The Nation Newspaper

Tag: pensions

  • ‘Pensions now fully secured’

    ‘Pensions now fully secured’

    Umaru Modibbo, Managing Director/CEO of Sigma Pensions Limited, is optimistic that the pension funds are fully secured and safe. He spoke with Joe Agbro Jr.

    With N3.5tr pension funds in the pool and over 5.6 million workers, how do you think these funds should be invested to ensure optimum returns on investments?

    Already, these monies are not idle. As prescribed by PENCOMM, we can invest even up to 100% in government securities. We are holding government securities. We’re also having investments in money collection banks. And we also have equity. So, the monies are already being utilised by the economy. It’s inside the economy already. It’s not that it is a pile of money sitting somewhere. No, it’s in the system already.

    At Sigma Pensions, what share of the PFA market do you control?

    I’m controlling about ten to 11 percent of the market. I have a total of N240billion I am managing as at today.

    There has been claims by some workers that companies don’t remit their share of the pensions pool as at when due. What legal remedies are open to employees of those companies?

    Under the law, the Reform Act says you should remit it (pension) seven days after the last pay day. But if you don’t do that, you’re bound to pay interest rate of whatever amount you withhold. In fact the National Pension Commission has started appointing companies to go after these defaulting employers and get them to pay. And they have started paying. Some law firms and accounting companies were appointed by National Pensions Commission to pursue these defaulting employers and get them to pay together with the interest to the organisation.

    A lot of people’s confidence has waned in the areas of pensions, especially in the area of misappropriation of funds in different quarters of the economy. There is a fear that their pension would be subject to such. How do you think the confidence level of these categories of people bee buoyed?

    Actually, when you’re talking about pensions, I know it’s a generic word. When you say pension, they will get scared. But, you know, we are transiting from the old scheme to the new scheme. The old scheme is the one that has issue. And we are the new ones that are coming in to replace them. So, these things are going to be phased out in a way because for now, all these pension scams that you are hearing is associated with the old scheme. And that is why the Act itself transits to the new scheme. So, there is this perception. I know it is a problem to distinguish between the two.

    So, you’re saying the new scheme is better than the old scheme?

    Definitely. That is why we are saying that we have N3.5trn in the past eight years and there is no single fraud, no single one kobo, is lost because of thee segregation of duty. The pension administrator is just administering this fund while the custodian is in custody of these funds. And these custodians are the big three or four banks in the country. We all know them – First Bank, UBA, Zenith and Diamond Bank. They are the ones holding this money. We can’t touch this money. We are just the administering them. We give them instructions. They would not do anything except with our own instructions while they are holding the money and PENCOMM being the referee, is sitting there and watching over. And we do reconcile these accounts on a daily basis. So, if there is a discrepancy of one kobo any day, you’ll report. And this money is already in the market place, it is in the economy.

    What would consider as some of your greatest challenges after about eight years as head of Sigma Pensions?

    The challenges have always been compliance. People don’ want to comply, especially employers. Consider our population. We are 160 million. What percentage is the working population in Nigeria? We are possibly like 45 million by our estimates. Only about 5 million are registered out of an estimated working population of 45 million. So, where is the 40 million? Add that 40 million on top of five million and you will see the difference. You will see the amount.

    You talked of companies not being compliant being the major challenge. What do you think should be done to make companies more compliant?

    Like I said, we need to get them. Some of them would say, ‘I don’t have the money. It’s an additional expense to my payroll, why would I pay?’ But the issue is that we’re trying to sensitise the workers. It’s their rights. If an employer is short-changing you in a way because it is your money he is reducing. Some would even deduct and not pay. So, double jeopardy. He refuses to pay his portion. He took your own portion and refused to pay. So, he has taken two times of your money. He is supposed to take 7.5% from your salary which he has done. He is supposed to take another 7.5% to make it 15%. So, he has taken 15% of your salary. Why would you allow him? You (employee) are suppose to whistle-blow. Tell Pencomm that his guy is taking my money and he is not paying. Or he has refused to comply. You can do that anonymously without being known. You can write a letter without putting your name. The regulator would now send an investigator to track compliance because he would tell them his why he is no remitting or he is not even complying.

    How would you describe your experience in business?

