The Nation Newspaper

Tag: pension

  • Pension most regulated, says Rewane

    Pension most regulated, says Rewane

    The cumulative contribution of N4 trillion pension recorded by the National Pension Commission (PenCom) since its existence nine years ago, is contributing significantly towards the economic development of the country, Managing Director, Financial Derivatives Company Limited, Mr. Bismark Rewane, has said.

    He said the industry is one of the best and most regulated industries in the country, adding that the amount is remarkable.

    He said: “We have N4trillion as pension funds, and this is remarkable in terms of the growth rate. It is important to note that in spite of the financial crisis in 2008, the pension fund did not lose any money. There was a market crisis and none of the Pension Fund Administrators (PFAs) lost money.

    “The pension industry is one of the best regulated in the country today, and it is contributing significantly towards economic development in the country,” he said.

    On whether the contributors are getting good investment returns on their contributions, Rewane said the limitations on investment as provided by the Pension Reform Act is good enough to ensure that the workers and retirees pensions are safe.

    He said if contributors want higher returns, then they must be ready to accept higher risk.

    The PFAs are limited in terms of investments, but they like it because the regulations prevent and protect them from going to take risky bets. You don’t bet with people’s money, he added.

    The Regulations on Investment of Pension Fund Assets under the PRA Act states that PFAs shall invest pension fund assets with the objectives of ensuring safety and maintenance of fair returns.

    He continued: “PFAs shall recruit and retain highly skilled personnel in their investment departments, shall not invest Pension Fund Assets in instruments that are subject to any type of prohibitions, or limitations on the sale or purchase of such instrument, except for open, close-end or hybrid funds and specialist investment funds allowed by this Regulation.

    “PFAs shall not trade on margin accounts with pension fund assets. A PFA shall not engage in borrowing or lending of pension fund assets; shall not trade in financial instruments with pension fund assets at prices that are prejudicial to the pension fund assets.’’

    He added: “When investing in eligible bonds or debt instruments issued by state or local governments and corporate entities, pension fund assets shall be invested only in eligible bonds, or debt instruments issued by states or local governments and corporate entities that have fully implemented the Contributory Pension Scheme (CPS).

    “The Commission shall provide periodic lists of compliant state or local governments and corporate entities. PFAs are to ensure that appropriate legal and financial due diligence are undertaken on all prospectus, or offer documents of eligible bonds or debt securities and other allowable instruments prior to investment.

    “All primary market investments by PFAs in ordinary or preference shares of eligible corporate entities shall only be through public offerings approved by the Securities and Exchange Commission.”

  • ‘Pension bosses must disclose costs’

    Pension fund managers will be forced to come clean about hidden costs which can wipe tens of thousands off the value of retirement savings pots under plans being set out by the government.

    Ministers will announce that fund managers of defined contribution workplace schemes must in future disclose full details of all their costs to the public, The Times reported.

    The Office of Fair Trading (OFT) warned last year that there was “insufficient visibility and comparability of charges” to ensure that competition in the market was fully effective.

    A Department for Work and Pensions spokesman said: “We’re taking action to ensure consumers have access to good quality pension schemes so they have the confidence to plan for their futures.

    “A lack of transparency around the true cost of schemes can prevent savers from having value for money. We will outline our proposals to tackle this issue shortly.”

    The Times reported that the announcement on disclosure of charges had been brought forward to avoid a damaging Lords revolt led by former chancellor Lord Lawson.

    Speaking during debate on the Pensions Bill last month, Lord Lawson said: “In a competitive market, compulsory disclosure will go a very long way towards removing the mischief.”

    Pensions Minister Steve Webb promised a “full frontal assault” on pension scheme charges, with the Government consulting on a cap of around 0.75 per cent a year.

    Small variations in charges can make huge differences over time to the eventual size of the pension pot that someone ends up with.

    The government said someone who saves £100 a month over a typical working life-time of 46 years could lose almost £170,000 from their pension pot with a 1 per cent charge and over £230,000 with a 1.5 per cent charge.

  • California pension boosts rates

    The California Public Employees’ Retirement System, the largest in the United States public pension, will begin phasing in higher contribution rates to account for the increased costs of retirees living longer.

    The board of the $282.5 billion fund voted yesterday to boost the state’s annual allocation to $5 billion over three years, from $3.8 billion now. Local government increases were postponed for two years.

    The vote represents a partial victory for Governor Jerry Brown, a 75-year-old Democrat, who urged the board to reflect the increased costs of increased longevity in three years. Cash-strapped local governments won a delay to help build a cushion before the higher payments kick in.

