The Nation Newspaper

Tag: Pension funds

  • Pension funds to provide long-term funds for capital market

    Pension funds would provide long-term funds that will enable the capital market to support Nigerian companies and governments in actualisation of their plans.

    Director-General, Nigerian Pension Commission (Pencom), Mrs Chinelo Amazu-Ahonu made this commitment during her visit to the Nigerian Stock Exchange (NSE).

    She said the Commission would work with the Nigerian Stock Exchange to grow the Nigerian capital market by deepening the existing partnership with a view to putting necessary measure in place in order to give institutional investors the needed comfort to remain in the equities market on a long term basis.

    “The reform that has been on going in the NSE is the kind of thing that PENCOM is looking for because we are institutional investors and because of the nature of funds we hold which idly belonging to the retirement service account holders, and the primary mandate of PENCOM is to establish and ensure that liabilities and pension retirement benefits are paid as and at when due, this is the crux of all investments we do,” Mrs Amazu-Ahonu said.

    According to her, the pension industry required an enabling environment to participate maximally in its effort to help move the market forward.

    “Now, the relationship we are establishing with the NSE is such that will enable us meet our initial mandate, while also playing an active part in the local development of the NSE because investment in equities for institutional investors is long term in nature. We are not portfolio investors, we are in for long term and I am happy that the management of the NSE is creating that platform to enable us fulfil that mandate,” she said.

    Mrs Amazu-Ahonu, while fielding questions from journalists  on state governments that are yet to be part of the initiative, she explained that the Commission recorded increased commitment from state government to sign up into the system at the just concluded world summit, noting that they also pledged to ensure that all the people working in the state level have this payment made to them.

    She added that pension has ensured that part of the regulations stipulates that a state PSA cannot invest in state bond that is not fully implementing the contributing system.

    “In terms of compliance, you must know it is an ongoing job. The state is slightly different, you have to pass their own law and then make it in conformity with Pension reform of last year and it is not just the state even in the private sector and companies everywhere. And part of our job is to ensure and follow up to see that RSA retirement savings account is fully funded. We have seen an upsurge in that and the future looks bright,” Mrs Amazu-Ahonu said.

     

  • N3.77tr pension funds idle, says PenCom chief

    Despite the availability of N3.95 trillion pension funds for Nigeria to finance its infrastructure challenges, only N156.3 billion has been utilised, leaving N3.77 trillion untapped, the Director-General, National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu, has said.

    She said the Pension Reform Act 2014 introduced Infrastructure Funds and Bonds to bridge the gap in  infrastructure and housing the financing.

    Mrs. Anohu-Amazu, whose views  are contained in a document made available to The Nation, said  the Commission has been making efforts to stimulate growth in the economy by introducing new asset classes into the portfolio of the pension funds as  provided by the PRA, 2014.

    The PenCom chief said the Act has stipulated the allowable instruments for investment of pension funds and assets, stressing that the instruments must be structured and traded on the platform of a Stock Exchange licensed, or recognised by the Securities and Exchange Commission (SEC); and Money Market Platforms approved by the Central Bank of Nigeria (CBN).

    Mrs. Anohu-Amazu said  in exercise of its regulatory responsibility, the Commission has issued regulation on Investment of Pension Fund Assets to further guide and advance 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 had earlier said it would issue  new investment regulation for pension operators before the end of December this year.

    The Commission said it recognised that the expansion of the Contributory Pension Scheme (CPS) has created a dearth of investment outlets.

    It was also observed that there is the risk of concentration of investment portfolio especially in Bonds and Fixed Income Securities.

    It was gatherd that the amended regulation is currently undergoing the usual Board approval process and would be issued shortly.

  • Pension funds burn cities as $1tr shortfall set to grow

    The cost to American cities for their cash-strapped pension funds is starting to look a lot worse, and it’s not because the stock-market rally may be losing steam, Bloomberg has reported.

