The Nation Newspaper

Tag: Pension funds

  • World’s top pension funds hit $18.1tr

    The 300 largest pension funds in the world grew assets under management by 15.1 percent in 2017 to reach a combined value of $18.1 trillion, a study has showed.

    According to the research from Willis Towers Watson’s Thinking Ahead Institute, the growth was more than double 2016’s  6.1 per  cent increase.

    Willis Towers Watson is a leading consultant and investment advisor to pension funds. A leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth.

    The report said the top 20 funds accounted for 41.1 per cent of the assets, led by Japan’s $1.4 trillion Government Pension Investment fund and Norway’s $1.1 trillion Government Pension Fund.

    Meanwhile, Nigeria’s pension assets hit N8.23 trillion as at September 3, this year, the National Bureau of Statistics (NBS) reported.

    The NBS reaffirmed that the current standing of Nigeria’s pension assets under the Contributory Pension Scheme (CPS) stood at N8.23 trillion.

    Data released at the weekend by the NBS showed that N8.23 trillion was recorded in the second quarter of 2018 as against N7.943 trillion recorded in the first quarter.

    According to NBS, the Federal Government of Nigeria bonds had the highest weight percentage of 49.08 per cent of the total PFA.

     

     

     

  • ‘Pension funds aiding financial sector’s growth’

    National Pension Commission (PenCom) Ag Director-General Mrs Aisha Dahir-Umar, in this interview with TOBA AGBOOLA, speaks on the commission’s ambitious project of extending pension coverage to the informal sector, which she describes as a revolution. She also lists the initiatives being introduced by the commission.

    What innovations are you bringing into Pension Fund Administration, and how do you hope to realise this?

    The Commission has developed a revised Risk-Based Supervisory Framework for Licensed Pension Fund Administrators in Nigeria in order to further strengthen its regulatory and supervisory function. The objective of the revised framework is to provide an effective process for assessing the safety and soundness of Licensed Pension Operators (LPOs) and the funds under Management/Custody. In addition, the Commission has commenced the implementation of the revised Framework in its 2018 on-site routine examination of LPOs.

    Can you shed more light on the Contributory Pension Scheme (CPS) performance  and list some of the achievements and challenges in the scheme’s operation?

    The Contributory Pension Scheme has achieved a lot since 2014 when it was introduced. For instance, the Commission has implemented the institutional framework as provided in the PRA, 2014. Licenses were issued to private companies to operate as PFAs, CPFAs & PFCs after meeting stringent requirements. These Licenses were issued to 27 Pension Fund Administrators (PFAs), seven Closed Pension Fund Administrators (CPFAs) and 4 Pension Fund Custodians (PFCs). However, the number of PFAs has reduced to 21 owing to mergers and acquisitions. These LPOs have effectively managed and administered pension funds, resulting in the consistent growth in pension assets as well as payments to retirees, among others. As at February, 2018, the total number of registered RSAs stood at N7.91 million with the public sector (comprising Federal and state government employees) and the private sector accounting for N3.50 million and N4.41 million respectively.  The total membership of the CPFAs and the Approved Existing Schemes (AES) were 23,668 and 40,951 respectively as at February28,, 2018.

    Also, the CPS has consistently accumulated pension assets since inception. It is noteworthy that the value of pension fund assets had grown from N265 billion in 2006 (which was the year of actual commencement of investment activities by the pension operators), to N7.79 trillion as at the end of February, 2018. As at February 2018 a total of 228, 489 retirees were receiving pensions under the CPS. Out of the total retirees receiving monthly pensions, 178, 111 (77.95per cent) are on Programmed Withdrawal through the PFAs, while 50,378 (22.05 per cent) are on Annuity contracts through insurance companies. The pool of pension funds generated by the CPS has aided the deepening of Nigeria’s financial sector and the economy in general.

    Of what importance is the pension sector to the economy?

    The relative importance of the pension sector in economic development is reflected by the proportion of the pension assets to Nigeria’s GDP, which grew from 1.4 per cent in 2006 to seven per cent in 2010 and was estimated at 6.78per cent of the rebased Nigerian GDP as at February, 2018.  Indeed, the pension funds have contributed to the development of the capital market through investments in blue chip quoted equities. They have also provided financial intermediation, as alternative to banks, on the platform of the Nigeria Stock Exchange. The most pronounced impact is on the Insurance Industry through the implementation of Group Life Insurance as provided by the PRA 2014.

    In addition, the provision for Life Annuity, as one of the ways to access monthly pension, has boosted the Insurance Industry. Since the commencement of payment of retirement benefits through Retiree Life Annuity up to February, 2018, N251.70 billion has been paid to insurance companies as premium for monthly pensions of 50,373 retirees under the CPS. Deliberate attempts were also made by the Commission to channel the pension funds for the development of the economy, particularly, real sector financing and infrastructure development. In this regard, the regulation for the investment of Pension funds allows, amongst others, investments in Corporate Debt Securities an infrastructure projects through Infrastructure Funds and Bonds. Accordingly, as at February, 2018, 6.39 per cent (about N500 billion) of the Pension Fund is invested in various infrastructure development instruments issued both by the public and private sectors. This include investments in Sukuk Bond, Green Bond, and Agency Bonds issued by the Federal Government and state governments.

    How many states have enacted Pension Reform law?

    Already, 26 states have enacted Pension Reform Laws, 11 of which have commenced remittance of pension contributions into the RSAs of their employees.  In addition, ten (10) other states have drafted Pension Reform Bills towards implementing the CPS eight (8) of which have been reviewed by the Commission.

    What about the challenges?

