‘The public should continue to have confidence in the Contributory Pension Scheme’

Legacy Funds inherited by Pension Fund Administrators (PFA’s) from existing pension scheme before the Pension Reform Act 2004, as amended in 2014 with its attendant challenges, particularly with beneficiaries require continuous education and enlightenment. Usman Suleiman, managing director, FUG Pensions in this interview explain on issues surrounding one of its legacy funds, PRA 2014 among other issues. Excerpts

You have had issues with your Union Homes Legacy Fund, what has happened to the fund now?

It was due to a misunderstanding by the management, employees and ex- employees of Union Homes of the requirement of the law, and so they imagined that probably we didn’t want to pay them. So they thought that coercion, intimidation and extra legal actions would solve their problem. We tried to explain to them the requirements as provided in the Pension Reform Act, and the regulators (PenCom) have said if you meet those requirements you have your payment. And that the fund was intact and it had grown by over 45 percent from when we received it. So, all they needed to do to have access to the fund was to proceed as required by the law and directed by the regulator.

Unfortunately, after coming to disturb our operations, mobilize labour union and addressed the media, they finally realized that what we were saying to them was the truth. When they realized that their action was not making any impact in the direction they were going, they then accepted that what we were saying to them was, perhaps, the correct position and so they decided to go back and did the right thing, and what is that, to meet the requirements of the regulator.

The former and serving employees requested for a meeting with the regulator which was accepted. We all met and it was made clear to them what the requirements were and they went ahead and provided all the necessary documents required by the regulator. The regulator, after reviewing the Trust Deed and Rules and what is provided by the Pension Reform Act came up with the position as to how the payment should be made.

The regulator identified 21 pensioners and instructed that those 21 should be paid 41 months pension arrears and paid pension for life. In actual fact, those 21 were earlier being paid pension for life before the company stopped it, saying that they realized that they were paying 20 of them in error and that only one was entitled. But they regulator, after reviewing all the documents came to the conclusion that all 21 were entitled to pension.

Secondly, ex-employees and the existing employees who were listed as beneficiaries of the Legacy Fund were now confirmed to be the beneficiaries to be paid in accordance with what was computed by actuarial valuation consultant. So the regulator gave us the approval to pay to the Retirement Savings Accounts (RSA) of all the former and the serving staff of the amounts that have been provided by the actuary against their individual names, to pay the 21 pensioners their 41 months arrears of pension and to continue paying them pension for life and Union Homes should be carrying out actuarial valuation on annual bases and make up for any shortfall until the last pensioner dies.

With that approval, we set up the process to liquidate the fund and pay to the RSAs of all the serving and ex-employees. We transferred the benefits to beneficiaries’ individual Pension Fund Administrators (PFAs). And for those of them that have their RSAs with us, after transferring to their accounts we proceeded to pay to their bank accounts. The same thing to other PFAs, after receiving the funds from us accredited the individual RSAs of those that have account with them and also proceeded to pay to their bank accounts.

However, there were some former and serving employees that did not have PIN numbers, that is they did not open any  RSA with any PFA, those ones were required to go to any PFA of their choice and open RSA and they are doing that. So each time they bring an RSA registration letter to us, we transfer their benefits to the PFA that they registered with and I think the PFAs also paid them. It is only those still without PINs that are still outstanding now and they are coming in fives, fours and sevens like week to week. Otherwise, all those that had their PIN numbers before now have got their money in their various RSAs. This is the position.

As for the 21 pensioners,   we are still waiting for Union Homes to give us the details of payment a director by the regulator. However, Union Homes is still insisting that 20 of them are not entitled. They wrote a letter in May asking PenCom to reverse the position and allow for payment to only one pensioner while others should be dropped but to the best of my knowledge PenCom has not reversed its position.

I doubt if that position will be reversed because before PenCom went ahead to confirm that all the 21 are entitled to pension, they had studied the Fund Trust Deed and Rules which is the condition under which each employee will benefit from that Legacy Fund.

For us at FUG, we have always said that we are regulated; we will do what our regulator says. Those pensioners that are now remaining, we are waiting, once the matter is resolved between the regulator and Union Homes and we are advised to pay them, we will pay.

Given your experience in tackling this matter, what message do you have for the public?

The message I want to give to the public is two; one, the public should continue to have confidence in the new pension system. This system is fraud free and full proof.  This system is well and properly regulated therefore the public should not have any worries about the security, integrity and efficient running of this system.  Two, the public should also understand that all that was put across by the former and current employees of Union Homes on this matter in the media was not correct. The correct position is that the fund was intact, we were waiting for approval and when we got the approval we paid. And finally I want to assure the public that our company is a highly ethical company, we value our integrity and operate within regulatory boundaries and the internationally accepted code of conduct. We cannot do anything that would jeopardize our image or would be against the regulatory requirements. So the public should continue to have confidence in this system and should continue to have trust and confidence in FUG Pensions.

What would you say about PenCom in this matter?

PenCom has done very well in this matter because they stood by the law. PenCom did not allow itself to be stampeded into acting outside the law and which is very good because it means that our institutions are being strengthened. Overtime what we have in this country is the rule of law being circumvented in deference to individuals or groups. If PenCom had succumbed in this matter, it could have as well succumbed in other matters and the institution will not have the strength to act and enforce the provisions of the law.

The draft regulation on the investment of pension funds in infrastructure was recently released by PenCom for operators input, what is going to be impactful in that law?

Pension funds are long term funds. They are funds that are intended to accumulate and grow.From the time a contributor commences work to the time he is to retire is a period of about 35 years, effectively meaning that it is a long term fund.You therefore expect to have accumulation of fund. You then should have substantial outlets for investing these funds; the fund has a great role to play in the economy. The new law has provided an avenue for the Commission to come up with various classes of assets which will be eligible for investment of the fund.

Two things will happen; one is that the pension fund managers will have a wider avenue for beneficial investment of these funds and two, the economy now will benefit from the accumulation of these huge funds. Investment in Infrastructural requires high capital outlay with a long period but it is a high return investment. Therefore marching the fund and investment is critical. Pension fund is the right fund in that regard. Once the proposal is well packaged and it meets all regulatory requirements, amongst which is security of the funds, it will become eligible to be invested by pension fund managers. In addition, the project must be packaged in accordance with globally accepted standards.

And I want to add here that the multiple fund structure which PenCom has been working on for sometime to enable pension contributors have a choice in their risk exposure by deciding in which fund they would want their contributions to be invested is also in the course of being implemented.