Category: Pension

For pension defaulters, it’s no longer business as usual as the National Pension Commission (PenCom) remains resolute in its quest to bring them under the wider pension net, reports Ibrahim Apekhade Yusuf

Unlike the proverbial attack dog that only barks, the National Pension Commission (PenCom) not only barks but bites as well because its canine teeth are just as ferocious and vicious.

This short anecdote becomes apposite in describing the recovery of over N24.53 billion from defaulting employers, by PenCom in the last few months.

PenCom recovered the total amount of money, owed by defaulting employers for their workers.

From available information, key highlights of the amounts recovered dates back from June 2012 to March 31, 2023.

Specifically, the recovered sum of N12.44 billion was the actual pension contribution and N12.09 billion is penalty applicable.

Making this revelation last Thursday was the Director-General of PenCom, Mrs Aisha Dahir-Umar. She spoke at the 2023 Labour Writers Association of Nigeria (LAWAN) Workshop in Lagos.

The PenCom boss who was represented by Head of Corporate Communications of PenCom, Mr Abdulqadir Dahiru, disclosed that the Commission had recorded some milestone thus far in its quest to shore the pension assets, including recoveries and ensuring compliance with the Pension Act.

“During the first quarter of 2023, N384.28 million (comprising N193.06 million contributions and N191.22 million penalties) was recovered from 34 defaulting employers.

“PenCom is committed to protecting workers’ interests and ensuring that employers pay pension contributions as and when due” according to its DG

Dahiru-Umar noted that PenCom is committed to ensuring that Nigerian workers would receive their retirement benefits in time, and its meticulous regulation and supervision of the pension industry had ensured that pension assets and the Contributory Pension Scheme (CPS) membership continued to grow, she added.

“The value of pension assets stood at N15.58 trillion as at March 31, while CPS membership was 9.95 million.

“In 2022, PenCom launched a policy allowing Retirement Savings Account (RSA) holders to utilise a portion of their retirement savings as equity for mortgages.

“The policy marked a significant milestone in the commission’s ongoing efforts to provide greater flexibility and access to pension funds for the benefit of RSA holders.

“We recognise that many individuals face challenges in securing adequate housing upon retirement, and we aim to address this issue by unlocking the value of their pension savings to facilitate homeownership.

“Under this new policy, RSA holders who have contributed to their accounts for at least five years and met specific eligibility criteria can utilise up to 25 per cent of their pension savings as equity contribution towards acquiring residential properties,” she added.

She added that the new PenCom policy aligns with its commitment to ensuring that pension funds catalyse economic development and social well-being.

In the first quarter of 2023, 34 defaulting employers were fined N191.22 million by the National Pension Commission (PenCom) for not remitting N193.06 million in pension contributions.

According to PenCom data, the amount totalled N384.28 million in pension contributions owed to workers in the 34 defaulting companies.

By the end of the quarter in review, which falls between January to March, PenCom disclosed that the value of pension assets stood at N15.58 trillion, with Contributory Pension Scheme (CPS) membership at 9.95 million.

Read Also: Court lifts suspension order on Abure, other LP officers

The data further showed that the commission recovered N12.44 billion in pension contributions and with defaulting companies fined N12.09 billion between January 2012 to March 31, 2023 – making the total recovery N24.53 billion.

“PenCom is determined to ensure that Nigerian workers receive their retirement benefits in time,” she said, adding “The commission’s meticulous regulation and supervision of the pension industry had ensured that pension assets and the contributory pension scheme (CPS) membership continued to grow.”

Dahir-Umar also stated that the commission has created value for the pension contributors by enabling them to use part of their pension to pay for mortgages in Nigeria.

Under the new policy, RSA holders could access 25 per cent of their RSA balance to cushion the effect of job loss if they could not secure another employment after four months of job loss, as partial withdrawal from RSA was to offer immediate support during a difficult period.

“We recognise that many individuals face challenges in securing adequate housing upon retirement, and we aim to address this issue by unlocking the value of their pension savings to facilitate homeownership.

“Under this new policy, RSA holders who have contributed to their accounts for at least five years and met specific eligibility criteria can utilise up to 25 percent of their pension savings as equity contribution towards acquiring residential properties.

“This policy aligns with our commitment to ensuring that pension funds catalyse economic development and social wellbeing,” Dahir-Umar stated.