    The two major challenges in implementing the CPS border on funding For instance, the portion of the Federal Government’s total wage bill (5 per cent) being set aside for the settlement of accrued pension rights of its employees, who migrated to the CPS from the Defined Benefits Scheme, remains inadequate. Furthermore, there are delays in the release of funds into the Retirement Benefits Bond Redemption Fund (RBBRF) Account with the Central Bank of Nigeria by the Federal Government.

    Consequently, Federal Government retirees are not being paid their retirement benefits promptly.  In April, 2017, Mr. President approved the release of N54 billion for the payment of part of the outstanding accrued pension rights. There were also subsequent monthly releases of funds for the purpose. However, there are still outstanding payments for retirees from April 2017 to date. The rate of pension contribution was increased by Section 4(1) of the PRA 2014 from a minimum of 15 per cent to a minimum of 18 per cent, comprising eight per cent (8 per cent) by the employee and 10 percent (10 per cent) by the employer.

    However, despite having come into effect since July 2014 when the PRA 2014 was enacted, this enhanced rate of pension contributions is yet to be implemented by the Federal Government for its employees. The CPS is facing other challenges, including limited public awareness of the workings of the new CPS, different interpretations of some provisions of the Act by retirees and comparison of benefits under the old and new scheme by retirees. Also, challenges such as  comparison of benefits by colleagues on similar position and different variables or data and over or under remittance of entitlement leading to delays in processing retirement benefits.

    However, the commission will address all bottlenecks in pension administration and deliver concrete windows to the contributors and retirees.

    Are there any institutional reforms taking place in PenCom in order to strengthen effective regulation of the pension industry?

    The major reform towards strengthening effective regulation of the pension industry is the introduction of stringent penalties and sanctions on infractions relating to pensions in the Pension Reform Act, 2014. The provisions of Sections 99 to 104 of the Act are some of the notable penalties for specific offenses. In addition, the Commission has since commenced the process of ensuring that all issued Regulations, Guidelines and Codes are reviewed to bring them in conformity with the new provisions of the PRA 2014.

    Some stakeholders in the industry are not comfortable that PenCom is yet to implement Micro-Pension.  What is the scheme all about?

    The Pension Reform Act 2014 (PRA 2014) makes it mandatory for employees in the public service of the Federation, Federal Capital Territory (FCT), states and local governments and the private sector organisations with three or more employees to participate under the CPS.  The Pension Reform Act under Section 2(3) also provides that employees of organisations with less than three employees as well as self-employed persons shall be entitled to participate under the Contributory Pension Scheme in accordance with guidelines issued by the Commission. The category of employees referred to under Section 2(3) of Pension Reform Act 2014 is not covered by any pension scheme due to the nature of their employment, therefore the Commission considered it necessary to develop the Micro Pension Plan to cater for these categories of persons.  The Micro Pension Plan is an arrangement for the provision of pension to the self-employed and persons operating in the informal sector through the CPS.  This means that traders, stylists, farmers as well as professionals operating on their own such as accountants, architects, lawyers, artisans and more, can contribute towards their pension at retirement. Now, some features of the Micro Pension Plan include flexible registration, simplified registration process. Contributors can register with a PFA of their choice, flexible modes and rates of contributions.

    However, the Commission is yet to roll out the Micro Pension plan because it wants to ensure that it provides a policy that provides the needed flexibility in the system for these categories of persons; guarantees contributors get optimal return on investment as well as guarantee the protection of the rights of contributors. We have released the draft guidelines and framework on the micro pension plan to the LPOs and the various stakeholders. The guidelines and framework documents shall provide details of the strategies to be adopted for securing participation in the plan, the minimum requirement for participation by the Licensed Pension Operators, operational modalities for the plan and the roles and responsibilities of the various stakeholders in the Micro Pension Plan.

    The Commission is also working on providing the required ICT infrastructure to drive the process. We are developing the necessary infrastructure in readiness for the scheme and this is in line with the commission’s strategic objective of expanding coverage of Contributory Pension Scheme (CPS) to the under-served sector.

    It was reported in some national dailies that less than 10 states have completed all processes for CPS implementation. What is the reason for the delayed adoption by states?

    The Pension Reform Act 2004 did not initially mandate states and local governments to adopt the CPS (CPS). However, with its re-enactment in 2014, states and local governments were mandated to adopt the CPS. Accordingly, the Commission had relentlessly pursued states’ engagement between March 2016 and July 2017 and had engaged key government officials and Labour Unions in all states. As a result, 26 states and the FCT had made significant efforts towards implementation of the CPS, nine  states are at the bill stage of implementation while only one state has not taken any significant step.  It is, however, imperative to point out that many of the critical stakeholders at the states are yet to fully grasp the tenets of the CPS and how state governments can achieve full compliance. It is worthy to note that individual states are developing at varying paces based on the resources available to them. However, we are of the view that the CPS would be fully implemented in all the states once there is the necessary political will from the Governors.

    You have spoken about PenCom’s readiness to enforce the law on employers’ failure to remit deductions to their employees’ RSAs. What bite will you add to this?

    We adopted a methodical approach to enforcement of compliance. We started with enlightenment campaigns through collaboration with the labour unions and the Nigerian Employers’ Consultative Association (NECA). We hold annual workshops on compliance. We commissioned Recovery Agents to examine employers’ records and determine outstanding pension contributions for payments to be made. Substantial recoveries are being made as we speak. In the case of recalcitrant organisations, we shall prosecute them in the courts in tune with our zero tolerance for non-compliance.

    Do you have any partnership with other pension schemes in West Africa and if you do, how are they?