    Houston was warned by Moody’s Investors Service this month that it may be downgraded because of mounting retirement bills, the latest municipality put on notice as the company ignores bookkeeping gimmicks that let cities mask the size of their debt for years. The approach foreshadows accounting rules for even top-rated issuers that are poised to cause pension shortfalls to swell as new financial reports are released.

    “If you’re AAA or AA rated and you’ve got significant and visible unfunded pension obligations, you’ve only got one direction to go in terms of rating, and that’s potentially down,” said Jeff Lipton, head of municipal research in New York at Oppenheimer & Co. “It’s the presentation on the balance sheet that is now going to drive urgency.”

    Cities that shortchanged pensions for years are under growing pressure to boost their contributions, even after windfalls from a stock market that’s tripled since early 2009. Janney Montgomery Scott has said growing retirement costs are “the largest cloud overhanging” the $3.6 trillion municipal-bond market, where investors are demanding higher yields from borrowers under the greatest strain.

    Chicago pays

    That was on display this week for Chicago, whose credit rating was cut to junk by Moody’s in May because of a $20 billion pension shortfall. The city was forced to pay yields of almost 8 percent on taxable bonds maturing in 2042, about twice what some homeowners can get on a 30-year mortgage.

    Estimates of the pension-fund deficits facing states and cities vary, depending on the assumptions used to calculate the cost of bills due over the next several decades. According to Federal Reserve figures, they have $1.4 trillion less than needed to cover promised benefits.

    Officials have been able to lower the size of the liability by counting on investment earnings of more than 7 percent a year, even after they expect to run out of cash. New rules from the Governmental Accounting Standards Board require a lower rate to be used after retirement plans go broke. Many reported shortfalls will grow as a result.

  • Africa’s pension funds hit $29b

    Africa’s pension funds hit $29b

    African pension funds, estimated at over $29billion can play a critical role in the region’s economic development, according to research conducted by the Commonwealth and other bodies.

    This joint report provides information that is crucial to a better understanding and appreciation of the pensions industry in Africa.

    In addition to outlining the latest data and regulatory profiles for 10 African countries, the report estimated how much capital could be available to support private equity in these countries as well as how much has already been mobilised to date.

    It said global interest in the African pension industry is increasing as recent regulatory reforms in many countries have created private pension systems pooling domestic resources that can be mobilised for long-term investments.

    The report indicated that Ghana’s industry, for example, is expected to expand by upwards of 400 per cent in the next four years. Pension assets now equate to some 80 per cent of the GDP in Namibia and 40 per cent in Botswana.

    In light of rapidly accumulating assets, pension funds across Africa are seeking investment opportunities to meet their long-term liabilities, it said, adding that private equity offers these pension funds and their contributors an opportunity to access the growth being generated by unlisted companies across the continent.

    The report made clear that  overall, the development  results in an outperformance potential that is uncorrelated to other asset classes, as well as the chance to contribute capital to spur private sector development in their respective countries.

    Head of Finance and Development Policy, Samantha Attridge at the Commonwealth, noted that “despite the rapid rise of pension funds in many African markets, little has been done previously to study the pension fund industry and promote the exchange of knowledge across the continent and globally.”

    He explained that African pension funds offer an enormous promise as a continental source of investment capital, adding that the report marks an important first step for the development of local capital sources in Africa and serves as a foundation for dialogue to continue.”

    According to Partnership Co-ordinator, MFW4A, Stefan Nalletamby, “The growth of African pension fund industries opens up a substantial opportunity for financial sector development on the continent and overall economic development.

    “These domestic resources can fuel investment in local businesses, infrastructure projects and services desperately needed for Africa’s continued transformation and growth.” His colleague David Ashiagbor adds, “Regulation has long been seen as the main stumbling block to African pension funds’ investment in private equity and similar asset classes; however, the reforms we are seeing across the continent offer hope for change.”

    Private equity is helping pension funds globally bridge the gap between targeted returns needed to meet long-term liabilities and actual median returns. As developed market pension funds look to emerging markets for the prospect of higher returns to achieve their fiduciary goals, African pension funds can serve as a positive indicator to international investors of a local fund manager’s credibility as well as the country-specific prospects of a certain sector.