    “We have to be as aggressive as we possibly can without causing significant fiscal stress for our most challenged participants,” said Christopher McKenzie, executive director of the League of California Cities, who argued for a delay on behalf of municipalities.

    Local governments may see costs rise as much as five per cent of payroll for typical state employees and as much as nine per cent of payroll for those in public-safety jobs, such as police and firefighters, at the end of a five-year phase-in, Calpers said in a statement.

    “No one likes to pay more for pensions, but ignoring their true costs for two more years will only burden the system and cost more in the long run,” Brown said Feb. 5 in a letter to Calpers.

    By 2028, men who retire at 55 are projected to live 2.1 years longer and women 1.6 years longer, boosting the state’s costs by $1.2 billion a year, or 32 percent, the governor said.

  • TD’s Clark to get $2.2m Lifetime Pension

    Dominion Bank (TD) Chief Executive Officer Ed Clark will get a lifetime yearly pension of C$2.49 million ($2.23 million) after stepping down as head of Canada’s largest lender by assets.

    According to Bloomberg, Clark, 66, is set to retire November 1 after leading the Toronto-based bank for almost 14 years. As part of his employment agreement, Clark’s pension payout will continue “unreduced” to his surviving spouse for her lifetime following his death, the firm said in a filing yesterday with Canadian regulators.

    The pension was determined using the yearly average of Clark’s highest consecutive 36 months’ salary and a percentage that became fixed in October 2010, when his pension benefits were frozen with no further accruals, according to the filing. The firm’s “supplemental executive retirement plan” was closed to new members in 2009, the filing shows.

    “This is a compensation element that has been decreasing in prevalence,” said Joe Sorrentino, Managing Director at Steven Hall & Partners LLC, a New York-based consulting firm. “When it was put in place it was pretty common practice, but over time we’ve seen the decline in these types of programs.”

    Clark joined Toronto-Dominion in 2000 after it acquired Canada Trust’s parent CT Financial Services Inc., where he was president and CEO. Since taking over the top job in 2002, he’s spent more than $25 billion on U.S. acquisitions to build a network of branches stretching from Maine to Florida.

    Royal Bank of Canada (RY) CEO Gordon Nixon, the country’s highest-paid bank head, is entitled to a maximum annual pension of C$2 million at age 65, according to a January 31 filing by the Toronto-based bank.

    Annual pension benefits payable as of year-end were C$1.68 million, the filing said, and disclosures don’t say if his pension is transferable to a spouse. Nixon, 57, will retire Aug. 1 after 13 years leading Royal Bank.

    Ali Duncan Martin, a Toronto-Dominion spokeswoman, and Royal Bank’s Jason Graham didn’t have an immediate response to questions about the CEO pensions.

    Pensions started to fall out of fashion in the late 1990s and early 2000s, after drawing more scrutiny from shareholders, Sorrentino said.

    “We saw some pretty large payouts in pensions and retirement benefits and those big numbers drew the ire of investors and was a focus of the press,” he said. “It’s also pretty costly to have these types of programs in place, so from a cost-cutting perspective that was definitely something that was a reason to curtail their usage.”

    Surviving Spouse

    The ability to transfer pensions to a surviving spouse used to be fairly typical, though transferring the full amount is “more generous” than usual, Sorrentino said.

    Many large U.S. banks have curtailed defined-pension plans with only some long-term employees grandfathered. Goldman Sachs Group Inc. (GS) froze its plan in 2004 and named executive officers haven’t accrued benefits since 1995, according to the New York-based lender’s 2013 proxy statement. Morgan Stanley (MS) froze its plan in 2010, while Charlotte, North Carolina-based Bank of America Corp. stopped offering additional compensation credits for employees in its plan in 2012, according to the firms’ proxies.

  • Pension charges cap shelved until 2015

    Pensions Minister, Steve Webb supported the plan, which capped charges above 0.75pc, as it would protect millions of people from high fees after they were automatically enrolled in their company’s pension scheme.

    The introduction of the cap has now been pushed back from April until next year at the earliest, the Financial Times claimed.

    Last October, Mr Webb vowed to crack down on pension scheme charges, pointing to a report by the Office of Fair Trading “identifying no fewer than 18 different sorts of charges which can be taken from people’s pensions”.

    He told The Telegraph: “For too long, private pension savers have been at the mercy of their pension provider. Apparently ‘low’ charges such as 1pc per year can mount up to a huge sum over the course of a working life.”

    The Department for Work and Pensions found that just 24pc of people in their 20s were saving into a company pension before the Government started automatically enrolling workers in 2012.