    We are making adequate preparations to partner other West Africa pension organisations to establish a strong and reliable pension scheme in the sub-region. On partnership, the truth is that if one wants to partner someone you must put your house in order before you want the person to join you. If we have shown the ability to leverage domestic financing to solve our challenges, we have to put a lot of instruments that are credit enhanced and free of risks so that people will join us. We must integrate the entire West African sub-region. Continental integration would have to start with regional integration. This is doable and at present, there are projects that are running from Nigeria to Cote d’Ivoire. These are things we can bring to the fore and there will be requirements from every state. Member-states have to make sure that their roads leading to other states are good. President Muhammadu Buhari has directed the commission to ensure that both salary earners and people in the informal sector are captured in the pension scheme.

    What are you doing to ensure that RSA holders access part of their contributions for mortgage financing?

    National Pension Commission (PenCom) is in the process of developing a workable guideline to allow RS) holders access part of their contribution for mortgage financing. We are making contacts with relevant stakeholders to get inputs before rolling out the guideline for the initiative. On using pensions for mortgage, a guideline has been developed and to implement the initiative, there are stakeholders that will be involved. A draft guideline has been developed and we have also engaged stakeholders, who will be involved in the process. Now, we are taking our time because we want to get it right, the process is ongoing, we intend to expose the guideline once the draft is ready so that all stakeholders can have a look at it again and give us their feedback. So that we can go back, fine-tune it and come up with a final guideline that will be implemented. We have also produced guidelines for the take off of micro pension scheme aimed at integrating informal sector operators into the Contributory Pension Scheme (CPS). For the micro pension, it is also the same process, the guideline has been in the works and I am also happy to say that just last week, we released the draft guideline, which is on our website. Now that it is out, it has been exposed and we are engaging stakeholders, we expect feedback from relevant stakehold-ers, including the press, so that we can come back to find tune it and have it ready for implementation.

    The planned integration of informal sector operators into the CPS remained an initiative the commission holds so passionately. Its successful implementation will result in further expansion of the nation’s pension system. You are aware that this is what the commission has been very passionate about because it is going to expand our coverage because most members of the society, especially those in informal sector who are engaged in business activities, will be captured.

     

  • Multiple bills threaten N6.5trn pension funds

    Nigeria’s pension funds which currently stands at N6.5 trillion is faced with a major threat of depletion due to the multiple bills sponsored by some persons and bodies at the National Assembly, the National Pension Commission (PenCom) and the Pension Fund Operators Association of Nigeria (PenOp), have said.

    Speaking over the weekend in Abeokuta, Ogun State, they said the current pension administration established by the Pension Reform Act 2004 as repealed by PRA 2014, may take a downward turn if the bills numbering over seven become law.

    PenCom and PENOP have condemned the bills describing them as spurious and against the interest of the country’s financial system..

    PENOP Chairman, Longe Eguarekhide said prominent among the bills, is the one sponsored by Hon Oluwole Oke on May 16, 2017 seeking to amend the Pension Reform Act 2014 to exclude members of the Nigeria Police, the Nigerian Security and Civil Defence Corps, Nigeria Customs Service, Nigeria Prison Service, Nigeria Immigration Service and the Economic and Financial Crimes Commission (EFCC) from the application of the Contributory Pension Scheme (CPS) and other related matters.

    He said the bill passed its second reading and has been referred to the relevant committee of the House of Representatives for further action.

    He stated that an additional cause for concern regarding the legislature, arose on May 10, 2017, when yet other private member’s bill sponsored by Senator Aliyu Wamako (Constituency – Sokoto North) sought to pass a law for “An Act to Further Amend the PRA 2004 to Provide for Definite Percentage a Retiree Can Withdraw from his RSA and for Other Matters Related Thereto”.

    He said  this permits retirees to withdraw a definite rate of 75 per cent of the value of their RSA upon retirement, leaving only 25 per cent to be spread over their expected years of retirement as periodic pension payments.

    He explained that the proposal was based on a misunderstanding of the concept of pension payment under the CPS.

    Longe said it is pedestrian to assume that lump sum should be fixed, rather, what should be implemented is a minimum replacement ratio as monthly pensions.

    He said: “Accordingly, the retiree should keep an amount that can procure an amount of monthly pensions as replacement of salary over an expected life span. Whatever remains over that amount may be taken as lump sum. The current replacement ratio under the CPS is 50 per cent of last pay by virtue of the PRA 2014 and regulations issued by the Commission.

    One of the objectives of the CPS is to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.

     

     

    “The proposed amendment would mean leaving only 25 per cent to be spread over the lifespan of the retiree, which may be longer than 20 years, thus giving meagre monthly pensions below the current replacement ratio of a minimum of 50 per cent of last pay. It is doubtful if the 25 per cent balance in a retiree’s RSA, after deduction of 75 per cent lump sum, would, if spread through the retiree’s expected life span, be adequate to reasonably cater for his livelihood during old age. Accordingly, the proposed amendment would only result in the depletion of the RSA without regard for the retiree’s continued subsistence, thereby impoverishing retirees.”

    On the proposed exit bill for the paramilitary, he said it is similar in context to that of the Armed Forces and intelligence agencies.

    He said it  seeks to fully exempt the stated organisations from the CPS and return them to be 100 per cent underwritten in relation to pension arrangements by the Federal Government.

    In other words, return them to the erstwhile Defined Benefit (DB) arrangement, he noted.

    “The arguments advanced by the promoters of the bill include national security; occupational hazard; delays in the payment of entitlements; low monthly pensions and preference for the old pension system. It is important to note, however, that the reasons that informed the decisions of both the Federal Government and the 6th National Assembly to respectively decline the request and the bill for exemption of the police and other paramilitary agencies from the CPS in 2011, despite the above arguments are still valid. Indeed, the argument against exemption is today further reinforced by many other economic, fiscal, social and public policy reasons, such as  exemption of the personnel of the police and other paramilitary agencies means additional financial burden on the Federal Government by way of unsustainable pension obligations.