    According to, Partner at The Abraaj Group, Sev Vettivetpillai “Local capital participation in Africa is critical to further developing the private sector on the continent. By providing a strong signal to the global investment community that opportunities are real, and risks have been adequately assessed, investment by local pensions in private equity catalyzes additional external investment into Africa. As private equity’s transformative impact has become clear, it is imperative that local institutions invest and contribute to their country’s economic transformation. And as fund managers, we must do our part to provide the tools and resources necessary to inform Africa’s pension funds about private equity to ultimately increase the pool of capital available to the whole continent.”

  • Union cautions govt on pension funds investment

    The National Union of Pensioners (NUP) has urged the Federal Government not to make pensioners’ funds available to corrupt politicians with its move to invest the pension cash under the Contributory Pension Scheme on Infrastructure.

    Given the profile of embezzlement of pension funds by civil servants and politicians, the union said it would only support the move if it could be convinced that the investment mechanism would guaranteed the safety of the investment.

    In a statement yesterday by its national president, Dr. A.O. Afolayan, the union said it did not oppose the idea of investing the funds, which it said would boost the Retirement Savings Accounts (RSA) of the future retirees, but added that government should allow National Pension Commission (PENCOM) to manage the investment on behalf of the pensioners to prevent fraud and embezzlement.

  • Pension fund hits N3.72t

    Pension fund hits N3.72t

    The National Pension Commission (PenCom) has said the Contributory Pension Scheme (CPS) fund has grown to N3.72 trillion by last month, as against the N3.5 trillion the previous month.

    Acting Director-General, PenCom, Mrs Chinelo Anohu-Amazu, made this known in Awka, the Anambra State capital,during the inauguration of the southeast zonal office of the commission.

    She said workers registered under the scheme have also grown to 5.82 million in October from 5.61 million in the previous month.

    She also said the Commission has remained steadfast in the implementation of the CPS such that within its few years of existence, modest achievements have been realised.

    According to her, the generation of more than N3.72 trillion invested in various financial instruments, and the registration of about 5.82 million contributors in the scheme are part of the modest achievements of the Commission.

    She listed other achievements as the payment of the benefits to retirees since 2007 without the bottlenecks experienced in the past, adding that the Commission had also established a call centre to enhance its service delivery through an efficient complaints resolution process.

    She said: “Central among its key objectives are to stem the growth of outstanding pension liabilities; ensure that every person who has worked in either the public or private sector receives his or her retirement benefits as and when due.

    “Foremost among such achievements is the consistent payment of retirement benefits to all employees who retired under the scheme since 2007 without the characteristic bottlenecks experienced in the past.

    “The Commission had also reviewed its Investment Regulations with a view to facilitating the investment of pension funds towards reducing the huge infrastructure gap in the country. The Commission has also made an input in the process of a major amendment to the Pension Reform Act 2004 at the final stages of consideration by the National Assembly.”

  • Pension funds may be invested in mortgage banks

    The Central Bank of Nigeria (CBN) will soon adopt a comprehensive reforms package for mortgage banking to reposition the sector for growth, spokesman Ugochukwu Okoroafor has said.

    Okoroafor said the reforms would not only be all-inclusive, but would transform the practice of mortgage banking.

    The reforms, he said, would address risks management, funding system, capacity of the mortgage firms to use another investment outlay for growth and corporate governance structures.

    He said: “Through the reforms, we will provide a refinancing package for the mortgage banks. We will create a strong secondary market for mortgage banks soon so that they would seek and explore other means of growth. Most pension assets are idle because there is no alternative window or destination through which they can be utilised. We are trying to see how mortgage institutions can tap into the opportunities.”

    The discovery of illiquidity, low profitability, and weak corporate governance in the balance sheets of the banks necessitated the reforms, he said, adding that other short comings include loss of confidence and gradual extinction of some of the firms.

    He said various regulatory bodies are coalescing to see how the mortgage industry can become a panacea for economic growth, adding that as many options as possible would be explored to improve the growth of the sub-sector.