    Government believed plan to cap charges above 0.75pc would protect millions of workers from high fees.

  • Premium Pension strategises

    Chairman, Premium Pension Limited, Mallam Aliyu Dikko has said the company grew its balance sheet from N52.3 billion in 2008 to N325.7 billion in 2013.

    Dikko, who made this known this in Abuja said competition in the pension industry was becoming stiffer and the environment throwing up tasking challenges.

    He said this had made it imperative for the company to consolidate on its zero tolerance for non-compliance and further sharpen the risk management policy and best practices in internal control processes and procedures.

    He added that the actual assets under management surpassed the 2008 strategic plan projections for four of the five years while performance over budget ranged from a low of N276 million to a high of N19.7 billion.

    He said: “The board and management of Premium Pension in the country met last weekend to draw up strategies to consolidate gains and move the company in tandem with the anticipated growth in the industry in the next five years.

    “The company was established in July, 2005 to achieve superior customer satisfaction in active and retirement life through best practices defined and driven by our core values of care, integrity, transparency, ethics and professionalism.

    “Our performances to date when placed in juxtaposition with the strategy we developed in 2008 reveals a mixed bag of areas where the benchmark were not attained and areas where targets were exceeded.

    “This strategy defining exercise has the principal objective of leading us to our set vision and mission through defining ways of developing a strong investment management policy with state of the arts investment management tools that will produce superior returns for our clients.”

  • Pennsylvania pension-fix impasse punishes investors

    Pennsylvania, which shoulders one of the biggest pension burdens among United States, is bucking the wave of local governments trimming the benefits. Its bondholders are paying the price.

    Since 2011, seven of the 10 states with the nation’s largest retirement liabilities as measured by Moody’s Investors Service have cut the costs. Pennsylvania, ranked eighth, has made no progress in that span, after lawmakers last year failed to pass Republican Governor Tom Corbett’s proposal to curb the expense.

    In the $3.7 trillion local-debt market, the state may see its relative borrowing costs double within two years and its credit grade weaken without a fix, said Adam Mackey, head of munis at PNC Capital Advisors LLC. In 2013, Pennsylvania bonds fared worse than those of Massachusetts, which has credit grades one step higher, data compiled by Bloomberg show. Obligations of Illinois, which last month broke an impasse to bolster its pensions, outperformed both states last quarter.

    “We don’t want Band-Aids,” said Mackey, who helps oversee $6.5 billion in munis, including Pennsylvania debt, from Philadelphia. Pennsylvania “needs to legislatively get some stuff done” on pensions or it may see its AA credit grade drop three levels, he said.

    Growing hurdle

    Financing retiree benefits is a deepening challenge for localities nationwide as they recover from the 18-month recession that ended in 2009. States’ median pension-funding ratio fell to 69 per cent in 2012, from about 83 per cent five years earlier, according to data compiled by Bloomberg.

    The payments are taking money from needs such as schools, according to a January 14 report from a privately funded panel of budget analysts led by former Federal Reserve Chairman Paul Volcker and ex-New York Lieutenant Governor Richard Ravitch.

    Pennsylvania’s unfunded liability is set to grow by 38 per cent to $65 billion in 2018, according to state estimates. It has the eighth-highest pension burden as a percentage of revenue, at 105 percent, compared with the U.S. state median of 45 per cent, according to Moody’s. Massachusetts placed ninth.

    In trading last year, the extra yield that investors demand to hold Pennsylvania obligations fell by 50 percent, to about 0.14 percentage point at year-end, Bloomberg data show. That trailed the 77 percent decline for the Massachusetts spread, to 0.08 percentage point. Mackey at PNC Capital said he compares Massachusetts and Pennsylvania debt for relative value.

    2010 Changes

    Pennsylvania’s most recent pension changes, in 2010, extended the practice of paying less into the systems than actuarially required, according to Standard & Poor’s.

    Massachusetts in 2011 raised the retirement age for most workers to 60 from 55 and reduced benefits for new public-safety officers, according to data from the National Association of State Retirement Administrators.

    Corbett, 64, who is running for re-election this year, plans to discuss the need for action in his February 4 budget address, said Charles Zogby, budget secretary for the sixth-most-populous state.

    Zogby said he expects the Republican-controlled legislature will propose bills this year that shift new workers to a defined-contribution plan, similar to a 401(k), from the current plan that guarantees specific benefits.

    Ratings companies have cited pension funding as a concern, Zogby said.