    “For instance, in the last 10 years, the number of FGN employees that retired under the CPS from the six agencies sought to be exempted are 50,730. The total accrued benefits of these personnel amounted to N208.22 billion, which had been redeemed by the Federal Government, paid into their respective Retirement Savings Accounts (RSAs) and consolidated with their monthly pension contributions to fund their retirement benefits. These retirees are currently receiving their retirement benefits promptly as and when due. Exempting them from the CPS would imply that Government would shoulder the huge financial obligation of payment of their pensions as well as that of future retirees through budgetary provisions, with no guarantee of availability of funding and; or timeliness of payment.

    “The Federal Government is already overburdened with the payment of pensions as illustrated by the 2016 Appropriation Act, which made a provision under the Service Wide Vote for the sum of N200.17 billion  as total pension and gratuities allocation. This allocation is still insufficient to fund the pension liabilities of the Federal Government. For instance, the 2016 Pension Transitional Arrangement Directorate (PTAD)’s Budget proposal indicated a total annual pension liability of the sum of N388.32 billion. Out of that amount, the sum of N255.89 billion constituted unfunded liability, which was inherited by PTAD mostly due to outstanding payments for 33 per cent pension arrears to pensioners under the DBS. Indeed, the Federal Government pension liability burden under the DBS is much higher than the PTAD proposals in view of the provisioning of about N74.53 billion for the Military Pension Board, N7.64 billion for the State Security Service and N3.71 billion for the National Intelligence Agency.

    Consequently, it would be fiscally imprudent to increase the number of this category of retirees under that Scheme. It would also render the retirees financially vulnerable and insecure”, he added.

     

     

  • I did not divert pension funds as VC, says JAMB Registrar

    I did not divert pension funds as VC, says JAMB Registrar

    The Registrar Joint Admissions and Matriculation Board ( JAMB), Professor Is-haq O. Oloyede, yesterday rubbished reports that he diverted pension funds during his tenure as the Vice Chancellor of the University of Ilorin.
    He also said he was never involved in any N3.5billion fraud at any point in time.
    He said he has never in his life collected bribe or inflated contracts.
    Oloyede was reacting yesterday to a petition sent to the Ibadan Zonal Office of the Economic and Financial Crimes Commission(EFCC) against him and the current Vice Chancellor of UNILORIN by some members of the Academic Staff Union of Universities( ASUU).
    The JAMB Registrar attributed the petition to some of the lecturers of the University of Ilorin who were sacked but later reinstated on the order of the Supreme Court.
    He insisted that he did not at any time tamper with the pensions of staff as a Vice Chancellor.
    He said: “The Pension Act of 2004 provided that 7.5 per cent of emoluments should be deducted from staff salaries and remitted into their pension accounts with Pension Funds Administrators (PFAs).
    “Most universities, including the University of Ilorin, based the calculation of 7.5 per cent on basic salary and transport allowance. This was the case between July 2004 and December 2006 before I became Vice-Chancellor.
    “ I know no PFA and if salaries were deducted and saved in employees’ accounts, I would not be the beneficiary.
    “Then, from January 2007, the Government that is matching the employees’ contribution with another 7.5 per cent directed that the deduction should be based on Consolidated Pay.
    “Some universities were compelled by the fake and fraudulent campus hyenas not to comply with the directive of 2007.
    “About two years into my tenure, my attention was drawn to the new decision which was of course advantageous to workers whose higher sum was being equally matched by the Government.
    “I convened a meeting of stakeholders including the Unions on the Government directive and all parties agreed not only to commence the higher savings (which Government doubles rather than double lower contributions) but also to double the difference for a certain number of months to ensure full compliance with effect from the stipulated January 2007.
    “I summoned the Ilorin representatives of all the PFAs to reiterate the date of compliance from when higher matching additions from Government should also be credited to each contributor’s account.
    “Any averagely educated person would understand who the beneficiaries of the compliance are, who for their tomorrow sacrifice a part of today’s comfort rather than the unreasonable agitators who insist on consuming tomorrow.
    “Some universities under the spell of some club crawlers do not comply to the eventual disadvantage of their unfortunate retirees and perhaps to the advantage of clever PFAs.
    “If those who parade doctoral degrees cannot understand this simple logic, may God save Nigeria from the anarchists. I as Vice-Chancellor complied and I believe few other universities did. How that would benefit me personally baffles me.
    He said he has never in his life collected bribe or inflated contracts.
    Oloyede added: “I am extremely selective in accepting gifts from even personal friends. My needs are limited and my legitimate income is sufficient to spend on my volunteer work. I have never in my life collected bribe, inflated contracts, extorted anyone nor accepted gifts beyond “Thank You greeting cards” from any contractor, dead or alive.
    “As Vice-Chancellor, I started the practice of publishing the financial transactions of the University every Monday in a publication circulated far and wide by hand and online. This has happily been sustained by my successor to-date.
    “Those who have skeletons in their cupboards don’t choose to publish their financial details. I am aware many universities don’t do so till today and the charlatans who make frivolous allegations against me should mention their mentors who do so.
    “Information Technology is good to determine the quality of the hirelings assembled to assassinate my character. The only one I faintly know among them led his pastor and his father-in-law, a former Vice-Chancellor of the University of Ibadan, to me in order to mount pressure on me to offer his wife, the Vice-Chancellor’s daughter, a temporary appointment as an Assistant Lecturer. I bulged to pressure out of deference to the father-in-law (because the Department could do without an additional lecturer) and the man of God. But soon thereafter, this character became a strong advocate of withdrawal of the power of temporary appointment of the Vice-Chancellor!
    “I do not claim perfection as it is the exclusive preserve of the Almighty Allah but I dare say I stand on a higher moral pedestal than “the 49 liars” and their masters. God will continue to keep them busy and they shall continue to lament their failure at the University of Ilorin and in life precipitated by their own inner insolvency. The barking of dogs does not affect the flight of a plane.
    “This statement is just to re-assure my admirers that the allegations against me are like pure wind with no solidity. I remain who I have ever been by the special grace of Allah, the Almighty.
    “Lastly, my explanation does not foreclose the possibility of legal action against the authors of the campaign of calumny against me and their willing collaborators.

