation of the informal sector.

    The bill also seeks to provide the framework for the adoption of the Contributory Pension Scheme by states and local governments, which will create new offences and provide stiffer penalties that will serve as a deterrent against mismanagement or diversion of pension funds’ assets under any guise, as well as other infractions of the provisions of the Act.

    The 2013 bills crutinised the provision of the 2004 Act with respect to qualifying years of experience for the director-general such that the requirement is graduated in descending order from that of the Chairman at 20 years to that of the director-general at 15 years. This particular clause in the bill has been most contentious.

     

  • NCRIB takes micro insurance campaign to market women

    THE Nigerian Council of Registered Insurance Brokers (NCRIB) has taken the campaign for micro insurance awareness to market women.

    Its President, Mr Ayodapo Shoderu, who led the crusade during a visit to the Iyaloja -General of Nigeria, Mrs Folashade Tinubu-Ojo in Lagos , said market women and traders constituted a significant segment that must be mobilised for the growth of insurance growth in Nigeria.

    Shoderu said the Market Development Restructuring Initiatives (MDRI) has brought more attention to micro insurance to further create wealth for Nigerians, especially the budding entrepreneurs and small scale business promoters at the grassroots.

    He said: “Suffice it to say that market women and men are prone to diverse risks that daily threaten their existence. The most significant of which is theft and fire outbreaks and these risks could be borne on their behalf by the insurance industry.”

    The NCRIB chief, who listed instances of devastating market fire disasters in Nigeria, noted that such perils had left tales of woes for their victims and increased poverty levels in the country.

    “Accepted that governments and concerned individuals give some forms of succour to victims after such incidents,”Shoderu said, adding that such assistance is monetary and could have been more long-lasting through insurance.

    He said brokers were in better position to assist the market women in view of their numerical spread across the nook and cranny of Nigeria and their knowledge, which they could deploy in assisting clients in profitable insurance placement and claims payment when loss occurs.

    Shoderu seized the opportunity to applaud governments who spend monumental sums of money to erect ultra-modern markets, advising that adequate building insurance covers must be put in place for such projects to safeguard against unfolding risks in line with the laws on compulsory insurances.

    The Iyaloja-General commended the initiatives of the NCRIB for the visit.

    She assured that the campaign would be taken to market women and men for their business growth.

  • UK plans reform to end pension system, lottery

    Retired workers would be allowed to switch to better paying pensions under government plans to tackle “murky” practices among insurance firms.

    Steve Webb, the pension’s minister, wants pensioners to be able to switch to better annuities regularly in the same way that home owners can change their mortgage deals every few years.

    The proposal would end the current “lottery” in which many pensioners are trapped in potentially poor-value schemes until they die.

    In an interview with The Telegraph, Webb sets out his blueprint for an overhaul of the private pension system.

    He also plans to help the long-term sick and introduce curbs on the hidden fees that can cost customers thousands of pounds.

    The intervention comes before a report from regulators that expected to accuse pension firms of making excessive profits from millions of people converting their lifetime savings into annuities.

    Currently, most people are forced to use their pension savings to buy an annuity, paying an annual income for the rest of their lives. For many people, it is the biggest financial decision they will make. However, in recent years annuity rates have plunged, trapping many people in poor-value schemes that have destroyed the value of their lifetime savings.

    The ability to switch annuities after retirement would trigger a revolution for savers and kick-start an industry catering for people who are shopping around to boost the value of their pension.

    Webb, a Liberal Democrat, said the Government must tackle “the whole issue of cost” for people buying annuities, as well as the “hidden charges” from insurers.

    “When you take out a mortgage, in a few years if rates change you can switch your mortgage. But when you take out an annuity, that is it for life. This could easily be for a quarter of a century. Why shouldn’t you be able to change your annuity provider so a few years later somebody else could offer you a bigger pension?

    “Why shouldn’t you be able to shop around?”

    The annuities market has been attacked for exploiting people’s confusion about the complicated arrangements and putting people off “shopping around” for the best deal when they retire – a decision that cannot be reversed.

    The problem has become particularly acute after the demise of final-salary pensions in the private sector, which do not require people to buy annuities.

    Webb accused insurance firms of engaging in “murky” practices when selling annuities to retiring workers, with extra charges that can add up to thousands of pounds.

    “There are almost murky things at the point where you buy an annuity,” he said. “There are odd percentages going in funny places for no good reason.”

    He called for greater clarity in the charges insurers make when selling annuities.

    “We need to ensure it’s transparent,” he said. “This is a complicated transaction for many people. The industry understands this stuff, the public don’t.

    “I think lottery is a fair word. We are worrying about charges, but if the outcome at retirement can differ by 15 to 20 per cent or more just because of whom you go to, that’s a huge difference and so there can be an element of a lottery in that.”

    Last month, a consumer watchdog warned that regulators were failing to stop insurers and pension brokers from ripping off elderly people when they buy annuities. Mr Webb said the 400,000 people who buy annuities every year “need value for money”.

