‘States have no reason not to join the Contributory Pension Scheme’

Managing pension was a major problem in Nigeria before the coming on board of the Contributory Pension Scheme following the Pension Reform Act 2004 as amended in 2014. Today, the Country enjoys a scheme that is sustainable and fraud free. Adamu Mele, executive director, Business Development and Investment,  Premium Pensions in this interview shares his thought on prospects of the scheme and its challenges. Excerpts

The pension industry is witnessing less than 10 percent market penetration considering the number of employed workers in Nigeria. What are the plans toget the remainder of already employed workers enrol into the CPS?

It is said that about 70 million people are employed, but we don’t have up to 7 million people enrolled in the contributory Pension Scheme.

It is a very good observation, it is a very good statistics. The World Bank has also mentioned that, even the Bureau of Statistics have also come up with such figures. Like I have always said, it is not just the lack of employment, but lack of compliance. The compliance level is very, very low. There are so many institutions and companies out there that have workers, but they don’t allow their workers to enrol in the scheme, because they look at it as a cost issue.

Secondly, the informal sectors which actually constitute a large number of that 70 million have not really enrolled into scheme, so you can see a lot of huge gaps. So out of that 70 million you are talking about, today we have just below seven million enrolled as RSA holders.

Compliance no doubt has been a major concern for this scheme, what is being done about it and what will be your suggestion.

The National Pension Commission (PenCom), the industry apex regulatory authority has been trying their best in terms of public enlightenment, you will agree with me. There have also been serious efforts through moral suasion to get companies into the scheme. As it stands now, for those companies that want to do business with government, it is one requirement that at least they have a pension clearance certificate. This is to further ensure compliance. Also, in the last amendment that gave birth to the Pensions Reform Act, 2014 as amended now; one of its key features is that it made it mandatory for any organisation that has at least a minimum of three workers to enrol. The only problem we have out there is enforcing the law. We are also doing our bit as PFAs. We are trying to ensure that most of these organisations comply by writing them letters, engaging them, organising workshops for most of their workers at least to show them the importance of saving

for retirement, and at least disabuse the minds of the employers that it is not really a cost issue. Rather, it helps in reducing their cost. Which one will you look at? It is either you take the whole burden or you go for the CPS that is the Contributory Pension Scheme which is more sustainable.

A continuous awareness programme is the way to go in deepening penetration. How would you rate the level of awareness of the industry by workers?

Today the pension industry is about ten years, we started in 2005, this is 2015, that is ten years, the Act was promulgated in 2004, but we started in 2005.In terms of enlightenment, we are not yet there. However, RSAs are not really a new thing. But still, you ask how many states have really joined the scheme? Just very few of them have joined. Only those that want to access the capital market. At the time they want to access the capital market, they will realize that they are not compliant, and then they will enrol their staff. The organised private sector, yes, most of them have actually embraced the scheme, but I can give you an average. On a scale of 1-10, only 5 have embraced the scheme.

For the State governments that have refused to key into the scheme, what are their challenges, have you looked into their reasons for not complying?

Honestly, state governments should not have any reason not allowing their workers to enrol in the scheme. We have seen in recent times that most states are grappling with payment of salaries. I don’t think it is a general issue. I think probably it has to do with the dwindling revenue base of the Federal Government, which most of the States draw on.

What they need to do is to focus on widening the scope of their revenue generation base so that they can augment whatever they get from the Federal allocation. State Governments must have to embrace the scheme. If the Federal Government could do that for their own workers, why not the States. I don’t think that there is any reason that is cogent and compelling for the States not to key into the scheme. That is my position.

Premium Pension’s asset under management isclosing in on N400 billion, what particular strategy have you done in the face of all these difficulties in the enviroment?

At Premium Pension Limited, we are in for thelong term; I mean the long haul. We believe in the business.That is why from day one we actually rolled out in all the nooks and crannies of this country. We are represented in virtually all the 36 States of the Federation including the FCT, Abuja. We have as it stands accredited close to 17 branches plus the head office. Our head office is our own building.

Our business plan is actuallyretail and that is why you find out that we focus on the business on the retail basis, and that is why we are able to make a modest achievement of Assets under Management of close to N400 billion and RSAs of close to 600,000, and we keep on growing. We intend to keep on widening our basket to cover as much sectors and subsectors as possible including all the workers out there; be they in the formal or informal sector. Every worker must be made to join the scheme.

How has it been getting business for Premium Pension in a highly competitive industry like Pension?

It is actually not a roller coaster business, but we thank God for the efforts we have made so far. It is a very challenging business environment out there. You will agree with me that if you look at the statistics in recent times, there is this consensus that we have a lot of graduates that have finished school without jobs, so that gives you a picture of the economic situation in the country today.

Our business actually depends on the employment situation in the country. When the economy is doing very well, governments, organisations, agencies, establishments, local governments, virtually all the institutions will begin to employ, and when institutions employ, we tap in on that by selling our products which is Retirement Savings Account, RSA.

As you gain employment, you normally have to register with any PFA of your choice. We target new employees, but with the lack of employment in the country, it is now giving us a sort of herculean task in terms of getting new RSAs in recent times.