Micro pensions, Multi-Fund structure to redefine pension industry in Nigeria – Stanbic Ibtc pensions
New measures taken by the National Pension Commission (PenCom) to sustain growth of the Nigerian pension industry including micro pension scheme, multi-fund investment structure and pension account transfer window are capable of putting the sector into stronger footing, says Stanbic IBTC Pension Managers Limited.
The company, Nigeria’s biggest pension fund administrator (PFA), spoke against the backdrop of the recent announcement by the industry regulator that the multi-fund structure would become operational from July 1, 2018.
Speaking during a media interactive session in Lagos Chief Executive, Stanbic IBTC Pension Managers Limited, Eric Fajemisin, said such reforms and innovations are necessary to maintain the strength and depth of Nigeria’s Contributory Pension Scheme (CPS). The session was one in the series of strategic approaches by the PFA to engage industry stakeholders on ways to strengthen the Nigerian pension industry and boost wider participation by Nigerians.
Fajemisin noted that the Retirement Savings Account (RSA) Multi-Fund Investment structure, which replaces the “one-size-fits-all” arrangement that puts all active contributors into one RSA Fund, would resolve the challenge of asset-liability risk management faced by the operators. By aligning the age and risk profile of RSA holders to match the four funds, contributors would have a better chance to earn improved returns on their investments in proportion to their risk appetites.
The different categories of the multi-funds structure are Fund 1, Fund 2, Fund 3 and Fund 4. Fund I is targeted at people of 49 years and below who in the quest for higher returns are willing to take more risks. Fund 2 is aimed at people who are aged 49 years and below and still working but are satisfied with moderate returns and levels of risks. Fund 3 targets people 50 years and above but still working and have very low risk appetite. In Fund 4 are retirees who have the lowest risk profile of all categories.
Among its other benefits include improved standard of living for the elderly, safety of funds and access to other incentives, such as mortgage facilities and health insurance. In addition are flexible contribution remittances, the opportunity to make withdrawal prior to retirement and the enhancement of financial inclusion in the country.
Speaking on the micro-pension scheme, Fajemisin said it would help in deepening asset accumulation in the country, and provide the crucial capital required for investment in critical sectors of the economy. As an initiative designed to cover an estimated 70 percent of Nigeria’s working population in the informal sector, the scheme offers enormous benefits to the societyand ensure improved standard of living for the elderly, guarantee the safety of funds and may provide access to other incentives, such as mortgage facilities and health insurance, regardless of challenges associated with its seamless implementation.
On the proposed pension transfer window, which allows a RSA holder to switch PFA once a year, the Stanbic IBTC Pension helmsman said it would deepen the democratic space in the pension industry as well as encourage healthy competition, resulting in further transparency and accountability, which would in turn enhance efficiency, innovation and service delivery.
Fajemisin also reviewed the 2014 Pension Reform Act and the impact on the CPS. On the enabling law, he said the introduction of more stringent penalties for erring operators and directors, especially as it relates to mismanagement of funds, has engendered greater corporate governance, making it almost impossible to misapply pension funds by anyone. By increasing the contributions of the employer and employee to10 and 8 percent respectively, Fajemisin said the Act has ensured the availability of more benefits to contributors at retirement. In addition, the Act makes the non-remittance of employees’ contribution by the employer an offence which the regulator can prosecute in court.
Amongst its provisions, which expanded its coverage, private sector organizations with just three employees or more are required to register under the scheme; while the law also compels an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee that fails to open a Retirement Savings Account within three months of being employed.
The PFA’s Head of Business Development, Nike Bajomo, said the company is already reaching out to its over 1.6 million RSA holders nationwide to create awareness about commencement of the multi-fund structure with effect from July 1, 2018. She said the PFA will continue to engage various stakeholders on developments in the industry to ensure the provisions of the CPS are fully harnessed to the benefit of all. Such platforms as the employers’ forum, preretirement seminars, among other initiatives Stanbic IBTC Pensions organises yearly, are fashioned to ensure regular engagement and to drive awareness.
Backed by the experience and expertise of Stanbic IBTC Group, a member of the over 155-year-old Standard Bank Group, Bajomo said the PFA will not relent in providing excellent services to its RSA holders and Nigerians. Stanbic IBTC Pension Managers Limited, she said, has over 1.6 million RSA holders nationwide, with assets under management in excess of N2 trillion. It pays approximately N1.3 billion to over 37,000 retirees monthly and over N279 billion has been paid to retirees since the PFA commenced operations in 2006, Bajomo added.