Pension

Over N11.09tn pension fund assets oiling wheel for economic growth

Funds generated from pension contributions which presently stand above N11.09 trillion is believed to have helped shaped the economy and impact lives. Chuks Udo Okonta in this report examines how the fund is helping the nation and individuals meet their projections.

Since the inception of the Contributory Pension Scheme (CPS) which now has over 9.01 million Retirement Savings Accounts (RSAs) holders and pool of funds standing above N11:09 trillion, the Nigeria economy and lives of those directly or indirectly involved in the system have been impacted significantly.

The enactment of the Pension Reform Act 2004, which has now given birth to the 2014 Act, removed pension from the hands of government and organisations, and entrenched a refined mechanism that guarantees safety of funds contributed. This new system in the past 15 years has helped retirees enjoyed what their predecessors failed to enjoy as they retire into comfort without the hassle of queuing to have their benefits. At retirement, they are given the option to choose the retirement benefits that suit them and this helps them to get regular payment depending on the plan chosen.

Aisha Dahir-Umar

According to the PenCom’s Acting Director-General, Aisha Dahir-Umar, the accumulation of over N11.09 trillion and other successes achieved since inception of implementation of the CPS is attributed to the esteemed contributors.

“The achievements recorded by the Commission in the last fifteen years would not have been possible without the support and understanding of all stakeholders, especially you, our esteemed contributors who are about to retiree. I therefore urge you to contribute positively towards the success of the Pension Reform Programme,” she said.

The accumulated multi-trillion pension fund has never been idle as insinuated by some individuals who do not understand the working of the scheme. The fund has been injected into the economy to help bolster its activities, in order to provide great benefits to the citizenry.

Investment in FGN securities

The Federal Government remains one of the biggest beneficiaries of the pension accumulated fund. The fund has helped the government in meeting most of its financial demands as Pension fund managers have invested over N7.01 trillion in Federal Government of Nigeria (FGN) securities, which is 66.25 per cent of pension fund assets as at April 2020. This investment has to great extent helped in lubricating the wheel of government’s activities.

Available data from PenCom showed that pension operators have injected N1.15 trillion in treasury bills in January 2020; N1.37 trillion in February; N1.32 trillion in March and N1.13 trillion in April, while N5.71 trillion in federal government bonds in January, N5.62 trillion in February; N5.61 trillion in March and N5.77 trillion in April.

Investment in infrastructure

Financing infrastructural projects has remained a challenge for many nations. The pension fund has been a ready source of fund for the government in executing some legacy projects.

With the investment of over N83.90 billion in Sukuk bonds, the federal and state governments in recent time have been able to execute some projects, especially in road construction.

According to PenCom over N54.32 billion of pension fund has so far been invested in infrastructure fund by pension operators.

Speaking on investment in infrastructure, the Director Centre For Pension Right Advocacy, Ivor Takor, mni (Esq.), said the Contributory Pension Scheme has created a huge pool of long term investable fund, which should be utilized for infrastructural development. This should be done within an agreed framework put in place by all critical stakeholders.

Investment in money market

Investment of pension fund in the money market has really helped to made fund available for banks to lend to the real sector. This has assisted in sustaining businesses and creating jobs, thereby reducing unemployment and crimes.

Data obtained from PenCom revealed that over N1.17 trillion has been invested in the local money market and that there has being steady rise in investment in bank placement by pension operators as against the drops in treasury bills and bonds.

PenCom noted that pension operators staked N1.06 trillion in bank placement in January 2020, N1.21 trillion in February; N1.48 trillion in N1.48 trillion in March and N1.52 trillion in April.

PenCom posited that over N152.61 billion has so far been invested in commercial papers managed by banks.

Job losses

One of the beauty of the CPS is the job loss pension benefit. This has really helped RSA holders weathered through the storm of short unemployment era.
According to the pension sector regulator, in the second quarter of 2019, approval was granted for payment of N5.28 billion to 10,673 RSA holders who were under the age of 50 years and were disengaged from work and unable to secure another job within four months of disengagement.

PenCom maintained that the cumulative total number of RSA holders who were paid benefits for temporary loss of job was 324,141 and were paid a total of N113,21 billion being 25 per cent of the balances of their RSAs as prescribed by the Pension Reform Act 2014.

A further analysis showed that the private sector accounted for 95.33 percent of those who benefitted from these payments while the public sector accounted for 4.67 per cent, PenCom posited.

Programmed withdrawal

Retirees are the biggest beneficiaries of the CPS. Prior to the enactment of the scheme, many retirees live a miserable life as they have to wait for pension which they may not earn in their lifetime. Many of them died on queues while waiting for their benefits. But the CPS has helped stemmed the menace.

Available data showed that the total number of retirees currently receiving their pensions under the Programmed Withdrawal (PW) contracts increased by 3.81 percent from 214,538 as at the end of the first quarter of 2019 to 222,712 as at the end of the second quarter of 2019.

A sectorial breakdown shows that 65.75 per cent of those that received pension under the PW were from the public sector while retirees from the private sector accounted for the remaining 34.25 per cent.

During the quarter under review, which is second quarter 2019, the sum of N 20.57 billion was paid to 8,174 retirees as lump sum and N 355.09 million as monthly programmed withdrawals. Details of these payments are provided in Table 3.11 below:

Annuity

Annuity
Annuity

Annuity which is pension benefit being administered by life insurance companies, remains a model which provides pension benefits for retiree all through their lifespan.
PenCom said it approved a total of 2,941 applications for retirement under life annuity during the quarter, bringing the total number of retirees receiving their retirement benefits through the annuity plan to 68,857 from inception.

The 2,941 retirees received N4.68 billion as lump sum payment and paid premium of N17.53 billion to insurance companies and monthly annuity of N184.50 million. This resulted in total lumps sum payment of N91.28 billion, premium of N371.21 billion and monthly annuity payments of N3.70 billion as at the end of Second quarter, 2019 as shown in Table 3.12 below.

Death benefits

The CPS continues to make impact even after the death of RSA holders. This is done through the group life policy. The families of deceased are paid benefits which are used to carter for those left behind.
According PenCom, it approved the payment of N4.69 billion as death benefits to the beneficiaries of the 1,223 deceased employees during the quarter under review, which brought the total number of deceased employees from both public and private sectors to 57,043. The amount paid during the quarter moved the total payments of death benefits to N178.56 billion.

To ensure the economy and citizenry continue to enjoy the aforesaid benefits, the pension sector regulator took up the mandate to ensure employers of labour sustain their contributions and remittances.

To this end, Pension said it has continued to maintained the services of Recovery Agents (RAs) for the recovery of outstanding pension contributions and penalty from defaulting employers, stressing that RAs were mandated to review the pension records of the employers assigned by the Commission with a view to recover outstanding pension contributions with penalty.

During the quarter, the commission said demand notices were issued to 37 defaulting employers whose pension liabilities had been established by the RAs, which resulted in the remittance of outstanding pension contributions of N260.62 million, representing principal contributions of N151.59 million and penalty of N109.64 million. Accordingly, total recoveries made from inception to date amounted to N16.01 billion, comprising principal contributions of N8.22 billion and penalty N7.79 billion. These amounts have since been credited to the respective RSAs of the employees.

Conclusion

Benefits accruable from the accumulated multi-trillion pension fund can’t be gainsaid. The fund has remained one of the largest pool of investable fund in the country. With the achievements recorded in the short time of implementation of the scheme, it is believed that sustaining the tempo of implementation the future promises great fortune for the nation and those involved in the system.

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