The remaining balance in the RSA will continue to grow and accumulate until the RSA holder attains retirement age.

In the previous year, PenCom also recovered N721.12 million from employers who failed to remit pension contributions for their employees to respective pension fund administrators (PFAs).

According to the Commission, the amount comprises N721.12 million principal contribution and N211,46 million penalty.

PenCom added that the sum was recovered from 20 defaulting employers during the second quarter of 2022.

PenCom further stated in its 2022 second Quarter report that seven defaulting employers have been recommended for appropriate legal action after all administrative steps taken to make them comply failed.

“From the commencement of the recovery exercise in June 2012 to 30 June 2022, a total of N22,130,695,913.23 comprising of principal contributions.”

Relief for pension contributors

PenCom had last year announced the final approval for pension contributors in active employment, to use 25% of the balance of their Retirement Savings Account (RSA) in paying equity contribution for mortgage.

This news came as a huge relief for Nigerians who have been advocating for the use of such fund for payment of residential mortgages.

The commission says that the approval is in line with Section 89 (2) of the Pension Reform Act 2014 (PRA 2014), which allowed RSA holders to use a portion of their RSA balance towards the payment of equity for residential mortgage.

Rising in pension assets

Also, the breakdown of the pension funds show 63.22 percent of the fund had been borrowed by the Federal Government and invested in the FGN securities totaling N9.2 trillion during the period under review.

The Pension Fund Administrators also invested 10.46 percent or N828.16 billion of the fund in domestic ordinary shares, while 0.71 or N100.29 billion of the fund was invested in foreign ordinary shares.

Other places Nigerian workers’ pension funds were invested in by pension fund administration include corporate debt securities of N1.52 trillion.

Investment in the Money market instrument stands at N2.17 trillion while N65.6 billion were invested in mutual funds.

According to the Pension Reform Act, the PFAs manage the funds which are in the custody of the Pension Fund Custodians.

The commission stated that it continued its consultative philosophy in the regulation and supervision of the industry.

According to PenCom, the risk-based examination approach was implemented as a way of promoting transparency and providing early warning signals as well as encouraging pension operators to regularly self-evaluate their positions.

As at last December, PenCom had paid N328 billion as death benefits to families of 86,610 deceased public and private workers in Nigeria under the Contributory Pension Scheme (CPS).

The figure is derived from an additional N17.6 billion paid as death benefits to the families of 3,077 deceased employees of the government and private companies between July and September 2022.

The funds were distributed among 1,781 families of federal government employees who received their salaries late, 451 families of state government employees in the same situation, and 845 families of workers from private companies.

Part of the report reads: “During the quarter under review, approvals were granted for payment of death benefit amounting to N17.62 billion to the legal beneficiaries/administrator of 3,077 deceased employees and retirees. This comprised of 2,232 public (FGN & State) and 845 private sector employees/retirees”

Meanwhile according to data from PenCom, since the inception of the Contributory Pension Scheme (CPS) in 2004 up to the end of September 2023, a total of 56,806 families of deceased employees in the federal government, 8,357 in the state government, and 21,447 in the private sector have received their death benefits.

The benefiting families were able to access this fund because their deceased family members subscribed to the Contributory Pension Scheme (CPS) and had been contributing to their respective Retirement Savings Accounts (RSA), while alive.

The CPS seeks to, among other reasons, ensure that every worker receives their retirement benefits as and when due.

In a related development, PenCom disclosed that pension fund assets in Nigeria increased from N13.76 trillion to N15.45 trillion within a year.

This represents a growth of N1.68 trillion from February 2022 to February 2023.

A PenCom report included details on approved existing schemes, closed pension fund administrators, and retirement savings account (RSA) funds, including unremitted contributions at the Central Bank of Nigeria and legacy funds.

The report also revealed that 64.4 percent of the total funds, amounting to N9.98 trillion, were invested in federal government securities such as bonds and treasury bills, while the rest was invested in domestic and foreign ordinary shares, real estate, corporate debt securities, and supranational bonds.

The report also revealed that the number of retirement savings accounts as at February 28, 2023, was 9,919,281.

Few states remitting pension contributions to workers under CPS

One of the challenges besetting the pension scheme according to PenCom is that not many states have commenced the payment of pensions to employees under the contributory pension scheme (CPS).