  • ‘Pension funds critical to economy’

    ‘Pension funds critical to economy’

    The nation’s pension funds play critical role in economic development, the Director General of the National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu has said.

    She spoke as a special guest of honour at the 17th annual lecture of the Catholic Brothers United (CBU) in Lagos.

    The DG who spoke on the theme: ‘The Use of Pension Funds as Catalyst for Economic Diversification,’ noted that: “The Nigerian pension funds are playing two critical roles in the local economy. The first and most important is ensuring that retirees receive their retirement benefits as and when due. The second role of the fund is the positive impact on the economic growth and development, which is directly related to their investment activities.”

    Anohu-Amazu who hinted that the Commission is proposing N3trillion investment to boost infrastructure development in critical sectors of the economy, observed, that the pension funds “Have become very important source of financial intermediation. They play significant role as vehicles for pooling and mobilising savings for funding long-term investments.”

    The PenCom boss also noted that the nation’s pension fund assets had seen a dramatic growth over the decade, from about N2trillion deficit in June 2004 to N5.74trillion as at the second quarter of 2016, informed that the pool of funds is being invested on behalf of the contributors based on the provision of the Pension Reform Act 2014 on stipulated allowable instruments for investment of pension funds and assets.

    While noting that the PRA has provision for investment of 15% pension fund assets on infrastructure funds, Anohu-Amazu, however, observed that only 0.03% has so far been invested due to non availability of the instrument in the market.

    The Commission, she hinted, “Is currently finalising a review of the investment regulations so as to ensure a sustainable deployment of pension funds for infrastructure developments. The untapped potential for pension fund investment instruments that will unlock the diversification of the Nigerian economy is over N3trillion.”

    As part of efforts to achieve this laudable objective, she said the Commission is already engaging critical stakeholders both in the public and private sectors, especially the Ministry of Works, Power and Housing to build a synergy towards developing the Nigerian infrastructure as a veritable step towards economic diversification.”

  • ‘Pension funds critical to economy’

    The nation’s pension funds play critical role in economic development, the Director General of the National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu has said.

    She spoke as a special guest of honour at the 17th annual lecture of the Catholic Brothers United (CBU) in Lagos.

    The DG who spoke on the theme: ‘The Use of Pension Funds as Catalyst for Economic Diversification,’ noted that: “The Nigerian pension funds are playing two critical roles in the local economy. The first and most important is ensuring that retirees receive their retirement benefits as and when due. The second role of the fund is the positive impact on the economic growth and development, which is directly related to their investment activities.”

    Anohu-Amazu who hinted that the Commission is proposing N3trillion investment to boost infrastructure development in critical sectors of the economy, observed, that the pension funds “Have become very important source of financial intermediation. They play significant role as vehicles for pooling and mobilising savings for funding long-term investments.”

    The PenCom boss also noted that the nation’s pension fund assets had seen a dramatic growth over the decade, from about N2trillion deficit in June 2004 to N5.74trillion as at the second quarter of 2016, informed that the pool of funds is being invested on behalf of the contributors based on the provision of the Pension Reform Act 2014 on stipulated allowable instruments for investment of pension funds and assets.

    While noting that the PRA has provision for investment of 15% pension fund assets on infrastructure funds, Anohu-Amazu, however, observed that only 0.03% has so far been invested due to non availability of the instrument in the market.

    The Commission, she hinted, “Is currently finalising a review of the investment regulations so as to ensure a sustainable deployment of pension funds for infrastructure developments. The untapped potential for pension fund investment instruments that will unlock the diversification of the Nigerian economy is over N3trillion.”

    As part of efforts to achieve this laudable objective, she said the Commission is already engaging critical stakeholders both in the public and private sectors, especially the Ministry of Works, Power and Housing to build a synergy towards developing the Nigerian infrastructure as a veritable step towards economic diversification.”

  • Oronsaye, others diverted N14bn pension funds using phoney names, contracts – witness

    Oronsaye, others diverted N14bn pension funds using phoney names, contracts – witness

    Trial opened yesterday in the case against ex-Head of Service of the Federation (HOSF), Steve Oronsaye and some others before the Federal High Court, Abuja with a prosecution witness giving details of how the defendants allegedly diverted 14billion pensioners’ fund using phoney names and contracts.

    This is the second case involving Oronsaye, as he is also being tried before Justice Olasumbo Goodlcuk of the High Court of the Federal Capital Territory (FCT), Maitama, Abuja for allegedly exploiting his position as Chairman of the Presidential Committee of Financial Action Task Force (PCFATF), under President Goodluck Jonathan, to divert about N382.9m, using a secret account in Access Bank.

    Oronsaye, Osarenkhoe Afe and three firms are being tried before the Federal High Court on a 35-count charged in which they were accused among others, of engaging in illegal acts of “conducting procurement fraud by means of fraudulent and corrupt act on the contract of biometric enrolment”.

