Executive Secretary, Pension Fund Operators Association of Nigeria, Susan Oranye
Punch
Susan
Oranye is the Executive Secretary of Pension Fund Operators Association
of Nigeria. She speaks about the challenges, achievements and future of
Nigeria’s pension industry in this interview with SIMON EJEMBI
How would you rate the Nigerian pension industry in comparison to other developing nations?
Unfortunately, when it comes to the
pensions Nigeria does not rate very highly when compared to other
developing nations. This could be due to our size as the most populous
nation on the continent or the length of time we have had a
well-structured pensions industry which is about 11 years old. When
certain parameters are used to measure comparison such as size of
pension funds as a proportion of the Gross Domestic Product, Nigerian
does not rank very high. In terms of pension fund assets as proportion
of GDP South Africa stands at 87.96 per cent; Namibia, 77.03 per cent;
Botswana, 40.05 per cent; Kenya, 13.25 per cent; Ghana, 5.35 per cent;
and Nigeria, 5.06 per cent.
Many
argue that very little is being done to create awareness among
Nigerians on the importance of having a pension. What do you make of
this view?
I think it is erroneous. PenOp as an
association is particularly passionate about raising the awareness of
Nigerians, especially young professionals. We are very mindful of the
fact that a lot of Nigerians focus on today and do not pay much
attention to how they will fare in old age or how they will cater for
their loved ones when they retire. This way of thinking coupled with the
bad perception of pensions due the mismanagement that plagued the old
system means we have our work cut out for us as an association in
raising the awareness of the safety of the CPS and importance of
pensions to all Nigerian workers and this we are tackling head on
through forums, social media, printed press, etc.
There is also the argument
that very few people make voluntary contribution to the pension in
addition to the statutory contribution. What percentage of the total
pension fund in the country would you say is from voluntary
contributions?
Voluntary contributions are driven by an
awareness of the importance of savings and an ability to put extra part
from what is demanded by law. With the current awareness levels being
what it is and also taking into consideration the challenges of getting
employers/employees to comply with the mandatory contribution, the
voluntary contributions are not very high. Figures received from PenCom
indicate that they currently stand at approximately 0.24 per cent of the
total pension assets under management. I believe that this figure will
change once the informal sector is fully engaged in the CPS.
In terms of compliance to the
Pension Reform Act, there have been reports of companies failing to pay
even after deducting from employee salaries, while many firms have yet
to comply. Is this a problem and is your association doing anything to
address it?
Yes, compliance has actually always been a
challenge. The PRA 2014 states that it is mandatory for any employer
with three or more employees but remember there are so many employers
and it is almost impossible to keep track. The Regulatory body
responsible for enforcing compliance is PenCom and they are dedicated to
this task. The PRA 2014 has also clearly spelt out penalties for
defaulting employers which PenCom enforce. It is important to point out
however, that employees of such employers, who either deduct and do not
remit to their employees RSA or do not deduct at all, have recourse.
They must be proactive by sending details of their employers contact
address (anonymously if they so wish) to PenCom’s compliance department
and also to their PFAs to follow up and ensure their employers are
forced to comply with the law.
Another area where there have
been concerns is the investment of the pension funds. Capital market
operators have lamented that pension fund administrators have refused to
seriously invest in equities. What would you say is the problem?
PFAs take their role as fiduciaries of
other people’s savings extremely seriously which is why they are guided
by what I call the ‘’Trifecta’’ – safety, liquidity, then returns. PE
offers higher returns but higher risks too. Note that we are not averse
to investing in equities; however, we will only do such investments
through safe instruments or vehicles. We must see that there is a very
clear path of getting invested capital back, plus a fair return. Our
mantra has always been safety first, followed by liquidity and return.
Remember that retirees will be paid with cash, not brick or mortar.
There is need for some kind of credit enhancement to make the
investments more attractive. This could come by way of partial or full
guarantee of say, the Federal Government of Nigeria. The current PenCom
guidelines have widened the playing field by allowing for investment in
many alternative asset classes, including Private Equity, infrastructure
bonds/funds, mortgage backed securities etc, so there is a diversified
range of assets we can invest in. The challenge is the quality of the
available proposals. We emphasise safety and liquidity over return.
