Success drives PenCom to seek more as pension assets hit N9.33tr

Goaded by the success of its micro pension scheme, which has resulted in the growth of pension funds to N9.33trillion, the National Pension Commission (PenCom) is deepening its enlightenment campaign to bring in more people, especially operators in the informal sector, into the scheme with a view to guaranteeing their post-retirement wellbeing and boosting the economy. SULAIMON OLANREWAJU reports.

Lately, contribution to the pension fund managed by the National Pension Commission (PenCom) has been on the rise. According to the monthly report on summary of pension fund assets and Retirement Saving Account (RSA) registration published on its website, the fund which stood at N8.74trillion in January, rose to N8.91trillion in February, moved to N9.03 trillion in March, increased to N9.12 trillion in April, soared to N9.22 trillion in May and hit N9.33 trillion in June. This means that in six months, the fund increased by N686billion at a time when investment in Federal Government securities declined by N6 billion, falling from N6.55 trillion in April to N6.49trillion in June.

The report further showed that a major chunk of N7.21 trillion out of the N9.33 trillion recorded in June was from RSA holders.

A further breakdown of the June report showed that out of the RSAs’ fund of N7.21 trillion, retirees fund, categorised under Fund IV, is N751.73 billion while contributors, categorised under Fund I, Fund II and Fund III, own N6.51 trillion.

Other contributions to the fund include N958.2billion from existing schemes and N1.24trillion from Closed Pension Fund Administrators (CPFAs).

The PFAs, the report added, invested a major chunk of the fund, totaling N6.48trillion in Federal Government securities out of the N9.33trillion in the period under review. Out of the N6.48trillion invested by the PFAs, N4.43trillion was invested in Federal Government Bonds; N1.93trillion in Treasury Bills; N11billion in Agency Bonds (NMRC and FMBN); N86billion in Sukuk Bonds; N12billion in Green Bonds and N129billion in state government securities.

The growth of Retirement Savings Accounts (RSAs) holders under the Contributory Pension Scheme of the National Pensions Commission (PenCom) led to a N29billion increase in pension assets in the first quarter of 2019 and N21billion in the second quarter. This has been attributed to salient policies being implemented by the Acting Director-General of PenCom, Mrs. Aisha Dahir-Umar.

The PenCom regulates and supervises the licensed pension fund operators while Pension Fund Administrators (PFAs) manage and invest the fund for contributors and retirees under the Contributory Pension Scheme (CPS).

Speaking about the success of the scheme, Mrs. Dahir-Umar attributed it to the Commission’s esteemed contributors. “The achievements recorded by the Commission in the last 15 years would not have been possible without the support and understanding of all stakeholders,” she said.

She added that the success recorded by the scheme is a pointer that more could be achieved. She then said the Commission’s enlightenment strategy would be intensified to inspire more participants to join the Contributory Pension Scheme.

Financial analysts expect the Industry’s growth to exceed 14 per cent in 2019 supported by an improved macroeconomic environment that would drive increased contribution. Also, investment returns are likely to improve in 2019, largely driven by higher interest rates, which are expected to spike in the second half of 2019.

Analysts also view positively the commencement of the Micro Pension Scheme (MPS), which is expected to increase the industry coverage ratio and help ramp up AuM.

PenCom, under its Acting Director-General, is carrying out massive campaigns to enlighten people at all cadres of the society even at the grassroots, to embrace CPS at all stages of their business growth. The campaigns are going on television, radio, newspaper, social media, online publications and other media platforms to get more people into the pension scheme and bring them to the financial services net.

The campaigns are ongoing in the markets, shopping malls, private and public sectors, motor parks to ensure that all Nigerians within pensionable age embrace the CPS and secure their future, financially.

The scheme covers farmers, teachers, hair dressing saloon owners, petty traders, musicians, actors/ actresses, and bricklayers, among others.

PenCom said that once a person reaches the age of 18, he or she is qualified and can contribute based on his income. The contributions can be daily, weekly, monthly, and contributions can be made through the mobile phones. Besides, should anything happen to a contributor’s business, such a person can get 40 per cent of the total contributions back to begin a new life. Also, in case of death, the contributor’s next of kin will be paid the total balance left in the account of the contributor. The Commission also said that Pension Fund Administrators (PFAs) are registering people that want to join the scheme at zero cost.