    We brought a crop of people who are seasoned who have been in the financial market. And by regulation, for you to even be a managing director of a PFA, you have to have 20 years relevant cognate financial services experience. The rules are very clear. You cannot just bring anybody and say, come and manage this place. We have for each grade of employees, we have the number of financial services you need to have. That has been the rule and we have been following it throughout the cadre from the bottom to the top. So, whoever you see that is in the pensions industry must have been qualified to be there because your approval for appointment would have to be given by the National Pensions Commission and they are very strict on that. So, I don’ have any problem. And you can see the pedigree of those that are on board. And the management, they are all qualified by the law and they have the required financial and regulatory requirement.

    So, what is your management style like?

    We are consultative. We are open. We take feedbacks from clients and we try to improve on a day to day basis.

    How do you motivate your staff?

    Engage them. We encourage them, let then be a part of the business. We even give them shares so that they would be co-owners of the business. We have what we call staff share scheme which we have given them five percent of share capital of the company to be distributed to the staff on loan which they pay gradually. And it makes them feel they are part of the company and theey aree part of the successes.

    And how do you scold erring staff?

    We have internal disciplinary mechanism and there are also rules governing that. If you are caught with some bad behaviour, after being dismissed, you can also be blacklisted. And nobody else would employ you in the industry. This, we have been doing and I think we’ve been very successful in that,

    As a CEO, what are the simplest and the toughest decisions you’ve had to make?

    Simplest decisions are the day to day ones. These are very difficult questions. But to make people change is difficult because people are used to adhering standards. You have to put your feet down and say, ‘this is the standard I want to maintain.’ And whoever cannot meet that standards, then you show him the way out.

    What drives you as an individual?

    What motivates me is success and more success

    And your ideal worker?

    My ideal worker is somebody who is performing higher than his target. And I think that is the benchmark for measuring it.

    How do you measure staff loyalty?

    First, you meet your target. I don’t want somebody to be loyal to me and not meet his target. Meet your target first before any other thing.

    After being MD of Sigma Pensions, what plans do you have?

    I will retire and get my retirement benefits.

    Your best holiday choice?

    I go to the village where it is quiet and then I rest.

    Any hobbies?

    Not quite. I’m not a sportsman.

    So, how do you relax?

    I relax when I go reading

  • Pensions influence catastrophe reinsurance

    The $30 trillion global pension fund industry is starting to muscle in on traditional reinsurers financing protection against earthquakes and tornadoes.

    This is even as interest rates, which near record lows spur the search for yield on catastrophe.

    According to The Telegraph, Guy Carpenter, the reinsurance brokerage of Marsh & McLennan Cos, said a record $10 billion of institutional money flowed into insurance linked investments in the 18 months through June, and for the first time is directly influencing pricing of some catastrophe risk coverage.

    LGT Capital Partners AG added that catastrophe bonds can yield as much as 15 per cent.

    Coverage provided by alternative capital, as pension and hedge-fund money is known in the insurance industry, reached $45 billion at the end of 2012, about 14 percent of the total global property catastrophe limit purchased, Carpenter said. While welcomed by nations seeking to spread disaster burdens, pension investment is pushing down prices, even as reinsurers press for higher rates to compensate for more frequent extreme weather.

    David Flandro, global head of business intelligence at Guy Carpenter in New Yorksaid this is the biggest change to the reinsurance sector’s capital structure in the last 20 years.

    “Catastrophe reinsurance is relatively high-risk, high-return. Pension funds are looking for direct access. Most of the capital is here to stay.”

    In a catastrophe bond, insurers pay buyers some of the premiums collected for protection against damage from natural disasters. In exchange for above-market yields, investors assume the risk of a disaster during the life of their bonds, with their principal used to cover damage caused if the catastrophe is severe enough. The first catastrophe bonds were issued after Hurricane Andrew in 1992.

    Meanwhile, New Zealand’s Superannuation Fund said in May it planned to more than double its holdings in catastrophe bonds and other insurance linked assets, while firms such as PGGM NV in the Netherlands and Royal Bank of Scotland Group Plc’s employee retirement fund have stepped up their reinsurance investments.

    Pension assets have reached $30 trillion globally this year, according to estimates from J. P. Morgan Asset Management.