Besides, Lagos, Osun, Kaduna, Delta, and the federal capital territory (FCT), many are in acting in breach of the Pension Act.

The agency disclosed in its latest report titled “Status of implementation of the CPS by states and the FCT for the first quarter of 2022.”

The CPS is an arrangement where both the employer and the employee make contributions towards the payment of the employee’s pension at retirement.

It is fully funded through the monthly pension contributions that are remitted into an employee’s retirement savings account (RSA) managed by the pension fund administrator (PFA).

According to PenCom’s report, 25 states have enacted laws to join the CPS.

Of these states, only 15 (Lagos, FCT, Osun, Kaduna, Delta, Ekiti, Ondo, Edo, Benue, Kebbi, Niger, Rivers, Ogun, Bayelsa, Kogi) have established pension bureaux/boards in line with the CPS.

Despite enacting the CPS laws, Anambra, Abia, Taraba, Imo, Sokoto, Adamawa, Ebonyi, Nasarawa, Enugu, and Oyo states are yet to establish a pension bureau to drive the implementation of the scheme.

The report added that eight states, namely Kwara, Plateau, Cross Rivers, Borno, Akwa Ibom, Bauchi, Katsina and Yobe, were still at the bill formation stage. It means that they are yet to enact a law on the CPS to guide the implementation of the scheme.

However, Jigawa, Kano, Gombe, and Zamfara states have opted to operate other pension schemes.

PenCom said it carried out sensitisation workshops, capacity-building programmes, and stakeholder engagement meetings during the quarter under review.

It said it met with representatives of the Ekiti State Pension Commission (ESPC) to discuss the challenges faced in the implementation of the CPS in the state.

The commission also said it made presentations at the pension management retreat organised by the FCT Area Councils Staff Pension Board (ACSPB) in Akwanga, Nasarawa state, adding that the presentations were on the CPS implementation challenges with emphasis on uncredited contributions.

“The commission engaged the government of Rivers state, expressing concern over the state’s inability to take steps to fully implement the CPS in the State, in view of the impending commencement of retirement of employees of the state under the CPS as from 1 June 2022,” it added.

“The commission also engaged the government of Ogun state on the persistent non-remittance of pension contributions into the State employees’ RSAs by the State, in view of the fact that employees of the State would start retiring under the CPS as from 1 July 2025.”

Stanbic IBTC Pension Managers Limited, a subsidiary of Stanbic IBTC Holdings PLC, has received an Initial Management Quality Rating of MQ2(NG)(mq) with a Stable Outlook from Global Credit Ratings (GCR).

The rating demonstrated the company’s commitment to excellence in its operations.

GCR, the rating agency, gained expertise in assessing the creditworthiness of financial institutions, corporate and government entities, and had established itself as a leading rating agency in Africa.

GCR adopted a MQ rating system that ranked from the highest – ‘MQ1’ to the lowest – ‘MQ5’. These serve as indicators of an entity’s organisational structure, risk management capabilities, and operational controls. They also hint markets of the quality, management characteristics and operating practices of organisations.

In a statement, Chairman, Stanbic IBTC Pension Managers, Dr Demola Sogunle, said the MQ2 rating assigned to Stanbic IBTC Pension Managers is an indicator of the institution’s strong management team with robust organisational structures, adequate controls, and sound risk management practices.

He expressed delight in the rating, noting it is an evidence of the company’s dedication to achieving excellence.

He said: “We are very delighted to have received this rating from GCR, which recognises our efforts to maintain the highest standards of corporate governance, risk management, and financial performance. It also accentuated the company’s clear strategy and solid financial position.

“The rating would boost confidence among Stanbic IBTC Pension Managers’ clients and stakeholders and would affirm the company’s dynamic capability to manage risks and deliver on its commitments.

 Chief Executive, Stanbic IBTC Pension Managers, Olumide Oyetan, attributed the rating to its commitment to better serve customers without compromising operational excellence.

He said: “We are a member of the Standard Bank Group, Africa’s largest banking groups by assets, totalling US$170 billion, as of December 31, 2022.

“This feat has enabled us to leverage the Group’s resources for our portfolio management functions. Our sister company, Stanbic IBTC Bank, is also the only AAA-rated bank in Nigeria today, lending further credence to the Group’s strength and stamina, especially in its leadership and governance structures.

