Tag: Chinelo Anohu-Amazu

The pension story is sad for many retirees. While waiting to collect their pension, some have collapsed and died. Others could not get theirs because the money was stolen. All these, says the Acting Director-General of the National Pension Commission (PenCom), Mrs Chinelo Anohu-Amazu, have changed with the coming of the Pension Reform Act 2014. She tells OMOBOLA TOLU-KUSIMO, in this interview, that pension fund can no longer be looted.

How will the Pension Reform Act, 2014 impact on contributors’ lives and enhance national development?

The Pension Reform Act 2014, which repealed Pension Reform Act, 2004 will consolidate the gains of reform, address the identified implementation challenges and provide the enabling legal environment to facilitate the creation of quality instruments through which pension assets could be best invested for infrastructure and real estate development. These fresh initiatives will assist us to consolidate the remarkable achievements recorded by the Commission in the implementation of the Contributory Pension Scheme (CPS) over the last 10 years for the benefit of contributors, and the entire economy while it also lays the foundations for the next decade in our pension regulation. The new legislation will strengthen our prudential regulatory powers and will enable us to put in place the necessary regulatory and supervisory framework to facilitate and accelerate the objectives of the reform especially in ensuring the safety of pension assets and hence, workers’ security in retirement. It will bring on board the informal sector of the economy and increase the threshold of pension contributions.

How are you tackling employers who deduct pension contribution from their employees, but fail to remit to PFAs?

The Pension Reform Act (PRA 2004) is clear on contravention of Section 11(7) of the PRA, 2004, which provides that any employer who fails to remit pension contributions within seven working days of payment of salary shall, in addition to making the remittances already due, pay penalty for the benefit of the Retirement Savings Account (RSA) holder. In pursuance of this statutory responsibility of ensuring compliance with Section 11 (7), the Commission deployed an application called Risk Management Analysis system for monitoring remittance of pension contributions of employees by employers. The application enables the Commission to monitor the status of the monthly remittance of contribution by all employers that at least one of their employees has opened a RSA. Defaulting employers are subject to the recovery process. In addition, the Commission has in place a framework for recovery of outstanding pension contributions with penalty from defaulting employers. The framework amongst others provides for appointment of Recovery Agents (RAs). Consequently, the Commission has identified and assigned over 15,000 employers to RAs to review their records and recover any outstanding pension contributions plus penalty. The Commission also follows up on complaints from workers against their employers for failure to remit pension contributions as when due. In the event where the employer refuses to remit the outstanding pension contributions of its employees within the time frame stipulated by the Commission, appropriate actions, including instituting legal action are taken.

How are you monitoring Pension Fund Administrators’ (PFAs’) compliance with investment limits?

The Commission monitors returns submitted by PFAs daily, weekly and monthly. The daily review monitors the authorised and unauthorised investments, while the weekly review focuses on compliance with per issuer limits.  The monthly review is a holistic review on investment activities of the PFA for the month. In the event of a PFA exceeding the investment limits, they are given a period of 90 days to rebalance the portfolio.

What about delay in payment of retirement benefits by some retirees and unresolved customer complaints?

The Commission monitors the monthly returns rendered by Pension Fund Custodians (PFCs) on all pension payments made by them on behalf of the PFAs. These returns include information on name of retiree, personal identification number, relevant month; amount paid and date of payment. The Commission reviews these returns against the approvals it granted to PFAs for the month in order to ensure that pension payments are made as and when due. In the event where a PFA delays in paying retirees then the Commission imposes appropriate sanction on the PFA. Also, once the Commission receives a complaint from a customer on the conduct of a PFA, the Commission in turn writes to the PFA forwarding the complaint and requests that the PFA provides proof of the resolution of the complaint within a timeframe. Thereafter, the PFA’s submission is reviewed by the Commission and if not satisfied appropriate penalty is imposed on any defaulting PFA while the customer is advised accordingly on the steps taken by the Commission to resolve the complaint.

What is your take on safe investment vehicles and how are you exploring them to ensure more funds are channelled into the development of infrastructure?

The Pension Reform Act 2004 and the Regulation on Investment of Pension Fund Assets (the Regulation) issued by the Commission clearly stipulate the allowable financial instruments in which pension fund assets can be invested. The list of allowable instruments as stipulated in Section 4 of the Regulation includes Equities (ordinary shares, global depository receipts), Federal Government Securities (FGN Bonds & Treasury Bills), State/Local Government Bonds, Corporate Debt Securities (such as bonds, asset/mortgage backed securities etc), Money Market Instruments, Open/Closed-end Funds, Infrastructure Bonds and Funds, Private Equity Funds. The efforts by the Commission to encourage pension fund investments in infrastructure and the real sector of the economy resulted in the expansion of the allowable asset classes in 2010 to include infrastructure funds, infrastructure bonds and private equity funds, among others. When these instruments are properly structured and available in the capital market, then pension funds can safely invest in Infrastructure. The Commission would continue to work with other stakeholders to realise this objective. Also, in a bid to ensure that pension fund assets contribute to socio-economic development, the Commission is currently working on initiatives that would enhance pension investments in affordable housing. This initiative is already incorporated in the new law which will definitely improve the life of every worker and retirees and the country generally. With the new law, contributors can now utilise part of the balances in their RSA to finance the acquisition of their primary homes. This, to a great extent, would enhance their living standards as well as positively impact on the construction, building materials and mortgage sectors of the economy.

Give us an insight into PenCom?