    “This is a coming-of-age moment,” said Michael Millette, global head of structured finance at Goldman Sachs Group Inc., which managed a catastrophe bond offering for the New York Metropolitan Transportation Authority after Superstorm Sandy in 2012. “Some of the largest asset-management complexes in the world are becoming more engaged in the space.”

    Catastrophe bonds can become even more attractive in the wake of a disaster as capital is depleted and insurance prices rise, said EvelineTakken, head of insurance-linked securities, or ILS, at PGGM, which oversees about 140 billion euros ($193 billion) in retirement savings for Dutch pension funds.

    PGGM is continuing to set up new investments in catastrophe insurance, eight years after its first forays following Hurricane Katrina, she said by phone from Zeist, Netherlands.

    The Swiss Re Cat Bond Total Return Index, which tracks dollar debt sold by insurers and reinsurers, shows catastrophe bonds have returned about 10 percent this year. U.S. 10-year Treasuries currently yield 2.5 percent. Takken and other fund managers interviewed declined to disclose their returns.

     

  • MDAs to use e-channels in salaries, pensions’ remittances

    MDAs to use e-channels in salaries, pensions’ remittances

    To address revenue leakages in the government and private sectors of the economy, the Central Bank of Nigeria (CBN) is encouraging ministries, departments and agencies (MDAs) to ensure salaries, pensions, suppliers and taxes payment are done with e-payment channels. The policy, however, applies to organisations with more than 50 employees.

    The CBN in a circular said the process will reduce time and costs of transactions, minimise leakages in government revenue receipts and provide reliable audit trails, thereby making the payments system comply with global standards.

    The is to save cost, promote transparency and accountability in governance and increase internally generated revenue (IGR). The e-payment policy is also expected to ensure confidentiality of information of e-payment of taxes, salary, pension and suppliers.

    It said, henceforth, payment instructions and associated schedules are no longer to be transmitted to banks by public and private sector organisations through unsecured channels such as paper-based mandates, flash drives, compact discs and email attachments, among others.

    The transactions must be routed through bank approved electronic platform which transmits the instruction to debit a payer’s account and credit a beneficiary’s bank account, mobile account, electronic wallet or any other electronic channels.

    It shall include the ability of a payer to independently monitor and obtain electronic feedback on the status of any payment, at any time without depending on any third party, manual or semi-manual means.

    Draft guidelines that will ratify the policy have been sent to commercial banks and payment service providers. The exercise is in line with its powers as provided in the CBN Act, 2007, Section 47, Sub-section 2(2d).

    It said the policy fully aligns with the core objectives of the National Payment Systems Vision 2020 (NPSV) which is to ensure the availability of safe and effective mechanisms for conveniently making and receiving all types of payments from any location and at any time through multiple channels.

    The CBN said all public and private sector organisations who maintain relationship with employees, pensioners, suppliers and taxpayers and other entities are considered as relevant stakeholders required to work together for the success of the policy.

  • National Assembly and its controversial pensions

    National Assembly and its controversial pensions

    The National Assembly is proposing life pensions for its principal officers. AUGUSTINE AVWODE examines the controversial proposal and its implications for the polity.

    THE decision of the National Assembly on the life pensions for the Senate President, his deputy, the House of Representatives Speaker and the Deputy Speaker has continued to generate controversy.

    Many Nigerians believe that the move smacked of egocentricity and insensitivity to the mood of the polity. And it has attracted so much condemnation.

    If the proposal becomes law, then, the principal officers will be entiled to a pension for life at a rate equivalent to the annual salary of the incumbent President and the Deputy President of Senate, the Speaker and the Deputy Speaker of House of Representatives.

     

    Life pension for what?

     

    But since the Senate voted overwhelmingly in favour of the recommendation, Nigerians have been seething with anger. Speaking with The Nation, Lagos lawyer Chief Fred Agbaje chided the lawmakers for “awarding” life pension to their principals. He questioned the rationale and morality behind the decision. He wondered whether they appreciated the full implications of the decision for the economy and the social divide.

    “Life pension for what? Anyway, don’t you know that our lawmakers love us so much? Have they not represented you well enough? You have constant light, good roads and the best security ever. What else do you want from them? Shouldn’t our lawmakers, who made these possible, be given life pension for such a good job? What else do you want?”, he queried.