“We deliver pension fund administration and management services to over 1.9 million private and public sector Retirement Savings Accounts (RSA) holders under the Contributory Pension Scheme (CPS) through our extensive network of 29 branches and ten service centres nationwide.”

Olumide said the organisation also managed defined benefit plans for large corporates and provided value-added services, including retirement planning advice and personal financial planning.

He described Stanbic IBTC Pension Managers as an organisation equipped with a stable, sound experienced management team to keep the organisation ahead of the pack.

“Our portfolio management is sound, and our investment style is value-based with a long-term bias. We implement a top-down approach in securities selection, which is monitored monthly by the executive committee.

 We also offer our clients transparency and ease of account access through channels such as our secure web portal, 24/7 multilingual contact centre, telephone, email, SMS and our growing loop of client experience centres,” Olumide said.

Leadway Pensure PFA Limited, one of Nigeria’s Pension Fund Administrators (PFAs), has completed a mortgage transfer to its enrolee in tandem with the National Pension Commission (PenCom) guidelines.

Last September , PenCom approved the guidelines for enrolees to access a residential mortgage employing their Retirement Savings Account (RSA) in line with Section 89 (2) of the Pension Reform Act 2014 (PRA 2014), adding: “RSA holders can use a portion (25 per cent) of their RSA balance towards the payment of equity for a residential mortgage.

The Managing Director/Chief Executive Officer of Leadway Pensure PFA Limited, Lanre Idris, in a statement on the approved guidelines and prompt response by Leadway Pensure, stated that the regulator and his organisation had demonstrated the belief that Nigerians could use their retirement savings account to pay for mortgage.

He said as an organisation committed to providing financial support for its RSA holders to live  after their productive years, aligning with PenCom’s guidelines for RSA holders to access part of their accounts to fulfil their dream of owning a house, is indeed a satisfying experience to actualise the possibilities of ultimate customer satisfaction further.

He said: “Following the approved guidelines, our team was set and eager to complete transfer processes for eligible RSA holders who meet the needed requirements and be part of the landmark achievement of owning a house by taking advantage of their RSA.

“Today, we are elated to announce that we have completed the 25 per cent transfer process to a contributor for a residential mortgage; and we are ready to complete more transfer processes to as many policyholders who meet the approved guidelines.

“Furthermore, we would like to call on our customers who desire to own a house to apply for the transfer process as we assure them of a seamless process in the actualisation of our commitment to fostering a rewarding life following productive years”, he added.

Idris noted that interested RSA holders must meet the conditions such as; have an offer letter for the property duly signed by the property owner and verified by the Mortgage Lender.

“The RSA of the applicant shall have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months (five years). The application for equity contribution for residential mortgage shall be in person and not by proxy.

“Other conditions include the maximum amount to be withdrawn shall not exceed 25 per cent of the total mandatory RSA balance as of the date of application, irrespective of the value of equity contribution required by the mortgage lender; where 25 per cent of a contributor’s RSA balance is not sufficient for payment as equity contribution, RSA holders may utilise the contingency portion of their voluntary contributions, if any,” he stressed.

The significance of data analytics in driving business growth and improving industry efficiency cannot be underestimated.

In this digital era, effective data management has played a crucial role in achieving valuable outcomes.

Against this background, the Pension Fund Operators Association of Nigeria (PenOp) organised a seminar for pension experts to educate them on the importance of utilising data analytics to bring about lasting changes in the industry.

Entitled: ‘Enhancing Operational Efficiency in the Pension Industry through Data Analytics”, the experts highlighted the value of data. It emphasised the need to manage unstructured data for business and gain insights into trends.

Chief Executive Officer, PenOp, Oguche Agudah, who  discussed the evolution of data and its practices, emphasised its ability to optimise workplace efficiency.

Facilitators of the session, Adeiza Suleman and Efemena Ikpro, who are co-founders of 10Alytics, said the main take-away from the event was the recognition that Data Analytics and Science adhere to the CRISP DM – Cross Industry Standard Process for Data Mining.

Suleman stated that this process is focused on generating insights, automating business, creating data products, providing product recommendations, and enhancing existing products.

Ikpro added that without adequate analytics, customer data, investment data, marketing data, customer service data, compliance data, and actuarial data, there could be knowledge deficit and liability.