PenCom has under the current management led by Mrs. Dahir-Umar, achieved visible milestones as seen in the geometric growth in pension contributions, which is projected to hit N10 trillion by year-end and N15.1 trillion by 2023.

PenCom introduced an Enhanced Contributor Registration System (ECRS) meant to solve the challenges faced with the existing Contributor Registration System (CRS). Aside helping to lift contributors’ confidence in the industry and bringing in more people into the financial system, the enhanced application is expected to open up transfer window for RSA holders to switch PFAs.

“Electronic submission of employer code requests by Pension Fund Administrators (PFAs) on employers and the full automation of the process of issuing employer codes. Updates and edits of contributors’ information on the National Databank maintained by the National Pension Commission by the PFAs. The deployment of the ECRS is a major step towards the introduction of the transfer widow, which will enable contributors change to the PFAs of their choice, in line with Section 13 of the Pension Reform Act (PRA) 2014,” it said.

Aside the ECRS, PenCom recently unveiled the Micro Pension Plan (MPP) that allows the informal sector contributors under the CPS to withdraw at least 40 per cent of the contributions in their RSA. The extension of the CPS to the informal sector and the flexibility of its operation is one of the incentives expected to encourage participation and growth of the   pension industry.

According to her, Section 2(3) of the Pension Reform Act, 2014 (PRA 2014) provides that employees of organisations with less than three employees as well as the self-employed persons shall be entitled to participate in the CPS in accordance with guidelines issued by the Commission. Majority of these categories of persons are found in the informal sector and have generally low and irregular incomes. The MPP has enabled artisans such as photographers, caterers, hairdressers, motorcycle service operators, tailors, fashion designers, carpenters, painters among others to embrace CPS and protect their future and businesses.

“As you are aware, the informal sector workers constitute the larger percentage of the working population in the country, there is therefore no doubt that robust participation would result in exponential growth of the pension funds which would consequently, provide funding for allowable and relevant investments that would impact positively on the economy. The MPP would contribute immensely to archiving the pension industry’s strategic objective of covering 30 per cent of the working population in Nigeria under the CPS by the end of 2024,” the PenCom boss said.

Mrs. Dahir-Umar explained that in order to sustain the tempo and momentum achieved from the MPP launch, the Commission is embarking on sensitization events in the six geo-political zones of the country. Continuing, she said: “The low income earners, the high income earners and the SMEs; each of these categories is going to be targeted with appropriate MPP products and sensitization programmes that meet their peculiarities. As earlier mentioned, the Commission is engaging relevant unions and associations in its enlightenment drive. Some of these unions and associations cover the artisans and grassroots operators. The Commission is aware that public enlightenment and pension education are key success factors and as such is working assiduously with the Pension Operators Association (PENOP) to ensure effective coverage.”

Analysts said achieving the Central Bank of Nigeria’s (CBN’s) financial inclusion mandate of having 80 per cent of adult population into the financial system  by 2020 requires the backing of key stakeholders like PenCom. According to them, the PenCom is, through the RSA remittances, helping to deepen the pension industry, financial system and economy.

Talking about some of its achievements, PenCom says it has enrolled more than 8.5 million people into the CPS since its inception 15 years ago. Head of Communication Department of PenCom, Peter Aghahowa, said the scheme, introduced in 2004 by the Federal Government, is a process where certain percentage of enrollees’ salaries is saved on monthly basis in a pool with the employers also contributing.

The scheme has PenCom as the regulatory body with PFAs working in their behest. Aghahowa said the scheme has made the life of retirees much easier, unlike the defined benefits scheme which it replaced. He said the Commission will continue to protect contributors’ funds and drive compliance by private sector employers through public awareness campaigns and engagement.

This initiative, he added, is aimed at educating employees/employers and expanding the coverage of the Contributory Pension Scheme. According to him, the Commission also monitors compliance through onsite inspections to ensure that employees of private sector organisations open Retirement Savings Accounts and pension contributions are remitted as and when due.