    Agbaje said the beneficiaries are comfortable Nigerians, adding that they do not deserve the benefits.

    “What type of life pension are you going to pay to the likes of Senator David Mark, who apart from collecting pension from the military as a retired General, a one-time state governor and a former minister, who also has a Golf Club? Is a Golf Club a poor man’s business?”, he asked.

    A political scientist, Prof Kimse Okoko of the University of Port Harcourt, described it as a demonstration of impunity. He said that it is immoral and unacceptable.

    “The decision of the National Assembly is a demonstration of the culture of impunity that we have come to know in this dispensation. It shows a lack of sensitivity to the feelings of Nigerians. Approving life pension for the leadership of the National Assembly is condemnable, especially when the majority of Nigerians are struggling to get food to eat. It is immoral, especially when you consider the obscene salaries and allowances they had approved for themselves,” he said.

    Veteran unionist Chief Frank Kokori, the former Secretary General of the National Union of Petroleum and Natural Gas (NUPENG) Workers, attributed the decision by the lawmakers to self-aggrandisement. He lamented that the Labour, Civil Society Organisations (CSOs) and other pro-democracy groups have failed to gavalnised the people to resist the move.

    “No sane person would support it, except, of course, the lawmakers themselves who are the same. In a situation where there is no cogent opposition to this type of development, they win easily. If it were to be our time, they dare not think of it, not to talk of endorsing it”, Kokori said.

    Prof Itse Sagay (SAN) shared Okoko’s sentiment. He argued that the life pension for an elected individual, who holds an office for four or eight years is undesirable.

    He said the lawmakers were selfish.

    His words: “They are not there to look after the country and Nigerians, but themselves. You don’t get a pension for being elected for few years as a political operator. Pension is meant for life service with an organization.

    “So, for them to add pension to the enormous salaries and other allowances, show how insensitive they are”, he said.

    Another Lagos lawyer, Bamidele Aturu, said that it is condemnable. He maintained that the next generation of lawmakers will likely do anything to become the principal officer of the National Assembly because of the anticipation of earning a life pension.

    “This is one clause that I think Nigerians should condemn in the strongest term possible. After serving for four years, with the emoluments and the benefits that are outrageous, all paid for by the taxpayers, why still subject the taxpayers to servicing you after you have left the office? With this type of clause, why won’t people kill to get to the National Assembly? Why won’t people do all kinds of despicable things to become one of the principal officers of the House or Senate? I think we should condemn it and call on them to rescind it. By the way, what exactly do they need it for,” he asked.

     

    Smuggled clause

     

    It has been alleged that the clause was smuggled into the items for consideration. A chieftain of the Peoples Democratic Party (PDP) from the Southsouth who spoke on condition of anonymity, told The Nation that life pension for lawmakers was not debated at the public hearings.

    “This is not fair. The senators have not been fair to Nigerians. They have the power to amend the constitution and they have abused it. No wonder, people say if men were God, they would do whatever they want. It is bad. It is unfair and wicked”, he said.

     

    Implication for the polity

     

    Many Nigerians believe that the legislators are competing for the control of public funds with the executive.

    Currently, only the President and the Vice President are entitled to life pensions. There is also a limitation. Any President or Vice President impeached by the National Assembly is excluded from the benefit.

    But in the present instance, no such limitation or check exists. The implication is that, if it becomes law today, all those who had held the positions from 1999 to date will automatically benefit from it.

    The amount to be paid to all the former Presidents of the Senate and Speakers of the House of Representatives and their deputies, that are still alive would be enormous. In a country where experts are calling for a reduction in the cost of governance, this clause, analysts say, is economically unwise.

    Besides, nobody can say with precision the number of leaders that will preside over the affairs of the Senate and the House of Representatives within a four year term. The polity is susceptible to unpredictable change.

    The implication is that there could be as many Speakers of the House and Presidents of the Senate as possible within four years. Ambitious legislators may orchestrate a change in the leadership of the House or the Senate in a way that the provision would become an albatross for the nation.

    Will it scale through or not? If it does, how will it benefit Nigerians and what value will it add to the democratic practice in Nigeria?