Pension for guaranteed protection, economic development

The nation’s pension industry despite the challenging economic environment has continued to make positive impacts in realising its set objectives, particularly ensuring that contributors who retire from employment have access to their pensions as and when due. This is the primary objective to which the pension reform Act was established. The Contributory Pension Scheme (CPS) therefore has largely succeeded in changing the hand of the clock from what existed in the past, where retirees and pensioners were not sure of their future after retirement from employment. Another major impact of this reform is its inclusiveness towards involvement of private sector employees, majority of who never had any secured pension plan from their employers before the commencement of the CPS about 11 years ago.

Beyond all of these is the monumental growth in pension assets under management, which according to the Pension Fund Operators Association of Nigeria (PenOp) grew by 15 percent, from N4.61trillion as at end of December 2014 to N5.3trillion as at the end of December 2015. While current figures from the National Pension Commission reveal that the figure has grown to N5.4 trillion as the end of March 2016, with over 65 percent of the fund already invested in government bonds and securities and the number of registered contributors now over seven million.

Pension for growth

PenOP, the umbrella body of pension fund operators at its 2016 Annual General Meeting in Lagos reviewed the economy, the industry, plan and strategies and came to a conclusion that the sector is positioned for growth and could contribute more meaningfully to economic development if stakeholders including government would work towards a more inclusive pension system that increases the size of pension assets to an estimated N20 trillion by 2030.

While the operators also share in the need to channel the huge pension funds to infrastructure development, they think that a more balanced engagement with government and its agencies would not only help realise expected objectives, but will also reduce the risks of exposure on the pension funds.

Eguarekhide Longe, president of PenOp during the meeting looked at different segment of the business: Excerpts in part-

Remittance compliance

Compliance with regard to remittances of pension contributions from the Public Sector on both the Federal and State levels has lagged notably. While remittances from the Federal Government through the National Pension Commission (PenCom) were last received for

September 2015, some States have outstanding remittances dating back over two years. Private sector remittances, though impacted by the adverse economic environment, have been more consistent.

Preparing for the Future

In January 2016, the Industry leaders assembled to deliberate on desirable strategies to consolidate the gains the industry have made to date and to evolve new thoughts on how to grow the industry and make a greater impact on the society which essentially serves as its base. Key decisions and action steps were agreed upon setting an agenda for the next 8 years – up to 2024. The highlights of these agreements revolve around the following headers: Expanded and Inclusive coverage; Excellence in Service Delivery; Low Cost & Efficient Industry; Positive Real Return & Visible Impact and Improvement in Industry Skills Set. Activity teams have set to work on these themes and momentum is developing daily in the direction of the set vision.

Pension funds and developmental investing

It is important for me to say a few words on the above subject, given its topical nature these days in our Country where a longing for transformation is palpable. It is my belief that as a people we have to learn to effectively dream big dreams. The transformation has got to start from our mindset. To do this, clear thinking, sincerity of purpose, selflessness, honesty and productive use of time and resources need to be emblazoned on the minds of all the ‘influencers’ in society. We need to rekindle our sense of self-esteem, pride in what is ours (our Nation) and a keen desire to become globally competitive. All of these constitute the inner preparation process. Then comes the engagement with the external stimuli; the transition to execution. It is well understood that we currently are in a situation of financial stringency. However, we are not altogether deficient. Our oil still sells; we still enjoy a comparatively higher state of peace than many parts of the world. Our Land is still fruitful. Judicious deployment of resources and an understanding of the concept and value of sequencing is what may be most required to see us rise as a people again.

This preamble relates to the call to invest a greater portion of the pension funds in infrastructure in the simple way that they both; National Renaissance and Infrastructure investing require clear, calm, incisive and strategic thinking to achieve any notable success in their pursuit; hence the need to succeed in the ‘inner’ preparation process first. With N5.3trillion, grown over an 11-year period, careless deployment could wipe these gains out in an instant. On the contrary, if looked at as a constituent part of National Economic Strategy, the focus will switch to how we can support the industry to grow beyond N20 trillion describing broader coverage so that a National savings pool, effectively utilized, will always be available to kick-start properly conceived, internally consistent, national development initiatives. This is the conversation I believe the pension industry needs to be afforded with government and governance at all levels in our dear nation. We need to elevate the quality of the discourse.