    The firms are: Fedrick Hamilton Global Services Limited (believed to be owned by Afe), Cluster Logistic Limited, Kangolo Dynamic Cleaning Limited, and Drew Investment & Construction Company Limited.

    Testifying yesterday in the case before the Federal High Court, an operative of the Economic and Financial Crimes Commission (EFCC) Rouqayya Ibrahim gave details of how Oronsaye and others allegedly diverted states funds using about 66 illegal bank accounts.

    Ibrahim said Oronsaye and others effected the alleged diversion through payments to “ghost” pensioners and disbursements of funds for non-existing contracts.

    The witness said the defendants also engaged in payments of non-existing allowances to fake members of staff and to the National Union of Pensioners and Association of Federal Civil Service Retirees.

    Ibrahim was led in evidence by prosecution lawyer, Adebisi Adeniyi. She added that aside a company – Innovative Solutions Uptrach Communications Limited – which executed “a semblance” of a contract awarded, other firms were paid for non-existing jobs.

    The witness said: “Sometimes in 2010, the EFCC was invited amongst other organisations, including ICPC (the Independent Corrupt Practice and other related offences Commission) and the DSS (Department of State Service) by the Head of Service of the Federation for verification of pensioners.

    “During the course of that verification, my colleagues who were doing the verification, discovered payment mandates for payment of pensioners bearing 32 names for the amount of over N94m as pension which was suspicious to them.

    “And, based on that, they required further information concerning the mandate and statement of account from the Head of Service of the Federation. It was discovered that indeed that some of the names on the list were fake pensioners.

    “Based on that, the EFCC constituted a pension fraud team to properly investigate the activities of the Head of Service in respect of pension payments.

    “I was drafted to be a member of the team including 10 other colleagues of mine. We wrote letters to all the existing banks at that time, about 32 of them, to furnish us with the statements of account operated by the Head of Service for payment of pensions and also payment mandates.

    “Based on the replies from the banks and from Accountant General’s office, we discovered that the Head of Service was operating 66 illegal accounts.

    “We also discovered that there were five basic modus operandi used by officials of the pension office to siphon pension funds from the accounts.

    “What our investigation established generally was that about N14bn was siphoned from the pension fund by the Head of Service.

    “The modus operandi I earlier mentioned were, non-existent collective allowances, where the suspects, some of whom are already standing trial in other courts will request for account numbers usually of staff or associated persons and the allowances will be paid into the accounts which will then be withdrawn in cash and give it to whoever asked them to present the account.

    “We also discovered illegal and non-existent contracts, specifically biometric enrolment contracts without the companies executing any contracts.

    “We also had ghost pensioners where names were inserted into the pension table and payments were made to them even when they were not pensioners.

    When she made move to use chart to demonstrate how the defendants allegedly perpetrated the fraud, the defence, represented by Oluwole Aladedoye, objected.

    Ruling, Justice Gabriel Kolawole upheld Aladedoye’s objection on the ground that since Adeniyi said he did not intend to tender the document, which bore Oronsaye’s photographs, allowing the witness to use it in the course of her evidence would not serve any purpose.

    The judge also held that the procedure of using the chart to demonstrate her evidence was unknown to law, adding that the situation envisaged under section 239 of the Evidence Act, whereby a witness could be allowed to use a document to refresh his or her memory had not arisen.

    Justice Kolawole held that by previous decisions of the Supreme Court and provisions of section 28 and 29 of the Evidence Act, the court had no choice but to order a “trial within trial”.

    He adjourned to June 21 for the trial-within-trial.

    When she resumed her evidence without the chart, Ibrahim referred to a confessional statement by Afe, but was halted Justice Kolawole, who said he would not record the witness’ oral evidence in relation to the statement unless it was first tendered and admitted as exhibit.

    But, when Adeniyi attempted to tender the statement, Aladedoye opposed the admissibility of the statement, arguing that it was obtained from his client under duress.

    Aladedoye said, apart from the November 24, 2011 statement, the two others made by Afe on February 24, 2011 and on March 16, 2011, were obtained through “oppression”.

    He stressed that “they (the two statements) were made through oppression. The second defendant was induced, threatened, harrassed to make this statements.”

    Aladedoye urged the court to order a trial-within-trial to test th authenticity of the statement And to enable him demonstrate how his client was allegedly compelled to admit to the charge.

     

  • ‘Pension funds can boost economy’

    With necessary measures put in place and the right steps taken by the Federal Government, pension funds may be the solid backbone required to jumpstart Nigeria’s economy beginning from massive infrastructural development.

    Head, Corporate Communication, Premium Pension Limited, Paddy Ezeala, made this statement in a report made available to reporters in Lagos and titled: “The liquidity squeeze and the traction of pension funds.”

    According to him, the Contributory Pension Scheme (CPS) has the potential to provide the necessary financial cushion in the nation’s drive to build a solid economy beginning with addressing our infrastructural deficiencies.

    He said it is gratifying that the investment portfolio in the pension industry has since 2010 been diversified to allow investments in infrastructure funds and bonds as well as other asset classes such as supranational bonds and private equity funds.

    He noted that from a deficit of more than two trillion naira in the old defined benefit scheme before 2004, the CPS is closing in on six trillion naira in the amassment of pension funds even when a fraction of this is illiquid.

    He said: “This is even with far less than 10 per cent market penetration in the pension industry. In other words, less than 10 per cent of Nigerian workers in the formal and informal sectors of the economy have enrolled in the CPS. This explains the great potential and immense possibilities of the industry.

