‘Pension coverage still very low despite level of success so far’

Lagos is one State that has successfully embraced the Contributory Pension scheme through the supervisory efforts of the Lagos State Pension Commission (LASPEC). Adekunle Hussain, the director general, in this interview, shares his experience, the revised pension law and what will drive growth in the industry going forward. Excerpts:

Government recently signed into law the revised pension bill, effecting amendments and changes in the Pension Reform Act 2004; what does this mean for the Contributory Pension Scheme?

What it means really is that we keep improving on the workings of the contributory pension scheme. We have run this scheme now for 10 years and I think that is long enough for us to have learnt from our experiences. The things that are contained in that law have all been tested and we now found that there were key areas that needed to be either fine tuned, changed or amended, drawing from the experience we have had in the last 10 years.

So clearly, without anybody being told, all those amendments were meant to improve the workings of the system. There are a few areas that would actually interest the contributor more, for instance, they have now increased the counterpart’s contribution from the employer.

The total contribution now has been increased to 18 percent out of which the employer is actually to contribute more. But, beyond that, there are a lot of other real technical areas that has been twisted in a way to ensure that there is more transparency.

The regulators are trying to make sure that they have their hands on ground in a manner that they will be able to enforce compliance. The important thing to note going forward is that no matter what we do with the law, change this, change that, the key element here is to be able to ensure that a lot more workers are brought into the net of the contributory scheme so that we can expand the scheme as it were.

As it is, the coverage is still very low if you compare it to the number of people who should ordinarily have been enrolled in the formal sector, then of course, there is still a huge gap out there in the informer sector. These are things that the new amendment will try as much as possible to bring to bear so that we can do better going forward. There is no point just being stagnant. People are saying that the industry have come a long way, yes it has, but we still have a lot more distance to cover for us to actually say that yes we are there and the scheme can on its own run auto pilot.

There are arguments in some quarters that maybe the recent amendment should have looked at expanding the base to accommodate other groups of Nigerians including political office holders. What do you think about this?

I agree with them totally. Some of us have always been of this view that yes, the scheme has been adjudged to be very successful, one of the best in Africa but the coverage is still low. Ideally, we shouldn’t have a situation where an employer will issue conditions of employment and state therein that your employment is pensionable or not pensionable.

I think anybody that works in any capacity whatsoever, ordinarily ought to be covered under the scheme and that should apply to public office holders because at this point they still earn salary. And as long as you earn salary, whether you are in public office or private, the issue is that you earn salary and the percentage of that salary should go towards ensuring that you have something kept aside for you towards your retirement.

This is because whether you are in private or public sector at one point you must retire. As long as the scheme is designed to take care of old age, your post retirement life, care for you when you can no longer earn a living, then everybody should be brought under that scheme, to that extent I agree entirely.

The CPS under the former contribution rate was somewhat a challenge for some states as well as employers; how do you think they will respond to the increment from 15 to 18 percent?

Yes, these are some contentious issues going forward that we will have to deal with, as you have rightly projected. Even at 7.5-7.5, some employers still found it difficult to comply because they still cannot find the fund and this is a fully funded scheme.

Now you are increasing the projected liability on the part of the employer, of course, that of the employee is being marginally increased but the truth of the matter is that it is still the employer that have to provide the funds both for what the worker will pay and what the employer contributes.

So, you ask yourself, when at 15 percent some employers were finding it difficult to key in based on the issue of funding and is now increased, so, it even becomes more difficult for such employers. But over and above that, I think we should move forward, because we cannot remain stagnant because you have laggards.

The industry should be dynamic and what has been done now is to ensure that you are a kind of laying the foundation to increase the benefits that gets to the worker because the ultimate beneficiary in this thing is the worker. I think we should see how it works; an increase from 15 to 18 percent will not kill anyone.

Those that have not complied at 15 may still not comply even if you lower it. So, what we should do really is to try and see how they can be convinced to key into the scheme. It is always said that where there is a will there is always a way. In a state, once there is the political will to do it, the rest is just a question of compliance. And all it takes is to copy what we do in Lagos State.

Give it a fresh line charge that takes care of workers’ pension before anything else, so that it comes along with the salary. As long as you continue to pay the salary of workers then their pension contribution is a given.

A lot of issues have been raised on how to utilise the pension funds for infrastructure; considering your concern for safety, what is your position?

My view has always been that the investment climate should be conducive. A lot of innovation will still have to go into it so that we have veritable avenues for this huge fund to be invested in a manner that yes, it guarantees some measure of income but more importantly security of those funds.

You cannot go into risky investment, because people retire everyday and when they retire, the funds must be there for you to pay them. Therefore, yes, it is a long term fund, we are looking at infrastructure which is beautiful as long as it is done in a socially responsible manner, but they must always keep an eye on the issue of safety so that there is sufficient liquidity for you to meet up with liabilities as they crystallise.

Government really is not good at investment. Yes, people use pension fund to buy treasury bills simply because of its safety and of course guaranteed returns but in terms of real solid investment, you don’t invest in government, you invest in projects.

I think we need to get a clear understanding of social responsibility on the part of the government and how you deploy pension funds I can say in a n responsible manner. If you deploy pension funds as huge as it is now in infrastructure it is a beautiful idea, there is a window now that allows pension funds to be used to acquire your own house under mortgage arrangement.

I think that is beautiful and welcomed, they can go into power sector, infrastructure and all of that, provided it is not seen or treated as another expenditure head of government because you must get returns, you must guarantee that your funds will come back because those funds are not just there, they are funds meant to pay the pension right of workers.

The only thing is that there is a time lag between the time you contribute and the time you retire and it is taking advantage of that time lag that you are looking at how best to invest those funds.