  • Rooting out pension thieves

    They toiled for the country. They gave their best for Nigeria’s growth and development. Unfortunately, they are living in abject poverty. Some have lost their lives while waiting for their entitlements as a result of some of the stringent procedures introduced into the processes of collecting their pension arrears.

    This is the sad story of many pensioners in Nigeria, no thanks to pension thieves who manipulate and beat the system to divert pension funds to their private bank accounts.

    Large sums of money running into billions of Naira have been stolen by many top officials who are saddled with the responsibility of managing and ensuring payment of pension arrears. They transmuted from petty thieves to racketeering syndicate.

    Initially, they modus operandi was lodging the funds meant for paying the pensioners into their private accounts and deliberately allow the funds to be in their accounts for months before eventually paying the poor pensioners their entitlements. This was with a view to earning fat bank interests. But now, total diversion of the funds is made with no payment made at all to some of the pensioners on flimsy excuses.

    Even as some of the thieves from Police Pension Funds and other government agencies have been exposed, taken to court, convicted and released on bail, it appears there are no strict laws in place aimed at discouraging those at the helm of affairs from tampering with the funds for their selfish gains.

    Two months ago, the Independent Corrupt Practices and other Related Offences Commission (ICPC) arrested 13 senior civil servants in connection with a fresh fraud in the pension unit of the Office of the Head of Service of the Federation.

    On the fresh fraud, the Media Consultant of PRTT, Mr. Olajide Fashikun told journalists that some saboteurs were bent on destroying the future of retirees in the country by falsifying documents to defraud government to the tune of N35 billion.

    Alhaji Kazeem Musa, who worked for several years and retired from the Department of Biological Sciences of the University of Sokoto, has not received any pension arrears since 2007. There are many other worst cases which have resulted in the untimely death of some of the affected retirees.

    Apart from other measures already taken to sanitise the system, President Goodluck Jonathan, before the commencement of the Federal Executive Council (FEC) meeting last Wednesday, inaugurated a new board for the National Pensions Commission (PenCom).

    He urged the new team to bring to a halt bad reports associated with pension payments in the country by ensuring that pensioners receive their retirement benefits as at when due.

    Jonathan said: “Government is also mindful of the fate of retirees who have served this great nation. It is therefore of paramount importance to this administration that pensioners receive their retirement benefits as at when due. PenCom is statutorily charged with the responsibilities of regulating and supervising all pension matters in Nigeria.

    “The enormity and sensitivity of the mandate of the Board of PenCom can therefore not be over-emphasised. The negative reports associated with the administrations of pension under the old scheme in the public sector in recent past have become an issue of grave national concern.”

    Stressing that several radical measures have recently been taken to restructure the scheme, he said: “This included the setting up, as provided by law, the Pension Constitutional Arrangement Department. It is our expectation that the Board of PenCom will work in synergy with this agency to engender a more robust pension system.

    “In addition, it is expected that the board will work to secure increased compliance with the Pension Reform Act, expand the coverage of the contributory pension scheme to include the informal sector, explore means of utilising the pool of funds towards Nigeria’s economic development in line with global best practices and maintain the existing culture of transparency and accountability in the management and custody of the contributory pension fund.

    “We know that other countries that have similar funds are even coming to invest in Nigeria, there is no reason for PenCom not to invest within and outside this country to even improve on the funds,” he added.

    Former Bauchi State governor, Adamu Muazu newly inaugurated as the Chairman of PenCom said: “Mr. President, your inaugural speech is very instructive. I have heard and I assure you under my supervision, PenCom will comply with your instruction and with the law.

    “I also assure you that we will ensure that compliance is made by the various states that have not complied, that the various Federal Government’s agencies and, indeed public sector and all informal sectors, will be made to comply as soon as possible.

    “In addition to that, Mr. President, we will take due diligence and we will consult with various government agencies, private sector organisations, the PFS and indeed, if need be, with other very successful pension commissions abroad to find ways and means of unveiling these monies that are made available for providing infrastructure and housing to the public.

    “In so doing, I want to assure you that these monies that are in the confines of the PenCom are owned by individuals. We will make sure, with the best of our ability, that whatever investment we make, is capital guaranteed.”

    Promising that pensioners will not only get their entitlements as at when due, but will also get good returns on their funds, he said: “We will make sure that the returns on the investment must beat inflation and possibly make very good returns for the pensioners.

    “By the grace of God, we will do whatever it takes. We will make you proud of our work in Pension Commission.”

    The provisions of the law should be reviewed to stipulate stiffer penalties for offenders in order to act as deterrent to others.

    Offenders also ought not to enjoy options of fines and bail grants when convicted since their actions, even though not through violence or gunshots are silently sending thousands of Nigerians to their early graves.

