Anohu-Amazu: PRA Now Allows Contributors with Sufficient RSA Balances to Own Homes through Mortgages


For the first time ever, the world pension regulators and professionals will gather in Nigeria tomorrow to discuss sustainable ways of managing pension funds. The Director-General, National Pension Commission (PenCom), Chinelo Anohu-Amazu, in this interview with Kunle Aderinokun, Associate Editor, points out the highpoints of the event. Anohu-Amazu also addresses relevant issues in the nation’s pensions that have been bogging the minds of many Nigerians. Excerpts:

Come October 5 and 6, the world will converge on Abuja as Nigeria hosts the World Pension Summit, Africa Special. How well have you prepared and what are the expectations?

The maiden World Pension Summit ‘Africa Special’ was held in July 2014. It was a notable milestone for Nigeria for the first time ever to host a global assemblage of finance and pension professionals. The summit provided a platform for peer review and discourse on innovative ways to strengthen pension administration on the continent. The 2015 Summit, holding on the 5th and 6th October promises to be even more exciting. With the theme “Building Sustainable Pension Systems in Africa” the summit will feature high level regional reports on the advancement of pension systems in Africa, which seeks to highlight how learning points of the previous summit has impacted on improved service delivery in pensions. We will also deliberate on efficient ways of structuring pension fund Investments for increased efficiency and sustainability; the huge prospects for Micro Pension Plans in Africa, and the much needed expansion of Investment frontiers for Pension Funds. The Summit would also feature the maiden edition of the Africa Pension Awards, intended as a platform to recognize achievements in the pension sector that impact on developments in Africa. The awards are to emerge from a rigorous selection process conducted by an evaluation team that is comprised wholly by international experts on pension and social security.

What is delaying the payment of accrued rights?

A key distinguishing feature of the Contributory Pension Scheme (CPS) is that it is fully funded as opposed to the Defined Benefits (DB) or Pay-As-You-Go scheme. The issue of payment of accrued pension rights emanated from having to transfer some employees mid-career from the old DB Scheme to the CPS after the enactment of the PRA 2004. Following the transfer, the employees were issued with a bond comprising of their entitlement prior to the transfer to the CPS. These bonds were to be redeemed at retirement. Based on the PRA, the government sets aside a percentage of the wage bill for the funding of the accrued rights. Since the inception of the CPS, the Federal Government has displayed substantial commitment on its obligation to the retirees. The current unfortunate delay being encountered is not unconnected to the drop in global oil prices in 2014, which directly impacted the revenue generation of the country.This has affected not only the payment of salaries but also the timely release of the funds for payment into the retirees’ RSAs.

The good news is that we are highly optimistic that this issue would soon be resolved. You are aware that the commission had briefed His Excellency, President Muhammadu Buhari on its activities and this was one of the issues highlighted. Mr. President was very concerned with the situation and directed the relevant agencies to expedite action on immediate settlement of the arrears.

There had been suggestions that pension funds should be used to finance infrastructure. We read that the Energy Ministry was discussing with PenCom and CBN and other stakeholders on how to go about this. What is the latest in this regard?

Discussions are ongoing with both the public and private sectors on efficient infrastructure initiatives. However, we must be clear that the accumulated pool of pension funds belong to individual contributors. The system in place is such that every Naira of that pool can be ascribed to an RSA. The funds are unitised, daily values determined and daily reports rendered to PenCom as the investments must comply with the investment regulations. The regulation was drawn with in-built risk mitigation tools in order to primarily ensure safety and fair returns on the assets. I highlighted the foregoing to buttress the level of accountability with which the funds are managed and the nature of investments allowed. Again, there are liquidity considerations due to the reality that contributors retire on a daily basis, thus, an appropriate investment mix to ensure that obligations are met must be attained. The dearth of adequate infrastructure, not only in Nigeria but across the African continent, has remained a clog in economic development. These concerns define the imperative of pension funds, as long-term patient capital, to play a role in infrastructure investments. However, the nature and structure of such investments is critical to the efficacy. The present administration has identified the provision of infrastructure as a key focus area and significant steps to encourage structured initiatives.

We learnt that PenCom is about to come up with guidelines that will assist RSA holders to pay for their mortgages or build houses. Please explain the philosophy behind it. And how far have you gone in actualising this?

One of the highpoints of the PRA 2014 is the provision which allows contributors to utilise part of their RSA balances towards payment of equity in a mortgage for the acquisition of a primary home.

The main rationale stemmed from what was obviously a critical aspiration of most workers. Since the CPS was designed to be responsive to the needs of contributors, the PRA now allows contributors with sufficient RSA balances to own their homes through mortgages, while still in active service. I should emphasise that the guidelines would be clear that access to the funds is to secure mortgages through appropriate institutions and after necessary due diligence. This is to ensure that the funds are utilised as intended. In a nutshell, there will be no cash given to contributors directly to build houses, since the law clearly does not allow that to be done. We have recently exposed the draft guidelines to various stakeholders for their input. Thereafter, the finalised guidelines will be issued after necessary internal approvals are concluded.

How easy is PenCom making the transfer window work for RSA holders because RSA holders have been agitating for it? And I know that PenCom is working on something but how soon will it happen?

The CPS is a pension scheme that allows contributors to take the decision on which PFA will manage their RSAs. This is one of its key in-built transparency mechanisms and promotion of healthy competition by its operators. It also allows the contributor to change a PFA through the RSA Transfer Window. It’s important that the Transfer Window takes off with appropriate structures that would guarantee lasting results. We realised the need to provide a sound technology platform that would adequately enable smooth operations of the transfer window from the onset. There is also the need to ensure that all contributors are biometrically identified to ensure that there are no duplications once the transfer commences. Already, the ongoing processes have reached advanced stages for an efficient implementation of the Transfer Window.

What is PenCom doing about non-remittance of deductions by private organisations?

We remain resolute in our determination to drive compliance at every level. We commissioned recovery agents to examine employers’ records and determine outstanding pension contributions and non-remittances for payment to be made. Substantial recoveries are being made and remitted. It is instructive to note that these non-remittances are being paid with appropriate penalties as well as interests that would have accrued to the RSAs. In the case of recalcitrant organisations, particularly those who make deductions from salaries of their employees but do not remit to their RSAS, we reiterate our resolve to ensure we turn them in to the appropriate law enforcement agencies.

PenCom is supposed to be supervising the Pension Transitional Arrangement Directorate (PTAD) and yet PTAD reports to the Finance Ministry. Why is it so?

PenCom was established by the PRA to regulate all pension matters in Nigeria. As at 2004 when the PRA was first enacted, there were retirees under the old DB Scheme in the public sector. Thus, under the transitional arrangements in the PRA, PTAD was to be established to oversee retirees under the old DB scheme in the Federal public service. The effective implementation of this provision commenced in 2012 when the government constituted an Inter-Ministerial Committee (IMC) chaired by the Director General of PenCom to recommend holistic measures at resolving the old DB issues.

The recommendations of the IMC led to the commencement of PTAD in 2013. However, the enactment of the PRA 2014 thereafter streamlined the structure of PTAD through express enabling provisions to consolidate under one platform, all the FGN pension departments, i.e. Civil Service; Police and Customs, Immigration and Prisons (CIPPO). PTAD is regulated by PenCom and guidelines for their operations have been issued. That PTAD reports to the Federal Ministry of Finance is as prescribed by the PRA 2014 for administrative purposes. This does not in any way conflict with our regulatory activities.


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