PenCom identifies challenges facing the CPS

The Director General of the National Pension Commission (PenCom), Chinelo Anohu-Amazu has identified some of the operational and regulatory challenges facing the pension industry in the country.

According to her, these span across coverage of the Contributory Pension Scheme (CPS), dearth of investment products, inadequate technological capacity as well as inadequate knowledge and skills on the part of Pension Fund Administrators (PFAs) to conduct due diligence on developmental projects.

The Director General pointed out these challenges during the High Level Side event at the just-concluded 3rd International Conference on Financing for Development in Addis Ababa, Ethiopia.

Sharing her thoughts on “Leveraging Pension Funds for Financing Infrastructure Development in Africa” in one of the discussion panels she noted that PenCom supervises and regulates the pension industry through regulations and guidelines, while the operators including PFAs and Pension Fund Custodians (PFCs) manage, secure and administer pension fund assets.

Some of the major challenges facing the Nigerian pension industry at the current stage of its evolution, according to her, have to do the coverage of the CPS.  She said the Commission hopes to raise the number of Retirement Savings Account (RSA) holders from 6.5 million this year to 20 million in the next four year with the introduction of Micro-pension.

“Current position of 6.5 million contributors is low relative to estimated working population. There is plan to expand to at least 20 million by 2019 through micro pensions. It is pertinent also due to inadequate social safety nets. This is a Pan-African issue that should provoke ideas sharing,” she said.

The Director General also lamented the dearth of investment products, particularly those that meet the strict criteria resulting in low activity in spite of pension funds availability.  She blamed this on inadequate local expertise to structure and manage infrastructure funds within acceptable risk profile, adding that opportunities for partnership abound across African nations where this expertise exists.

Anohu-Amazu also complained about inadequate technological capacity to assure integrity of database of pension contributors, which she said is a prerequisite to some major initiatives such as transfer of RSAs between PFAs. Technological improvements also required to enhance customer service experience for contributors, she said, adding that PenCom is leading in this regard with ambitious IT projects for the industry’s future.

The Director General also stated that insufficient knowledge and skills of PFAs in conducting due diligence on specialised investments such as infrastructure and private equity is also a big challenge.

In this regard, she said the Commission encourages mutually beneficial relations between pension funds and the private sector through its consultative approach to industry governance and promotion of new investment outlets.