The Nation Newspaper

Tag: contributory pension

  • Contributory Pension Scheme is fraud-free, says Pencom

    The National Pension Commission (PenCOM) has assured employers and contributors of the safety of their funds under the Contributory Pension Scheme (CPS).

    Pencom’s Head of  State Operations Dan Ndackson spoke at a consultative forum for states and local governments in Port Harcourt, Rivers State capital.

    Ndackson said: “Under the contributory pension scheme,  fraud is reduced to the barest minimum,that is why we make bold to say, the new scheme is fraud-free to a large extent. If states continue with the old scheme, the issue if pension fraud will continue to arise, this is because, it has so many loose ends that people exploit and commit fraud.

    ”That cashier, that officer that used to steal under the old scheme, where will he see the money to still, the money is remitted into peoples’ accounts.

    “We normally advise employers to ensure necessary measures are put up by their organisations to discourage the drive to commit fraud.

    “The scheme is self- insured, the way the scheme is structured,  it is very difficult for a fraud to be perpetrated under the scheme.  This is because the people who manage the funds have no access to the funds, those who keep custody of the fund assets do no relate with anybody and the contributors have record of everything that is credited into their accounts.

    “By this, it is not possible for anybody to tamper with the money, as in the secular bank accounts,  if anybody notices unexplained reduction in his,  her bank account is at liberty to query the bank,  so much so it is with this account,  in the same way,  nobody has ever come up to allege that finds were withdrawn from the accounts since the commencement of this scheme,” he said.

    He confirmed that most states were yet to sign up  for the scheme.

    “Which naturally means that it goes with non- payment of gratuity,  death benefits, and we are also aware that most of this state still do not pay pension to their retirees, and even those that are managing to pay,  settlement of gratuity still remains a challenge.

    “PenCOM is helpless with states because the constitution gives them the powers to design their pension systems, we only assist states as required,  we cannot impose a particular pension scheme to states, because of this,  we can only appeal to them to do something on this area,  and the matter is worsen because of the fact that most states are yet to accept the CPS system.”

  • ‘Salary increase’ll boost contributory pension’

    ‘Salary increase’ll boost contributory pension’

    A significant way of sustaining the Contributory Pension Scheme (CPS) is to have a timely increase in the salary of workers, to avoid issues of low contribution into their Retirement Savings Account (RSA), the General Secretary, National Union of Textile and Garment Workers of Nigeria (NUTGWN), Comrade Isa Aremu, has said.

    Speaking with reporters in Abuja, he advised the National Pension Commission (PenCom) to work harder to capture the informal sector.

    According to him, of the 80 million working population in the country, only seven million people are captured in the scheme.

    He commended PenCom for its management of the scheme and leadership role in the pension industry in the past 12 years.

    Aremu said: “There is a lot of work to be done in order for PenCom to capture the rest of the working population in the country, especially the informal sector which has a larger percentage of the working population in the country.

    “Of 80 million workforce in the country, only seven million workers have been captured. So I think we have actually not started. This scheme is just a new baby that has to be nurtured to capture the army of worker, both in the formal and informal sectors.

    “The CPS introduced to the pension industry is the best way to go in achieving an organised pension administration. The workers who have retired under this scheme have received their payment as at when due compared to the previous scheme. This makes the scheme highly commendable.”

    He warned that the pension industry should not be carried away by the investment of the funds under their management, but bear in mind the security of those funds to give back the pension to workers who are eligible for it when they can work no more.

  • Contributory pension: Success story of effective regulation

    Contributory pension: Success story of effective regulation

    Although reforms vide Pension Reform Act 2004 held high promises as the panacea for the Augean stable of wanton corruption, sharp practices, and the life sentence for the aged that was the old pension system, it has taken some years of steady success for Nigerians to truly reckon with the pleasant reality. And the people cannot be blamed for their initial cautious optimism at its inception

    In a country where policy somersaults, internal sabotage, and circumvention of rules by entrenched cabals are the order; in a country where hopes are betrayed, while programmes, policies, and laws, which appear perfect on papers translate to empty promises and paper tigers, the consistent success story of the Pension Reform, especially the Contributory Pension Scheme (CPS), under the watchful eyes of the National Pension Commission, PENCOM, will rightly qualify as one of the major breakthroughs of the present democratic experience.

    The PRA 2004 created the Contributory Pension Scheme (CPS) as a replacement for the old pension scheme, Defined Benefits Scheme (DBS) and surer way of securing a meaningful life after service for the Nigerian worker. The sense in it is: Instead of working your ass up in your prime hoping for pensions and gratuities that hardly comes, why not contribute part of your monthly earning (7.5 per cent at inception, but now 8 percent), while your employer also contributes a minimum of 7.5 percent (but now 10 percent based on the Pension Reform Amendment Act 2014.

    The success of the Pension Reform, especially the CPS aspect of it, can be hinged on three main factors: policy consistency, effective regulation, and transparency, which, in itself, is an offshoot of regulation. Former President Olusegun Obasanjo underscored the consistency during the Pension Awards on the fringes of the maiden World Pension Summit ‘Africa Special’ at the Aso Rock in 2014.