  • 2014: New Bill, improved regulation, others raise hopes for industry

    2014: New Bill, improved regulation, others raise hopes for industry

    Following the enactment of the Pension Reform Act (PRA) 2004 and its subsequent implementation, the problems that confront workers after their retirement have largely disappeared. The appointment of a substantive head for the National Pension Commission (PenCom) and speedy passage into law of  the 2013 Pension Reform Bill are some of the factors that will define the pension landscape this year, writes OmobolaTolu-Kusimo.

    Prior to the establishment of the National Pension Commission (PenCom) and enactment of the Pension Reform Act 2004, pension schemes in Nigeria were bedeviled by many problems.

    The public service operated an unfunded Pay As You Go Defined Benefit Scheme under which the payment of retirement benefits were budgeted yearly. The allocation for pensions was often one of the most vulnerable items in budget implementation.

    In many cases, even where budgetary provisions were made, inadequate and untimely release of funds resulted in delays and accumulation of arrears of payment of pensions. There were outstanding pension liabilities, weak and inefficient administration of pension schemes and pension scam.

    Also, most private sector employees were not covered by any form of retirement benefits. Private sector schemes were mostly “resignation schemes” as opposed to “retirement schemes.”

    It was obvious, therefore, that the Defined Benefits Scheme could not be sustained. Against the backdrop of a huge deficit, arbitrary increases in salaries and pensions as well as poor administrative structures, the need for pension reform became glaring.

    It necessitated a re-think of pension administration in the country by the administration of President Olusegun Obasanjo. Accordingly, the administration initiated a pension reform to address and eliminate the problems associated with pension schemes in the country. The outcome of the reform was the enactment into law of the Pension Reform Act (PRA) 2004.

    One of the benefits of the new scheme is that retirement benefits are safe and available to pensioners promptly. It has the potential to stem the trend of thieving, and has the ability to end the menace of ghost workers in the civil service.

    According to PenCom, there is also a principle of separation of custody of funds from management and supervision.

    The PRA establishes a Contributory Pension Scheme (CPS) for payment of retirement benefits of employees of the public service of the Federation, the and the private sector. Under the CPS, the employees contribute a minimum of 7.5 per cent of their basic salary, housing and transport allowances and 2.5 per cent for the military. Employers in the public sector contribute 7.5 per cent while the military 12.5 per cent.

    Employers and employees in the private sector contribute a minimum of 7.5 per cent each. An employer may elect to contribute for the employees such that the total contribution shall not be less than 15 per cent of the basic salary, housing and transport allowances of the employees.

    The Act also established PenCom as the single body responsible for the regulation of the pension industry in Nigeria with a cardinal objective to regulate, supervise and ensure the effective administration of pension matters.

    The Pension Fund Administrator (PFAs) and CPFAs are the key operators under the scheme and as such are responsible for the administration and management of pension funds under the Act. They deal directly with the contributors or Retirement Savings Account (RSA) holders and their beneficiaries on continuous basis. The PFCs on their part are subsidiaries of licensed financial institutions responsible for the custody and safe keeping of pension assets.

    At present, the pension industry boasts of N3.8 trillion pension fund.

    Meanwhile, events that will shape the industry in the year include the Pension Reform Bill, adoption of risk-based supervison, investment opportunities, issues of non-remmittance, transfer window, decentralisation among others.

     

    Adoption of risk-based supervision

    The commission would continue to fine-tune its risk-based supervisory approach in the discharge of its supervisory and regulatory function. In this regard, PenCom has deployed and implemented a risk management and analysis sytem (RMAS), which follows off site examinat

     

    ion of pension operators as well as generate timely industry report.

     

    Appointment of substantive DG

    Since the exit of the pioneer PenCom Director-General (DG), Ahmad Mohammed and the directors a year ago, the Presidency has not replaced them. Instead, it appointed Mrs Chinelo Anohu-Amazu as acting DG.

    This led to a lull in activities at the commission. But with the appointment of a substantive head, there is bound to be an improvement in the supervisory and oversight functions of the agency. The commission is waiting for a substantive head as the Senate Committee on Establishment and Public Service Matters headed by Dr. Alloysius Etok winds up the screening of the nominated chairman and commissioners.

    President Goodluck Jonathan had sought the Senate confirmation of former Governor Adamu Mu’azu of Bauchi State as chairman of the Commission; Anohu-Amazu (Southeast), Director-General; Omotowa Gilbert (Northcentral); Mohammed Abubakar (Northwest) and Adesojo Olaoba-Efuntayo (Southwest) as commissioners. A source hinted that the president may inaugurate the appointees this month.

     

    Supervision of old pension scheme

    Mrs. Anohu-Amazu said the Commission is refocusing attention on the supervision of the old scheme to eliminate its inefficiencies.

    This, she said, would be carried out through the Pension Transitional Arrangement Department (PTAD) established by the Federal Government.