    Okoroafor said: “We are working with the World Bank, Securities and Exchange Commission (SEC), Federal Mortgage Bankers of Nigeria (FMBN), National Pension Commission (PenCOM), and Debt Management Office (DMO) to revive the mortgage operations. These regulators are coming together to provide their input on how the operations of mortgage bankers can be made stronger and competitive.”

    He said the CBN was not concerned with recapitalisation of the banks alone, arguing that there are others issues that they are of importance to the growth of the mortgage companies. Okoroafor said the apex bank is awaiting for the deadline to expire at the end of this month before taking the next step.

    “Let’s wait till the end of April before we can talk about the issues of companies that would meet the recapitalisation deadline or not. When we get to the bridge, we would know how to cross it,” he said.

    Meanwhile, operators are upbeat about the April 31 recapitalisation deadline for them to shore up their base to N2.5billion and N5billion for those that want to play at the state and the national levels.

    The Managing Director, Skyfield Savings and Loans Limited, Mr Kola Abdul, said the mortgage firms are eager to raise the capital because of its benefits to them. Abdul said the deadline is sacrosanct because CBN has promised not to change it. He said the major issue facing the companies is how to get the required capital and make good returns.

    He said banks that are able to recapitalise will be able to compete favourably for business, expand their operations and improve their profitability. He said the recapitalisation signals a good omen for the sector that is struggling to survive.

    In a related development, the President, Mortgage Bankers Association of Nigeria(FMBN), Mr Abimbola Olayinka, had predicted that 25 mortgage companies would scale the deadline, stressing that there would not be any need for extension. He added that the recapitalised banks would have capacity to absorb shocks.

  • Pension funds: Senate orders arrest of task force chairman

    Pension funds: Senate orders arrest of task force chairman

    The Senate on Wednesday ordered the arrest of the Chairman, Pension Reform Task Team (PRTT), Mr. Abdulrasheed Maina.

    This followed the refusal of Maina to honour invitation by the joint Senate Committee probing the management of pension funds in the last five years.

    Chairman of the joint Committee, Senator Aloysius Etok, announced that Senate President, David Mark, has signed a warrant of arrest mandating the Inspector General of Police, Mr. Mohammed Abubakar, to arrest and bring Maina to the Senate dead or alive on Thursday.

    The Senate had on Tuesday said that Maina failed to account for N195 billion pension funds.

    Vice Chairman, Senate Committee on Public Service, Establishment, Local and State Governments, Senator Kabiru Gaya, disclosed this at the resumed public hearing on the management of pension funds on Tuesday.

    Gaya, who gave breakdown of the missing pension funds, said that in the Head of Service, a total of N139, 056, 523, 955. 20 was released, N100, 641, 106,957. 33 paid to pensioners with a balance of N39, 783, 682, 993. 00 unaccounted for.

    In the Police Service pension office, he stated that N131.5 billion was released in five years but only N58.3 billion was paid to pensioners while the sum of N44. 2 billion is yet to be accounted for.

    In Customs, Immigration and Prisons Pension Office, he said that a total of N85, 249, 222, 900. 16 was released, N27, 452, 200, 993.72 billion paid to pensioners leaving a balance of N27, 797, 822, 127. 00 unaccounted for.

    In Military Pension Board, he said that N317, 609, 082, 566. 05 billion was released, N294, 076, 743, 532. 87 billion paid to pensioners with a balance of N23, 532, 339, 034. 00 billion unaccounted for.

    In the Department of State Service Pension Office, Gaya disclosed that N34, 698, 149, 304. 68 billion was released, N9, 413, 090, 416. 00 paid to pensioners with a balance of N26, 121, 394, 662. 63 unaccounted for.

    Before the warrant of arrest was issued, Gaya said: “We have the rule and we have the power to request the Inspector General of Police to arrest and bring Maina here.

    “This committee has been patient to give him fair hearing. Members of the committee have resolved to ask the IGP to arrest him and bring him here tomorrow (today) by 11 am. Maina has to respect the law,” Gaya told the lawmakers.