  • Federal Govt, NLC set for showdown over N5.14 trillion pension funds

    Federal Govt, NLC set for showdown over N5.14 trillion pension funds

    Federal agencies are considering all options to dance around dwindling oil revenues triggered by tumbling prices of crude at the international market. One of such options is a request by the Mr. Babatunde Fashola, the minister of Housing, Works and Power, to access the N5.14 trillion pension fund to finance critical infrastructure. But, the Nigerian Labour Congress (NLC) has rejected the proposal, reports OMOBOLA TOLU-KUSIMO

    “It should thus be avoided immediately before it gains ground within the corridors of power. It is a kite the congress and the generality of workers will not want to see fly in this circumstance.

    “Nigerian workers are worried when we remember that it was in the midst of the mess that the public sector had made of the public sector pension fund scheme that the unified pension fund scheme was established.

    “The thought of using our pension fund for investment in public sector infrastructure development is highly frightening given the well-known penchant for mismanagement inherent in public sector institutions in Nigeria.

    “The future of Nigerian workers cannot be guaranteed under a scheme controlled entirely by crass, profligate and often insensitive politicians famous for their careless handling of public funds.

    “We find it difficult to muster any confidence from anywhere to entrust our livelihood in the hands of a group that has historically and systematically decimated our collective resources over the years pauperising us at the slightest opportunity without any conscience.

    “Moreover, we want to state that the Minister in all intents has only seen a pool of funds and sees it as something that could be annexed for the usual things Nigerian politicians do with our funds. Our pension fund is managed by the PFAs under the advisory of PENCOM.

    “We are therefore at a loss how the minister wants to actualise this stated objective. What will be the mechanism for accessing this fund for infrastructure development without infringing the different laws put in place to manage the fund? Is he suggesting that the fraction set aside for PFAs to invest in public infrastructure development is small and should be a larger chunk?

    “Let it be noted that workers in Nigeria have become the weeping boys and girls of every government policies and actions. Whenever there is a down-turn in the economy; wicked and heartless politicians have always turned to workers in search of what they could get from our hard-earned tokens.

    “They have cut-down the little perks available to workers without any resistance while refusing to give up on their comforts but have instead increased the size of the budget to service their personal needs; they are currently indebted to workers in some instances and states, up to 15 months arrears and that is not sufficient; they are not paying the now expired minimum wage as prescribed by the law; yet, they are not satisfied; they are sacking workers with reckless abandon just like the 3,000 workers in Imo State last week yet, they are not done.”

    Governor Rochas Okorocha reinstated the workers after striking a deal with the NLC on a sharing formula accruing to the state from the federation account.

    The NLC chief described Fashola’s proposal as another stone being prepared to be cast at the workers by politicians in their effort at furthering their emasculation.

    He said: “The imperativeness of reminding our political leaders that Nigerian workers were not responsible for mismanaging the nation’s economy but the politicians becomes real given their present intentions.

    “We cannot therefore be made sacrificial lambs when anything goes wrong with the economy which our politicians have so hopelessly wrecked and continued to rape without any regard.

    “It is therefore immoral and careless to subject such fund which is the life-blood of workers to the itchy-fingers of politicians no matter how well intentioned.”

    Advising the minister to leave the pension fund alone, the NLC said: “If our politicians could mismanage the huge accruals to our treasuries from the oil and gas sector over the years, is it the pension fund that will be left unscathed?

    “In any case, since we are the owners of the fund, we insist that whatsoever benefits that purportedly will accrue to us as a result, we do not want to be part of it.

    “We also insist that before anything could be done regarding our pension contributions, we should be the first to know as the custodians of the interests and desires of the workers.

    “If Fashola intentionally wants to light the fire of debate on this, let him know that this is where we stand and should immediately bury the idea. We suggest that the MDAs and the government use their well known dexterity and creativity to look for funds elsewhere and take their lustful gaze away from workers’ pension funds.”

    “NLC will resist any action or policy designed to turn the nation’s pension funds into one of the sources of fund available for the use of the Federal Government. We will not tolerate this seeming ‘lusting after’ the purse of the pension fund. We will not take kindly to attempts by any politician to expose our life-savings to the vicissitudes of the politics we play in Nigeria today.

    “We have always remembered the greed with which successive governments have announced the degree of expansion in the size of the pension fund. When it was N2 trillion, they were watching, when they announced it was N3 trillion, the look on their faces changed; when they said it was over N4 trillion, they began to salivate and now that it has grown to about N6 trillion; it has become a frenzied and delirious attempt to annex it.

    “Unfortunately, we recognise all of these in the look on the faces and body language of those in government which has also become heavily expressed and resonated in the sound-bite of Fashola’s proposal. We say a resounding no to the use of pension fund for infrastructural development.”

    She said: “The major thrusts of the 2014 Act are the enhancement of the powers of the commission in its regulatory and enforcement activities, enhancement of the protection of pension fund assets, provision of greater opportunity for investment of pension funds in infrastructure and housing development, review of the sanctions regime to reflect current realities, provisions that would facilitate the participation of the informal sector and provide the framework for the adoption of the CPS by states and local government areas.

    “In exercise of the commission’s regulatory responsibility, it had issued regulation on investment of pension fund assets to further guide how the pension contributions should be invested.

    “The pension assets have been largely invested in Federal Government securities, equities, money market instruments and corporate debt. The Commission has been making efforts to stimulate growth in the economy by introducing new assets classes into the portfolio of the pension funds provided they are allowed by the Pension Reform Act 2014.

    In this regard, Infrastructure Funds and Bonds were introduced to bridge the gap in the financing of infrastructure and housing. However, despite the availability of over N3.95 trillion for infrastructure financing, over N156 billion has been taken leaving over three trillion untapped.