With the current economic
challenges facing the country, are there adequate measures in place to
ensure the pension funds are safe?
The way the pension system is set up
under the new Scheme – Contributory Pension Scheme, there are many
checks and balances put in place as measures to ensure the safety of the
funds. For instance, the PFAs never have direct access to the funds
contributed. These are held with the pension fund custodians who have
the guaranteed backing of four of the biggest and well established banks
in the country namely First PFC, Zenith PFC, Diamond PFC and UBA PFC.
The Custodians transact based on the instructions of the PFAs and in
line with regulations/guidelines set by PenCom. PenCom on the other hand
monitors very closely the transactions made on pension funds and have
set out strict guidelines on investment that further ensure the safety
ad relative liquidity of the funds.
Under the current, Pension
Act, and based on the retirement age, do you think Nigerians are saving
enough for retirement? If not, what is the way forward?
This is a question that can only
correctly answered after a survey has been carried so you have the
figures, however, having said that, I think that in recent times the
savings culture of Nigerians has improved somewhat. There is still a
long way to go as we can be quite myopic sometimes and choose not to
focus too far in future hoping that it will take care of itself. Savings
can greatly be encouraged through education in pensions and retirement
planning as well as a boost in salary because it is when you have excess
left that you truly sae something meaningful. This highlights the
importance of the CPS even more because it makes saving for the future
mandatory so whether you like it or not, you can expect a pension when
you retire. You may not appreciate the mandatory nature of the scheme
now but having a steady source of income from savings is usually a great
feeling as attested to by most of our retirees.
Now, as an association, what are you looking at improving or adding to the country’s pension industry?
As an association of pension operators,
it is naturally a major focus of ours to improve Nigeria’s pensions
industry through efforts that enhance service excellence and capacity
building as well educating the general populace. To achieve this, PenOp
has played a very active role in driving legislation that has made
Pensions more inclusive for Nigerians ie from employers of five or more
employees to now employers of three or more employees. PenOp is also
active on social media driving the conversation with Nigerian workers,
answering their questions and educating them on how the CPS works,
processes involved and importance of Pensions. There is a lot of
misinformation and mistrust still existing and we are tirelessly
addressing peoples’ concerns. As the CPS will include the informal
sector shortly, it is essential that the Operators front office staff
and operations staff are well trained and PenOp has organised trainings
in Abuja, Lagos and Port Harcourt to improve and ensure the standard of
service being provided by all Operators is in line with International
Best Practices. PenOp has also organised extensive trainings in
investment of pension funds and risk management all aimed at service
excellence. We have also held fora in conjunction with key stakeholders
like NECA and PenCom to educate them on the implications of the PRA 2014
on employers and employees alike. Information is Power thus we seek to
empower Nigerian workers by keeping them informed enough to make wise
decisions regarding the financial security of themselves and their loved
ones.
What would you say is the biggest challenge in the industry and what is the biggest strength of the Nigerian pension industry?
There are a few main concerns for the
industry: one, compliance with the law has been waning; rate of
enrolment into the CPS has slowed down. Current enrolment stands at 6.5
million out of a population of 170 million. How can we get traction in
compliance and thereby raise the number of contributors to say 20
million in the next three-five years? Two, funding of registered RSAs is
becoming a challenge for many employers. Three, while our investments
have been safe and returned reasonably above inflation in the past,
inflation is rising and with currency devaluation, real return on
investments is threatened, and four, general awareness on the importance
of pensions among Nigerian workers.
I would definitely consider the young
vibrant population of workers that have their whole careers and lives
ahead of them a definite strength for the pensions industry as they
represent a pool of funds that can be invested for economic growth.
Also, the highly regulated and supervised Contributory Pension Scheme
which ensures Nigerian workers can trust the system and more importantly
can retire in peace and financial stability whilst maintaining a decent
standard of living. Finally, the drive of the operators to ensure
people’s savings are managed and administered at international best
standards so there will be no repeat of the old scheme is a definite
strength for the Nigerian pension industry.
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