     

    Dynamic investment regulation

    The commission employed dynamic investment monetary procedures that focused on risk issues as they affect the investment portfolio of pension fund. This was backed by support activities towards the development of new financial instruments and deepening the financial market. Plans are in the pipeline to introduce multi funds and allow foreign investments by pension funds. In order to ensure successful implementation of this programme, research capabilities are also being enhanced in investment and risk manage

     

    ment.

    Investment opportunities

    It is expected that the new pension bill, if passed into law, will boost investment opportunities for PFAs in the country. Mrs Anohu-Amazu said the need to broaden the universe of instrument for pension fund investment is of equal importance as the need to support the drive for tax-efficient laws that would promote the introduction of alternative assets and significantly impact on contributors and the economy.

    She cited the Real Investment Trust (REITs), Asset and Mortgage backed securities, adding that the commission has identified dearth of investible financial instruments.

     

    Amendment of the PRA 2004

    Amendment of the Pension Reform Act 2004 is ongoing in the National Assembly and has passed through the second reading in the Senate. The amended Act would address various stakeholders’ concerns and other problems the commission identified during the implementation of the reform since 2004.

     

    Compliance by small employers on CPS

    Compliance among the small sized private sector employers remains a critical challenge in the implementation of the CPS.

    Mrs Anohu-Amazu said these organisations see the CPS as additional costs to their operations and are not willing to implement the scheme.

    She added that the informal sector and self-employed persons lack a coherent structure and have an unwieldy composition, which renders their integration into the new scheme difficult.

    Policy issues, such as contribution rate, mode of collection and enforcement have been addressed by the framework put in place by the commission, she added.

     

    Transfer window

    Transfer window will avail contributors under the CPS opportunities to move their RSA account from one PFA to another. This is expected to increase customer service and market efficiency. At present, this remains a challenge for PenCom to achieve because of lack of proper identity management structuire in the country. But the commission has promised a biometric system in place. The commission is optimistic that the transfer window will be opened soon.

    Non-remittance

    In January, last year, PenCom asked the Attorney-General of the Federation for a fiat to institute criminal proceedings against employers who default in remitting pension contributions of their employees to their RSA.

    In a circular, the commission said the move will enable it institute criminal proceedings against employers for persistent refusal to remit pension contributions as at when due. The Commission called for the amendment of Section 11(7) of the Pension Reform Act, PRA 2004, stressing that the provision has alot of limitations.

     

    States’ participation

    Southwest Zone which comprises Ekiti, Lagos, Ogun, Oyo, Ondo and Osun states led other zones as far as CPS implementation is concerned.

    According to reports from PenCom, all states in this geo-political zone have enacted the Act to establish the CPS for civil servants while almost all have started its implementation.

    Going by this, workers in the Southwest zone are guaranteed pleasant retirement.

    With many of the state government promising that they would comply fully this year, PenCom believes that they woukld do the needful for their workers.

    Mrs Anohu-Amazu has, however, assured pensioners under the new scheme of prompt payment of pension and security of pension assets this year. He also assured them of compliance by employers and effective service delivery by operators.

    Generally, it assured of a safe and sound industry, positive contribution to economic development and contribution to social safety net.

    Vice President, Nigeria Labour Congress (NLC) Issa Aremu while speaking at the opening of PenCom zonal office in Kano, commended the agency for changing the story of pensioners from that of agony to joy in retirement.

    He said PenCom’s remarkable growth and development in less than 10 years of its establishment, showed that the nation is capable of institution building.

    With 20 PFAs, seven closed PFAs, four Pension Fund Custodians with impressive turnover, about N3.8 trillion worth of pension fund assets and 5.83 million registered workers, PenCom deserves commendation, he added.

    “The old defined benefit scheme as good as it could be is not sustainable. With the new pension scheme, there is good corporate governance, strengthened PFAs, with guaranteed transparency and accountability.

    “All the revelations about the public sector pension scam show that we must urgently think outside the box of unfunded, crime-prone defined benefit (DB). The future lies in the mandatory individual defined contributions which the Pension Reform Act represents. The bane of public sector pension lies in its non-contributory character as well as sheer corruption and diversion of funds even allegedly for partisan political purposes. NLC protest in the past over pension is legitimately directed against this much abused non-contributory public pension scheme,” he said.

    Managing Director, AIICO Pensions, Mr. Lounge Eguarekhide, said the regulatory environment and processes in the pension industry are stable.

    He said: “I think that investment return was a lot better last year than it has been over the last two years. Compliance has improved because PenCom has appointed recovery agent that have done some work in improving compliance to the CPS. For this year, I think we are going to see some of consolidations of work done by the regulator but the distraction of elections would probably slow things down on the government side.

    “So we are not likely to see a lot of recruitment of workers on the government side. We are rather hopeful that with recoveryin some of the sectors particularly the new electricity management that is place among other positive developments in the industry, there will be huge growth in pension account in 2014.”