    He thanked his successors for “not reversing the Pension Act because in a country like ours, (because) for us to make progress, we must build accumulatively on measures, on structures, and where necessary, like have just been done, make amendments (Pension Reform Amendment Act 2014) where necessary.”

    While also extolling the integrity and competence of those who designed the Reform, including Fola Adeola and the current Director-General of PENCOM, Mrs. Chinelo Anohu-Amazu as well as those who have managed it, Obasanjo confessed that nobody, including himself “could imagine that within a space of 10 years the fund would have built up to USD27 billion of cool money, not hot money.”

    Under the law, the subscribers have their Retirement Savings Accounts (RSAs), which are managed by professionals, the Pension Fund Administrators (PFAs), who do not have access to the fund. The Pension Fund Custodians (PFCs), different from PFAs, cannot administer the fund. It is like separating the goats from the yam or putting a piece of kolanut in a toothless mouth. This arrangement has gone a long way in streamlining and strengthening the efficacy of pension administration in the country, coupled with the fact that both the PFAs and PFCs report to PENCOM, a stickler to the rules and undeniably one of the most effective regulators in Nigeria.

    The case of the First Guarantee Pensions Limited (FGPL), also clearly shows how speedy and scrupulous PENCOM can be in safeguarding pension assets and enforcing compliance and sound corporate governance by industry players.

    Here, shareholders led by one Alhaji Kashim Imam, petitioned the Economic and Financial Crimes Commission (EFCC) and PENCOM against a former Member of the House of Representatives, one Hon. Nze Chidi Duru; Mr. Derick Roper; and Chief Olaiya Ojo, former Vice Chairman, Director and Chairman of FGPL, respectively, over alleged forgery and other financial crimes against the PFA.

    Upon establishing strong prima facie cases of breach of the Pension Reform Act, PENCOM’s Code of Ethics and Business Practices as well as Code of Corporate Governance in 2011, the regulator immediately moved in to forestall the very grave implications of such breeches on the PFA itself and pension assets managed by it. PENCOM invoked its powers under Sections 88(2), 20(i), and 21(j) of the Pension Reform Act to remove the accused persons as Directors and Board Members of FGPL. PENCOM set up an Interim Management Committee (IMC), to oversee the affairs of the PFA pending the reconstitution of the company’s Board and resolution of a plethora of litigations connected thereto.

    Interestingly, records show that the PFA in question has done far better under the PENCOM-supervised IMC because of the instillation of tight corporate governance and fiscal responsibility. Reports show that pension assets, which stood at N38 billion when PENCOM took over the management of FGPL, has moved to over N100 Billion. This means that even while the EFCC and the law enforcement agencies are after the alleged offenders, pension assets domiciled with the PFA are safe and bourgeoning.

    On the fear that those who injected ghost workers syndrome in the public service might also have set up ghost Retirement Savings Accounts (RSAs), especially at the inception when there were no biometrics in the pension and banking industry, PENCOM has insisted on biometrics for every RSA owner from day one, while owners of RSAs which were opened before the introduction of biometrics are made to compulsorily update their information. As the PENCOM DG rightly quipped during a recent interview on Bloomberg, “there can be no ghosts with biometrics”. It means anybody who thought he/she had set up ghost RSAs automatically loses such funds to the Federal Government because they cannot take the money away.

    The implications of the strict regulation in the industry is that today, Nigeria is an industry leader in Africa, even though Nigeria’s CPS started just about a decade ago. About seven million public and private sectors employees have opened RSAs with the PFAs. And with the collaboration between EFCC and the PENCOM, compliances to remittances are improving gradually. For instance, N45 billion or 70 percent of the total expected remittance was remitted to 1,607,361 RSAs in December 2015, while average monthly remittance of pension contributions has moved from N35 billion in 2011 to over N55 billion in 2015. Importantly, under the watchful eyes of PENCOM and its high regulatory drive, pension assets have grown from about N2 trillion deficit at inception to N5.4 trillion in assets today.

    Meanwhile, the regulatory agency is set to launch the Micro Pension Scheme to absorb the greater number of Nigerians in the informal sector who are self-employed and have no RSAs. This will more than double the current subscription figures and pension assets.

    It is therefore not surprising that there is no single PFA that does not have a buyer seeking take it over or buy the majority/controlling share therein. The industry is also generating a lot of interests from foreign entities in search of partnerships and investments, especially in the infrastructural development, which in itself, is a can’t-do-without if the nation must diversify its economy at this critical time.

    Only recently, the Sustainable Business Initiative (SBI) of the University of Edinburgh, United Kingdom, endorsed PENCOM as “clearly a trailblazer in Africa in terms of transforming a regulatory vision into reality.”

    The Trade Union Congress (TUC) also conferred the TUC, “Excellent, Visionary, and Emphatic Leader” Award at the TUC Triennial National Delegates Conference/Excellent Service Award Dinner. The TUC, which described the DG as part of a new generation of leaders in Nigeria and skilled technocrats determined to diversify the Nigerian economy, said the award was in recognition of her outstanding qualitative services and commitment to protecting workers welfare through a well regulated and pension industry.