     

  • ‘New Pension Bill ‘ll change industry’

    ‘New Pension Bill ‘ll change industry’

    One of the bills that may receive attention from members of the National Assembly as they resume from recess is the Pension Reform Bill, 2013.

    The bill, which seeks to repeal the Pension Reform Act (PRA) 2004 and enact the Pension Reform Act 2013 is undergoing legislative process at the National Assembly.

    The Chairman, Senate Committee on Establishment and Public Services, Senator Aloysius Etokin told the The Nation on telephone that the committee will renew efforts to ensure speedy passage of the bill as soon as the National Assembly members resume.

    He assured Nigerians of a more regulated and stronger pension system.

    If the Bill is passed, it will bring changes to the pension industry.

    The PRA 2004 was only applicable to employers with five or more employees. But the 2013 bill will be applicable to employers with three or more employees.

    The total rate of contribution will increase from the current 15 per cent of monthly emolument being 7.5 per cent each by the employer and the employee to 20 per cent with a minimum of 12 per cent by the employer and a minimum of eight per cent by the employee.

    This section in the 2013 bill is one of the most crucial as it seeks to change the basis upon which employee’s monthly contribution is calculated. This is known as total emoluments in the proposed law as may be defined in the employee’s contract of employment but shall not be less than a total sum of basic salary, housing allowance and transport allowance. Monthly emolument simply means a total sum of basic salary, housing allowance and transport allowance.

    The implication of the new definition is that all employers and employees will have to pay more.

    For instance, a company with a salary structure in which basic housing and transport allowances account for about 50 per cent of the total compensation, the employees may have to make additional contributions of over 100 per cent of their current contributions while for the employer it could be over 200 per cent increase notwithstanding that the headline rates have only been increased by 0.5 per cent and 4.5 per cent for the employee and the employer.

    The scheme will also enhance the powers of the National Pension Commission (PenCom) in its regulatory and enforcement activities as well as enhance the protection of pension fund assets.

    It will unlock the opportunities for the deployment of pension assets for national development, review the sanctions regime to reflect current realities; and provide for the participation of the informal sector.

    The bill also seeks to provide the framework for the adoption of the Contributory Pension Scheme by states and local governments, which will create new offences and provide stiffer penalties that will serve as a deterrent against mismanagement or diversion of pension funds’ assets under any guise, as well as other infractions of the provisions of the Act.

    The 2013 bills crutinised the provision of the 2004 Act with respect to qualifying years of experience for the director-general such that the requirement is graduated in descending order from that of the Chairman at 20 years to that of the director-general at 15 years. This particular clause in the bill has been most contentious.

     

  • AIICO pension funds hit N45b

    Apension fund administrator, AIICO Pension Managers, has said it has recorded pensioners’ fund to the tune of N45 billion.

    Head, Marketing and Sales Development, MrTunde Ottun disclosed this while speaking to journalists in Lagos on the 2014 campaign of the firm.

    Ottun said the firm has nine legacy fund with existing retirees of over a thousand and 200,000 contributors registered under it comprising persons from the government and private sectors.

    He pointed out that the PFA adopted the philosophy called “Live Smart,” because it wants its pensioners to adopt a good lifestyle where judicious usage of their funds can be attained.

    He called on people to live right,plan well in advance their retirement years,get financial education and avoid flamboyant lifestyles.

    The need for the philosophy,he said,is borne out of the fact that as PFAs, they not only want to manage their customers’ pension funds, but to also enable the attainment of positive aspirations in ways that create value in their lives.

    This ideology guides our work at AIICO Pension and largely informs the way they do business, he added.

    Commenting on the workability of the philosophy, Head of Benefits, Mr TundeAdebari, said “At AIICO Pension, we have thought long and hard about what truly makes for a desirable future and comfortable retirement. Taking on this responsibility, we have developed several platforms to enable us achieve this objective”.

    He said: “Aside communicating our message to our customers, we are also currently running several radio programmes that provide audiences with information and useful tips with the aim of subtly getting the audience to reflect on those simple acts that can help them live life better.”

    To sustain this new ideology, Acting head,Investments,Mrs Susan Ifashe said the firm has upgraded their service delivery system and redefined its processes more efficiently as it has also invested a great deal in their people, inducting them in the true spirit of the brand.

    “By this, we can successfully achieve both our objectives as a business and our customers’ retirement goals. We believe that by inspiring and enabling people to live smartly, we are helping them store up value in all areas of their lives; value which they can access in future. When this happens, we have successfully done good business”.