He noted that data analytics could be employed in various areas, including risk management, customer feedback analytics, recommendation systems, portfolio optimation, customer lifetime value analytics, and investment portfolio optimisation.

 Participants  emphasised the importance of establishing a robust data governance structure in the  industry. They agreed that such a structure would enable long-term customise interactions between customers and organisations, facilitated by machine learning algorithms.

The Pension Reform Act (PRA), 2004, which introduced the Contributory Pension Scheme (CPS) for public and private sector employees is the outcome of the efforts to address the challenges that bedevilled the various pension schemes in Nigeria before 2004.

The challenges included unsustainable outstanding pension liabilities, weak and inefficient pension administration, and low coverage of workers in the private sector.

The Director-General, National Pension Commission (PenCom), Mrs. Aisha Dahir-Umar, said the structures put in place to ensure the safety of pension assets through under the CPS and the PFCs have re-defined the country’s pension industry.

She emphasised that as of February, this year, registered contributors have grown to 9.91 million, while the total pension fund assets has grown to N15.44trillion.

According to her, these feats were achieved going by the establishment of a regulatory framework by PenCom, licensing Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs).

They were essential steps in implementing the CPS, adding that PFCs are mainly responsible for keeping safe custody of pension assets on trust for contributors. Therefore, PFCs are vital to the safety of pension funds’ assets.

Custodian of Pension Funds and Assets

Mrs. Dahir-Umar explained that PFCS are responsible for keeping the pension funds and assets in  custody for the PFAs and the trust of Retirement Account Savings (RSA) holders.

She said it is essential to state that PFCs undergo rigorous licencing requirements issued by PenCom before being licensed as pension custodians.

Receiving Pension Contributions on behalf of PFAs

The PenCom boss further said: “PFCs receive the total monthly contributions that are deducted and remitted by employers for the credit of the RSA of the employee. PFCs are mandated to inform the PFAs of the receipt of such contributions within 24 hours.”

Settlement and clearing for PFAs

“PFCs are responsible for executing investment decisions for the PFAs. When a PFA decides to invest in a particular asset. It advises the PFC to pay the counterparty. In addition, where a PFA chooses to sell investments to realise a profit, the PFC will receive the consideration for the PFA. Furthermore, the PFC is also responsible for benefit payments to beneficiaries as advised by the PFA, accompanied by the requisite approval of PenCom.”

Corporate Action Administration and Proxy Voting

“The PFC is responsible for protecting the interests of the PFA in corporate actions declared by companies in which pension funds are invested. PFCs advise PFAs on Annual General meetings of such companies, represent the PFA at such AGMs, and ensure that PFAs’ voting instructions are carried out.”

Income Collection

“The PFC is responsible for collecting income from pension fund investments made by the PFA. The PFCs calculate, collect and track  the outstanding income for the PFA. On fixed-income investments such as time deposits with banks, Federal Government of Nigeria (FGN) and corporate bonds, the PFC ensures that interest and coupon income are accrued daily and redeemed as and when due. It also collects dividends when declared.”

Reporting to PenCom and PFAs

She continued: “The PFCs maintain proper books of account and render periodic returns to PenCom, which ensures adequate supervision. In addition, the PFC also renders reports to the PFA on the custodial services it provides. These reports enable a reconciliation to be carried out between the records of operators.

“It is important to note that the PFCs are the only licensed bodies that can perform the functions stated above under the strict supervision and monitoring of PenCom. The three  approved Pension Fund Custodians in the pension industry are First Pension Custodian, United Bank for Africa Pension Custodian and Zenith Pension Custodian.

“PFCs are licensed by PenCom after satisfying rigorous licensing criteria. It is pertinent to note that Commission considers applications for a licence to operate as a PFC from entities that fulfil the requirements enshrined in Section 62 of the PRA 2014. The applicant company must be owned by a licensed financial institution with a networth as may be determined by the Commission from time to time. In addition, the parent company must guarantee the total value of pension assets held by the PFC.

“In conclusion, the structures put in place to ensure the safety of pension assets through the PFCs have re-defined Nigeria’s pension landscape. As of February 2023, registered contributors have grown to 9.91 million. Furthermore, the total pension fund assets under the CPS have grown to N15.44 Trillion as of February 2023. PenCom remains committed to regulating and supervising PFCs in Nigeria effectively,” she added.