     

    PenOp’s position

     

    Chairman, Pension Fund Operators Association of Nigeria (PenOp), Mr. Lounge Egherioude, believes the funds can be released to finance infrastructure, once the due process is followed.

    Longe, who doubles as Managing Director, AIICO Pension Ltd, says the PFAs can invest the fund in projects that are well conceived.

    According to him, investing the pension funds in infrastructure would generate better returns to pension scheme contributors, adding that nobody needs to be convinced with the minister’s proposal.

    His words: “It is not a matter of conviction but a matter of taking each step of its conviction through the right process.

    Yes, there is commitment around the table and a lot more energy. There is a realisation that we have nowhere to go and that our backs are against the wall. As it is now, everybody has to contribute his own part, and we, as PFAs, are ready to play our own part. But, the government and all other stakeholders need to play their own part.

    “We can invest the fund in projects that are well conceived. This catalyst fund will bring counterpart funding from the international community because if you don’t invest in your country, nobody will invest in it. If you provide the anchor funding, you are likely to attract international investment.

    “With the new PRA 2014, I can say that the industry is consolidated. There is more knowledge and commitment. What we need is serious government to see a completely different economic environment.

    “What we said during the meeting with the minister is that infrastructure investing requires clear concept and clear contract. There is also the reconstruction and recycle phase of money that has been spent by people paying for the infrastructure.

    “All of these will take time because if you are talking about the concept, we have to determine which of the projects to be selected and which we have already discussed. How will the projects be put together, who is going to implement the contract and who is going to have the concession?

    “The selection has to be done right. Then we proceed to construction which takes a few years. When will the construction be delivered? This must be stated in the contract. If it is a road project, how are you going to pay the tolls to make the facility refinance itself? These are the things that we need to do. These are the bolts and nuts and the way to move forward.

    Managing Director, Zenith Pension, Mrs. Nkem Oni-Egboma, said one would expect that pension fund should provide a sure gateway for the needed finance to fund infrastructural deficit but corruption, policy inconsistency and lack of appropriate investible products have hindered the deployment of pension fund to nation building.

    Speaking in Lagos during a symposium organised by the Nigeria Pension Consumer on the “Security and strategic deployment of pension fund in Nigeria for nation building”, Mrs. Oni-Egboma said a suitable investable vehicles like infrastructural bonds and equity with low risk must be created for Nigeria to harness the exponential growth in pension asset and channel it to achieve laudable infrastructural and structural transformation.

    She also stated the need for the right policy formulation that will provide conducive ground rules for the funds’ deployment.

    Speaking specifically on how to channel Nigeria Pension Fund towards infrastructural development for nation building, she said there is need for capacity building, Public-Private Partnership (PPP) among others.

    She explained that pension operators need to acquire necessary knowledge, expertise, skill and resources through the development of appropriate capacity programmes that would enable them play directly in infrastructure investment.

    Her words: “There must be a contractual arrangement between a public agency and a private sector entity. Through this agreement, the skills and assets of each sector are shared in delivering a service or facility for the use of general public. The government needs to ensure that all parties are carried along to build confidence with stakeholders.”

    “Floating of infrastructure bond targeted at specific public good and infrastructure with clearly defined exit route, private equity – targeted at infrastructural development like ARM Harith Infrastructure Fund for power project; appropriate government policy and stability that would create the enabling environment for the right financing from pension fund and collaboration with Nigeria Mortgage Re-financing Corporation”, she added.

  • African pension funds create investment capital pool

    With pension funds in some parts of Africa growing at a remarkable pace, the continent has become its own biggest investor.

    This is according to RisCura’s 2015 Bright Africa report, an on-going research effort aimed at assisting investors into the continent.

    Africa has experienced tremendous growth in pension assets over last five years. Assets in East Africa, for example, have grown in excess of 20 per cent on a consistent basis only overshadowed by Nigeria, which has seen growth between 25 per cent and 30 per cent.

    In much of sub-Saharan Africa where pension systems are older and more established, growth rates have been lower, but still strong, ranging between eight percent and 18 per cent over the previous five years. These trends are set to continue as this young continent moves towards increased coverage, and more inclusive and comprehensive systems.

    In line with global trends, the vast majority of retirement income in Africa is funded by governments, derived from taxes or other forms of government revenue (essentially a pay-as-you-go system or PAYG). With a large proportion of formal sector workers concentrated in the civil service, pension funds for public sector workers are well established and benefits are often more substantial compared to the private sector.

    Coverage on the continent however, is much lower compared to the rest of the world. Data from the Labour Office’s 2014, 2015 World Social Protection Report estimates that currently only 16.9 per cent of older people in sub-Saharan Africa receive an old age pension. Although this number is higher in North Africa at 36.7 per cent, it is still considerably lower than much of the developed world, 90 per cent in North America and Europe. A recent report on the pension sector in the East African Community estimates that between 80-90 per cent of the population is not reached via public or private pension fund schemes.

    In part, this is due to the unique circumstances in Africa including demographics, young population, a large informal employment sector, and migration with limited pension portability, and dependency on government finances. The pace of regulatory reform has also led to divergent coverage trends between countries and regions.

     

    Pension funds as investors

    Pension funds globally have become significant investors, both as fiduciaries in global capital markets and in their capacity as investors in local and international development projects. At the end of 2014, global pension fund assets were estimated at USD 36,119 billion, representing a 6.1 per cent rise from the 2013 year-end value. On average, these assets account for 84.4 per cent of these countries’ GDP.

    • Courtesy: RisCura analysis