Reassessing role of stakeholders in developing the pension industry
The nation’s pension industry has continued to record increased growth with different stakeholders playing their parts, with some doing excellently well, and some others underperforming. Here, Ivor Takor, executive director, Centre for Pension Rights Advocacy looks at their roles and proffered solutions.
For Takor, there was no pension industry pre 2004 pension reform in Nigeria. Pension schemes operated in both the public and private sector before the 2004 reforms, were burdened with a lot of problems. Principal among them was that the schemes were unregulated; Suffered from poor administrative structures; the public sector scheme was unfunded, causing it to become unsustainable, with an estimated N2 trillion deficit. In the private sector, with the exception of the National Social Insurance Trust Fund (NSITF), the schemes were as many as there were companies. They were voluntary, being products of collective agreements with no law backing them. Section 1 of Pension Reform Act 2004, the forerunner of the current Pension Reform Act 2014 as well as section 3 of the 2014 Act, established the Contributory Pension Scheme and made it to apply to employees of both the public and private sectors. Herein lies the beginning of the pension industry.
The Act therefore laid down stakeholders in the pension industry and went ahead to set out the roles they are expected to play for the sustenance and development of the industry. The Act didn’t stop at laying down roles for stakeholders. It went further, to stipulate sanctions for non compliance.The stakeholders in the pension industry are the regulator, employers, employees and the operators (Pension Fund Administrators (PFAs and PFCs).
Section 17 of the Pension Reform Act 2014, which henceforth will be referred to as the Act, established the National Pension Commission (PenCom), while section 18 states the objectives of PenCom to be, to enforce and administer the provisions of the Act; co-ordinate and enforce all other laws on pension and retirement benefits; and regulate, supervise and ensure the effective administration of pension matters and retirement benefits in Nigeria. Since the establishment of PenCom, the Commission has strived to achieve the objectives of the Act, effectively performed the functions given it in section 23 and judiciously utilized the powers bestowed upon her in section 24.There is no other way to justify the establishment of the Commission and adequately highlighting the role she has played in the establishment and development of the pension industry than to point to a non existing industry in 2004, with a public sector pension deficit of N2 trillion in 2004 to a pension industry with a pension assets of N8.23 trillion as at July 2018.
The Commission has succeeded in building and maintaining a culture of healthy compliance in the industry: This has not only helped the industry to stay out of trouble, but has built a reputation for the industry as being trust worthy, which has led to the continuous development of the industry. Being a friendly regulator, PenCom exposes draft guidelines to operators for inputs before finalizing them. There is a monthly consultative fora with licensed operators and holds regular consultations with the operators “union” the Pension Operators Association (PenOp).
The next set of stakeholders in the industry is the employers. This is the group that provides the greatest challenge to the industry. Principal among the challenges being that of non compliance with the provisions of sections 4, 5 and 6 of the Act, which deals with paying the contributions of the employer; deductions and timely remittances of both the pension contributions of the employer and employees pension deductions, as well as maintaining Group Life Insurance policy in favour of employees as provided for in section 4(5) of the Act. Governments, federal and states are the biggest employers of labour and also happen to be the greatest culprits in this regard. This will continue to be the greatest challenge the industry will be facing because owners of businesses in the private sector will continue to be greedy in their desire to maximize profit, while governments will continue to avoid the responsibility of adequately addressing the welfare of workers. The regulator and employees must do everything within their powers to get employers to comply with the provisions of the Act.
The primary stakeholders in the pension industry are employees.Section 1 paragraph ( c ) states one of the objectives of the Act “ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory, States and Local Governments or the Private Sector receives his retirement benefits as and when due. The Nigeria Labour Congress (NLC), the Trade Union Congress (TUC) and Industrial Unions, whose responsibility it is to campion the cause of improvement of the welfare of workers and pensioners, must be at the forefront of efforts to grow the industry. The labour movement should ensure that employees open Retirement Savings Accounts (RSAs) and understand salient sections of the Act that need their attention; and they should put pension issues as principal items for discussion/negotiations, in every meeting and negotiation with employers especially governments.
The last but not the least stakeholders are the operator, Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFC). The Act segregates the management and custody of pension fund. While PFAs are responsible for the management of the funds, the PFCs warehouse the funds and invest them in line with the directives of the PFAs, based on guidelines issued by PenCom. In an attempt aimed at insulating pension fund from fraud and forgeries, it is imbedded in the Act, a lot of compliance obligations for the operators, which the Act also empowers PenCom to enforce and apply sanctions for noncompliance. Operators will help in the continuous development of the industry if they comply with the provisions of the Act and all regulations and guidelines issued by PenCom; render good customers services and additional services.
So far, the pension industry remains the most rapidly growing industry in the country and will remain so for a long time. This position will be strengthened when the micro pension targeted at getting the self employed in the informal sector to key into the Contributory Pension Scheme commences.