Developments in the Pension Industry
• by
• Dr. Farouk Aminu
• Head, Research & Corporate Strategy
• Outline
§ Background
§ Implementing the CPS
§ Some Recent Developments
§ Challenges
§ Prospects
• Background
• Implementing the CPS
• Established Legal and Institutional Structures
o 21 PFAs
o 7 CPFAs
o 4 PFCs
o Approved AES
• Pension Transitional Arrangement Department (PTAD) consisting the 6 FGN Pension Offices has been established by Law
o Regulated and supervised by PenCom
• About 21 State Governments had adopted the CPS while 14 others are at various levels of enacting their CPS laws
o Already 5.28 million Nigerians were registered as at September 2012
•
• Scheme Memberships
• Implementing the CPS
• Pension Fund Assets
§ Accessing Retirement Benefits
o By Retirement on later of 50 years or attainment of 60 years or 35 years of service
o Retirement based on Terms and Conditions of service
o Retirement before 50 years, after 6months without job – max. 25% of RSA balance
o Retirement on medical ground based on advice of a Physician/Medical Board or due to total or permanent disability either of mind or body
o By Death/Cases of missing persons
o Payments effected as and when due
o Figures were as at September 2012
o Life Annuities vs Programmed Withdrawals
• Some Recent Developments
• Revised the Minimum Share Capital Requirement for Licensed PFAs
• Industry had continued to consolidate as four (4) marginal players were taken over by other PFAs
▫ PAL – Standard Alliance
▫ Sigma – Amana
▫ Evergreen and Crib – Royal Trust
▫ Two other PFAs, IGI and Citi Trust were issued letters of intention to revoke their licences for their inability to make up the capital requirement
• Guidelines for fund accounting issued in order to streamline record keeping in the industry
• Issued Regulations on Transfer of RSAs – already available on our website
▫ Window to be opened as soon as work on implementation of AFIS is concluded
• Compliance & Enforcement in the Industry
o Commenced issuing Compliance Certificates
o Framework had been developed and agents were appointed to recover outstanding pension contributions with penalties
• Concluding on development and implementation of core and support applications – RMAS, AFIS & Oracle e-Business Suite
• The Regulation on Investment of Pension Fund Assets was revised to expand the allowable investment outlets to include alternative asset classes such as:
o Private Equity (PE) Funds
o Infrastructure Financing (Debt Instruments and Funds)
o Supranational Bonds, amongst others
• Regulation is still under review
o Multiple Funds would be established
ü Ethical Fund would be introduced
• Guidelines on Offshore Investment being worked out
• Capacity Building with support from IFC/World Bank
o Program on infrastructure financing and PE investments
o Seminars and Workshops in conjunction with SEC, NSE and Capital Market Operators to simulate increased activities on Corporate Bond in the Nigerian Capital Market
• Regulatory Intervention
o Management of First Guarantee Pension Limited was taken over due to poor corporate governance practices
o An Interim Management Committee was constituted to superintend over the affairs of the PFA
o Issue is still pending at the Court of Appeal
o Intervention is not new to the industry – Trustfund PFA was the first to undergo such regulatory intervention
• Work has reached an advanced stage to establish fully functional Zonal Offices for the Commission
o Challenges
§ Still lack of adequate knowledge about the workings of the CPS
§ Multiple registrations and lack of clear identification of RSA holders
§ Delays in remittance of contributions occasioned by non-submission of nominal rolls by the MDAs
o Non-submission of updated and/or incomplete nominal rolls indicating changes in grades and levels resulting in non-remittance of right contributions into RSAs
§ Low Level of Monthly Pension
o Lump sum withdrawals vs monthly pensions
o Small balances in employees’ RSAs that were insufficient to fund a PW or the purchase of annuity
§ Periodic Review of Pension Benefits
§ Funding of Public Sector Accrued Rights
o 5% of the Federal Government’s wage bill being paid into the Retirement Benefits Bond Redemption Fund (RBBRF) Account is insufficient to upset the additional claims arising from early exit occasioned by voluntary and mandatory retirements or death
§ Accessing Retirement Benefits
o Misconception about 50% of RSA balance as lumpsum as well as number of years of benefits payment under Programmed Withdrawal
o Challenges in obtaining Letters of Administration – courts ask for 10% of RSA balance before issuing the Letter of Administration
§ Poor service delivery by PFAs
§ Pension Desk Officers not proving required support to contributors and retirees
• Prospects of the CPS
§ Key Drivers:
o Political Will & support to implement the reform
o Strong and consistent commitment and support of Social Partners
o Operational and Regulatory Autonomy for the Commission
o Consultative and transparent in rule making
o Complimentary reforms in other sectors of the Nigerian economy
§ Continued political will & commitment to the scheme by the FGN
o Recent government decision to keep Police in CPS
o Government has consistently supported PenCom without any interference in its operations
o Approval of Mr. President to setup PTAD to ensure full compliance with the law and further ensure transparency and accountability in pension administration
§ Established a clear understanding and strong buy-in by social partners
§ Acceptability and confidence in the CPS by the private sector and State Governments
o Many employees in organizations that hitherto did not have pension schemes are now registered under the CPS
o Laws enacted and structures established by State Governments
§ Implementation of the CPS by the informal sector
§ Continued growth in the number of registered RSAs
§ Growth of pool of long term investible funds for economic development – grown to about N2.84 trillion as at August 2012 and are growing by at least 30% annually
§ Already pension funds had invested in various sectors of the Nigerian economy and provision has been made for investment in infrastructure development and real sector financing
§ Complimentary reforms in other sectors of the Nigerian economy
Thank you
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