‘Pension fund jointly owned by govt, employees’

The pension accumulated under the Contributory pension Scheme (CPS)  is a mutual fund contributed and owned by the government and  employees.

This is why the government is  interested in how an employee spends the money during his retirement.

The Pension Reform Act (PRA) 2004, repealed by PRA 2014, pegs the minimum rate of pension contributions at 18 per cent of the employee’s monthly emoluments, where 10 per cent is contributed by the employer and eight per cent is contributed by the employee.

The Managing Director, IEI Anchor Pensions Managers, Mr. Glory Etaduovie said the government is also interested in how the money is spent to avoid the beneficiary becoming a social burden, adding that it is not a personal savings scheme.

He stressed that this is why it is regulated to avoid abuse and ensure that the government’s social responsibility programme is not jeopardised.

He said: “The government is like a father who trains a child to be independent to have a steady life. No parent wants a situation when a child has to fall back to the parents for support financially if and when they have mismanaged their lives. Consequently, any mismanaged pension benefit is a potential liability on the government and the system.

“So, it is beyond the notion or mentality of ‘it is my money’. There are other collective interests on how the money is used securely for the period a pensioner lives. While pension looks like wholly owned by the retiree, what the retiree does with the money, to the extent that the retiree does not become a burden, is important to the government.

“Also, a critical aspect of the desire of Nigerian retirees to withdraw huge part of the individual pension money upfront is based on ignorance of assumed enough financial literacy to better self-manage the funds.There are permutations and agitations being circulated on how people would have done better managing their  funds. This is misleading and a great disservice to the retirees.”

He stated that the investment environment is dynamic,  unpredictable, except the skills acquired overtime in funds management.

Besides, benefits of group and institutional investments are inestimable. Recently, money market, T-bills, indeed, equities surprised a lot of people on how low rates and pricing could be, like one per cent, he said.

Yet, he said pension operators  under the National Pension Commission (PenCom) stabilised their funds, hedging with more stable class of investment for higher averages.

“Again, how easy would it be to be a businessman that one has not been up till retirement? The business environment is very dynamic and highly knowledge and experience driven. Many have dreamt of starting a business at retirement that they knew little about. What is the failure ratio of many start-ups? Research shows that 90 per cent fail over stretched study. Based on the research, 21.5 per cent failure in the first year, 30 per cent in the second year and 50 per cent in the fifth year. The business idea might even be of a crazy one from a relation who knows of your retirement money coming and has planned with it in mind. Then the money evaporates, as well as the ‘crazy’ relation.

“The truth is that pension is not adventure money. People should be winding down then. Largely, what is not done or achieved by then, when one was healthy and more agile should be considered more carefully before being attempted,” he added.