Frequently asked questions on pension issues
A1. Describe the Nigeria Pension Scheme briefly.
Q1. The Nigerian pension scheme is a scheme aimed at helping people save and plan for their retirement to avoid old age poverty and dependency. It is not a short or mid term venture but a long term venture aimed at ensuring people who can no longer work still live a comfortable life
A2. How is the pension sub-sector structured in Nigeria? Players? Roles?
Q2. At the helm you have the National Pension Commission who ensures that the operators strictly follow the laid down rules and guidelines of the commission, and then you have the operators who deal directly with the contributors of the scheme. Contributions are supposed to be automatically debited from the salaries of contributors at the end of each month by employers and remitted to their pension fund accounts.
The role of the operators is to ensure safety and wise investment of contributors’ funds for maximum returns.
A3. How is the structure similar, different, distinct or unique from other structures globally?
Q3. it is similar to some schemes in the developed world like the direct debit but also different because it is tailored for this particular market place, incentives like tax exemption are put in place to encourage savings.
A4. How is the National Pension Scheme superior to other schemes?
Q4. It is not superior but different and targeted at ensuring transparency and accountability with contributors’ funds.
A5. How does the scheme compete with other investment platforms available to contributors?
Q5. Every investment platform has its attendant risk associated with it, people have lost
funds in the stock market and in real estates, custodians try to be extremely careful when
investing contributors’ funds and in investing must follow the rules as laid down by PENCOM or be sanctioned.
A6. How superior are the competing investment platforms?
Q6. They are not superior but have different aims and objectives for clients/contributors and have different methods of operation,different rules and regulations guiding them.
A7. With a high total market capitalization, where does the money go? Where are funds invested?
Q7. The funds are invested in industries/sectors as permitted by PENCOM based on strict guidelines defied and monitored by PENCOM
A8. How are the returns on the investment of re-invested funds managed?
Q8. All returns on invested funds belong to contributors except for the 2.2% fees for the operators
A9. How does PENCOM execute its role of ensuring accountability and transparency?
Q9. By demanding and receiving feedback and reports from operators detailing how
contributors’ funds have been managed and invested, while heavily sanctioning erring operators.
By ensuring that operators follow the rules strictly to the letter
A10. What degree of interference does the scheme face? In investment decisions? Regulatory? Policy setting?
Q10. The National Pension Commission hasn’t faced any form of interference from any quarters and Pension operators have faced minimal interference.
A11. Is there a strategic plan/intent towards driving capital formation in the country?
Q11. Yes, pension funds are strategically invested as allowed by the commission to help boost the economy and growth but thisis done with caution as the funds of the contributors must be well accounted for.
A12. What is in it for contributors? Short term? Midterm? Long term?
Q12. There is nothing in it for contributors in the short or mid-term because the scheme is a long term venture, however what could be termed as a mid-term gain is that if the account is untouched for five years and upwards, it will be tax exempt. In the long term, its savings for the days of retirement (Rainy days).
A13. What can be a threat to the integrity of the scheme and contributors confidence?
Q13. Fraud and embezzlement, but with the new contributory pension scheme, they are technically and highly impossible.