The National Pension Commission (PenCom) is an agency of the Federal Government of Nigeria charged with the supervision and regulation of all pension matters in the country. It was established following the enactment of the Pension Reform Act 2004. Prior to the reform, there were many problems with pension administration in Nigeria, which necessitated the reform and one of such issues was the absence of a regulator to perform oversight functions and ensure that appropriate rules on pension delivery were made and enforced. The PRA 2004 established a mandatory Contributory Pension Scheme (CPS) for the employees of the Federal Government and the private sector organisations with five or more employees. The CPS is contributory, fully funded, managed and kept in custody by licensed private operators, the PFAs and PFCs; and is based on individual portable accounts, the Retirement Savings Accounts (RSAs).

Why is PenCom important and how safe are pensions?

Our conservative and modest philosophy may not permit me to say how important PenCom is. However, by the time we look at the numbers in terms of where we were before the reform and our position today, you should arrive at the answer. First of all, the CPS has engendered a regime of a fully funded pension scheme with assets in excess of N4 trillion today. This has been a remarkable growth when compared to estimated pension liabilities of over N2 trillion before the reform. Over 98,000 workers have retired so far and are receiving their retirement benefits as when due without any hassles. In the past, they joined long queues and some even died in the process. In terms of safety, the pension fund assets are ring fenced. That is, there is a separation between management and custody. While the PFA manages the assets, the PFC maintains actual custody of the funds and these functions and the investment of the funds are all guided by the investment regulations issued by PenCom. The pension assets are only invested in safe and secure instruments. The Commission monitors this daily by requiring PFAs to submit daily valuation reports which are reviewed to ensure compliance. These are the things that speak to the importance of PenCom.

You have been involved with PenCom from the reform stage, passing of the law, being the legal adviser, and now Acting DG, how has the journey been and what lessons have you learnt?

The journey has been very challenging but rewarding when one looks at the successes recorded. Concerned by the magnitude of issues and lack of transparency in pensions in Nigeria then, President Olusegun Obasanjo constituted a Pension Reform Committee chaired by Mr. Fola Adeola. I served on that committee. It was the committee’s work that culminated into the PRA 2004. At the time, there was a lot of apprehension on the part of stakeholders, labour for example. Their concerns were understandable considering some not so pleasant outcomes of other reforms by government in the past. Ten Years, I am glad that having seen PenCom’s steadfastness in protecting the interest of retirees, Labour is one of our greatest supporters. We have tried to continue sustaining the reform by being proactive. That is why we embarked on a major review of the Pension Reform Act 2004 (PRA 2004) to strengthen the reform by expanding its coverage and enhancing benefits to retirees. We are pleased that both chambers of the National Assembly passed the bill. We now have a new law, PRA 2014 that has repealed PRA 2004. One of our strategic focus areas is to bring on board the informal sector of the economy where most of our active employees earn their living. However, the rules would be tailor made to suit their peculiarities. We have also made considerable progress in defining and implementing reforms, and instituting governance structures based on best global practices.

What is your vision for PenCom in terms of expanding coverage, infrastructure, and enabling more sustainable and deep investments, among others?

Our vision is to sustain and improve on the reform by ensuring that retirees are more comfortable at retirement. We also seek to expand coverage by bringing the informal sector to come on board. We seek to get pension funds to play a more active role in the economic development of the nation by, for instance assisting in solving the huge infrastructure gaps in terms of roads, power supply, housing, etc. However, we must emphasise that any investments that pension funds partake in must be through safe investment vehicles.

The Commission had an inaugural World Pension Summit (WPS) Africa Special last month. What has it achieved with the programme?

The WPS is the largest annual gathering of pension professionals worldwide where issues on how to advance the provision of pensions are discussed. The WPS Organisation is based in Amsterdam, the Netherlands where its annual summits take place and they have welcomed well over 1000 senior pension professionals from three continents across the globe since their inception. The partnership between WPS and PenCom to bring that wealth of experience to Africa is perhaps an indication of the confidence being reposed in PenCom over the successes of the pension reform in Nigeria. For the Commission, the Summit has provided a platform to find solutions to some of our pressing challenges in moving our industry to the next level. Major issues include discussions around Pension funds’ investments in infrastructure and real estate, enhancing contributor satisfaction through technological innovation, risk management and social security, amongst others. We also shared these learning experiences with other African countries. That’s why invitations were extended to all African countries, with speakers attracted from global thought leaders with diverse expertise.

What does the future hold for PenCom and the pension industry and what is your message for Nigerians?

The future appears bright indeed and quiet challenging. PenCom has a social responsibility to discharge. The Nigerian worker must derive the benefits of belonging to the CPS; and the country as a whole must be significantly impacted by the effective deployment of the pension assets. This is the challenge for us at PenCom and we must focus to deliver on it.

What are your projections for the funds in the next five years?

The value of total pension fund assets, which was N4.3 trillion as at May 31, 2014, had grown at an annual average rate of 25 per cent over the past eight years. In view of continuing efforts by the Commission to ensure compliance by eligible employers, voluntary introduction of CPS by the states and strategies being developed to bring in the informal sector workers into the CPS, it is projected that the value of pension fund assets may double within the next three to five years.

What checks are in place at PenCom to ensure workers are not compromised?

The Commission ensures that it recruits the best talent and calibre of staff with the right skills both soft and hard, and competencies required for delivering its overall objectives in the short and long term through a very rigorous recruitment and selection process. This process also ensures that the staffs possess the core values of the Commission which are transparency, responsiveness, integrity, professionalism and pro-activeness in their duties. All staff of the Commission are also requested to acquaint themselves with the ethical values and code of conduct of the Commission as stipulated in the Commission’s staff condition of service. Periodically, staff are also reminded by way of circulars, drawing their attention to the need to uphold high ethical standards and to abide by the code of conduct of the Commission, which stipulates the minimum conduct expected of staff of the Commission. Furthermore, welfare schemes and conditions of service of the staff of the Commission are continuously improved upon to ensure that staff are well taken care of and are not compromised at any point in time.