Ahmad implores pension operators to unlock informal sector

From left: Managing Director, IEI Anchor Pension Manager, Glory Etaduovie; representative of Director General, National Pension Commission, Clement Akintola; Chairman, Senate Committee on Establisment and Pension, Senator Ibrahim Shekarau; Chairman, House of Representatives Committee on Pension, Hon. Alhassan Rurum and Former Director General, National Pension Commission, Muhammed Ahmad at the event.

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Chuks Udo Okonta

The Former Director-General, National Pension Commission (PenCom) Muhammed Ahmad has implored pension operators to unlock the informal sector by reaching out to the workers.

He said this today at the 3rd annual Pension Fund Operators Association of Nigeria (PenOp) and National Assembly retreat in Lagos, stressing that pension operators should never expect the workers to come to them willing without engaging them.

Speaking on the theme: 17 Years of Pension Reforms: Gains, Challenges and Opportunities, he maintained that the micro pension plan was evolved to unlock the informal sector, adding that the set objective for the plan could only be achieved through proper and regular engagements with people in the sector.

Ahmad posited that the pension and insurance sectors are yet to gain more grounds in the financial inclusion strategy. He then implored pension operators to assist informal sector workers in planning their future by bringing them into the micro pension plan.

President, Pension Fund Operators Association of Nigeria, Wale Odutola, noted that the growth of any industry is premised on constant dialogue and communication among the key stakeholders, adding that over the years, PenCom and the operators have built a strong and robust stakeholder engagement framework which has significantly assisted in the growth and development of the Pension Industry.

He submitted that PenCom and PenOp have also developed a strong relationship with the National Assembly whom they recognize as key partners in the industry.

“In the last 17 years, Nigeria’s pension industry has certainly come a long way from when the pension reform act was initially passed in 2004.

“The industry has moved from a largely unfunded pension system to one that is fully funded, professionally managed, and mainly private sector driven. We can all agree that the Contributory Pension Scheme practiced in Nigeria, has adopted international best practices, is technologically driven and has grown steadily over the period.

“There is also a marked progress with respect to the level of professionalism within the industry. The pension industry has raised the bar for professionals locally.

“The investment, risk and compliance professionals within the industry can favourably compare to their counterparts anywhere in the world. Indeed, the industry has bred a new class of pension professionals across board over the years,” he said.

He went further to highlights areas where the industry lags behind other countries, stressing that one area was the level of pension penetration.

According to him, Nigeria currently has a pension penetration rate of approximately 11 per cent of its labour force, adding that this pales in comparison to 19 per cent in South Africa, 20 per cent in Kenya and 77 per cent in the United Kingdom.

“Consequently, it goes without saying that the industry needs to deepen its level of penetration, especially in the informal sector,” he added.

Another area of improvement, he noted was the level of pension assets to GDP. Nigeria’s level of pensions assets to GDP is only a little over seven per cent while in developed markets, it’s typically above 100 per cent, he submitted.

“So, whilst the level of our pension assets are relatively large in absolute terms, when you look at it in relation to GDP, it is actually low. This further speaks to the fact that we need to increase the level of penetration of the pensions scheme in general,” he added.

Odutola maintained that whilst stakeholders applaud the fact that the industry has grown in number of areas over the years, there are still areas that require improvement.
“This is not lost on us as operators or as an industry. We continue to work with the regulator and other stakeholders, including the National Assembly, on several areas in the near and long term. These include areas like market development, Service delivery, National impact, upskilling of pension professionals and maintaining a sound and ethical environment within the industry,” he posited.

On market development, he noted that the operators are engaging with market operators, the exchanges, the regulators, and international organisations to develop new and alternative products that pension funds can profitably invest in. “It is in ours and our contributors’ interest to continually find new products and markets that meet our objectives,” he added.

He submitted that on service delivery, operators realized that the industry needs to reduce its cost to acquire and serve its current and future contributors, adding that operators need to increase the level of technology adoption and collaboration within the industry on shared services and the likes.

“In addition, we are working towards ensuring that the pension industry has a greater positive effect on National development by increasing our funding for infrastructure and transformational companies, sectors and projects in a sustainable manner that does not jeopardize our fiduciary responsibility to the pension contributors who are the ultimate beneficiaries of the funds,” he said.

He said operators also need to continue the process of improving professionalism within the industry by focusing on learning and development and adoption of international best practices in their operations

He posited that operators must work to protect the integrity of the industry, by ensuring a level playing field for all operators and a process to address grievances and other issues through a self-regulatory framework.

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