    These endorsements, the bourgeoning funds, growing local and foreign interests in the industry, are clear testimonies to performance on the part of PENCOM and the industry in general.

    As the PENCOM DG recently advised, it is up to the capital market operators to device appropriate investment vehicles to utilise pension funds for national development in accordance with laid down guidelines as obtainable in the developed world.

    • Ibrahim is an economist

     

  • Contributory pension records 162,343 retirees

    Over 162, 343 had retired under the Contributory Pension Scheme (CPS) as at March 2016 and are currently receiving pensions as and when due, the Director-General, National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu, has said.

    The PenCom boss, who was represented by PenCom’s Head, Research and Strategy Management, Dr. Farouk Umar, made this known at a round table on retirement and pension to commemorate the workers day 2016, organised by Daily Trust Newspaper in Abuja.

    Reeling out the scorecard of the scheme, she stated that the total pension fund assets had grown to N5.39 trillion as at March,  with the monthly average contributions at about N25 billion.

    According to her, the number of registered contributors stood at 7.01 million as at March, representing about 7.45 per cent of total labour force in Nigeria and 3.95 per cent of total population.

    She added that about 200,000 private sector employers of labour are implementing the CPS.

    She said: “The Commission initially licensed 26 Pension Fund Administrators (PFAs), seven Closed Pension Fund Administrators (CPFAs) and five Pension Fund Custodians (PFCs) but they have presently reduced to 21 PFAs, seven CPFAs and four PFCs due to mergers and acquisitions.

    “Presently, 26 states of the Federation had adopted the scheme and are at different stages of implementation while the remaining 10 states are at bill stage.

    “The assets were equivalent to about 7.72 per cent of the Nigerian rebased gross domestic product (GDP), and about 60 per cent of the total pension fund assets belong to the private sector.”

    On micro pension, she said the plan was introduced to extend coverage to the persons working in the informal sector and the self-employed.

    “The Micro Pension Department has been established to drive implementation of the plan. multi-channel platform will be used in providing customer services to those who will be covered under the plan and discussions are ongoing with relevant service providers and regulators to provide the required technology.

    “Sensitisation is being undertaken through the print and the electronic media including the various social media platforms while we have started discussions with the Central Bank of Nigeria (CBN) and other relevant government agencies on extending coverage to the Small and Medium Scale Enterprises,’’she said.

     

     

  • Lack of awareness keeps contributory pension undersubscribed

    The Contributory Pension Scheme (CPS) is undersubscribed owing to lack of adequate public awareness, Managing Director, Premium Pension Limited, Wilson Ideva has said.

    Ideva, who made this known while speaking with journalist in Abuja, said this is why the scheme remains at less than 10 per cent penetration level more than 10 years after its commencement.

    He stated that a vast majority of Nigerians including the supposedly enlightened community lack information on the workings and belief in the workability of the scheme.

    He said: “How else can one explain the less than 10 per cent penetration of the market more than 10 years after the commencement of the scheme?

    “Less than seven million workers in Nigeria have subscribed to the new pension scheme out of the estimated more that 70 million working population while a total of 4.9 trillion Naira has been amassed as pension assets under management in the pension industry.”

    Ideva lamented the lukewarm attitude of some Nigerians to the scheme.

    “It is inexplicable considering the ugly past of the Defined Benefit Scheme which we have all been striving to break away from.

    “Workers looked up to retirement with so much fear and trepidation because of the inherent uncertainties. The old scheme was fraught with corruption and bureaucratic bottlenecks that occasioned the ugly sight of long queues of aged citizens waiting to be paid pension that oftentimes never came.”

    He, however, noted that the contributory scheme is a huge success and the most impactful government initiative in recent times, adding that there is the need to applaud the initiators of the scheme in the country.

    He pointed out that while the old scheme which operated before 2004 left a huge pension deficit two trillion naira within the economy, the new scheme has accumulated pension asset of over 4.7 trillion naira and an enrolment of over 6.5 million people.

    He noted that when these figures are put together, it would show that it has been a success story and this pool of funds is already playing a critical role in national development.

    The scheme, he said, has already begun to improve the lives of retirees in the country and also  becoming a critical contributor to national development.

    He recalled that initially, when the idea was presented, a lot of people did not believe in it.

    “This is understandable considering where we were coming from. Such skepticism has been dissipated with the successes recorded by the new scheme since inception.

    “The pathetic situation of pensioners before the scheme was introduced is different from the current situation where workers are partners in the management of their pension funds. He urged Nigerians to note the difference between the new scheme and the old defined benefit system under which some pensioners are still being managed.

    He noted that under the new scheme entitlements are being paid regularly. He also advised workers and retirees to  notify their Pension Fund Administrator (PFA) six months before retirement and submit all the necessary documents.

    Once this is done, within one or two months upon retirement you will be paid your lump sum.