Ghana insurance regulator announces new solvency regime

Bawa

The National Insurance Commission (NIC), regulator of the  Ghanaian insurance market,  has directed subsidiary of Nigerian underwriting firms operating in the market and  local insurance and reinsurance companies to comply with the new solvency regime.

   A directive by the commission explained that the new solvency margin was necessitated by worldwide requirements to comply with international standards. The solvency framework takes effect from January 1, 2015.

  In circular to the Chief Executive Officers of insurance, reinsurance and broking companies dated December 19,2014,   the Commissioner of Insurance, Ms. Lydia Bawa, justified the rationale for this new solvency framework,  as necessitated by  “recent developments worldwide  that our solvency regime complies with the international standards and best practice”.

  The subsidiaries of Nigerian insurance companies operating  in Ghana include,  Equity Assurance, WAPIC, Regency Alliance, IEI Ghana and NEM Insurance Plc. 

  According to the Ghanian insurance boss, “This implies that we should have a risk adjusted sensitive approach to the determination of capital adequacy requirements of insurance companies”.

  The scope of the new solvency framework covers the capital resources, capital adequacy requirements, solvency control levels, investments, technical provisions, valuation of assets and liabilities and financial condition reports.

  While the current solvency regime was to ensure appropriate asset spread, good yield and safety of investments of insurance companies, as well as appropriate asset liability matching, she added that the new solvency framework aims to ensure that a risk sensitive approach is adopted in assessing the solvency of insurance companies based on the size, nature and complexity of operations of the company.

  Consequently, the assessment and analysis of the 2015 yearly returns of all insurers and reinsurers will be based on this framework.

  While the minimum solvency capital requirement applicable to the insurer is three million Ghana Cedis, all insurance and reinsurance companies are required to comply with the minimum capital requirement of 15 million Cedis by December 31, 2015.

  Besides, all insurance and reinsurance companies are also required to comply with the target Capital Adequacy Ratio of at least 130 per cent by December 31, 2015, 140 per cent by June 30, 2016 and 150 per cent by December 31, 2016.

  All non-life and reinsurance companies are required to calculate their technical provisions using the prescribed methodologies with effect from December 31, 2015.

  Also, each insurance and reinsurance company is required to have investment strategies and policies as well as risk management strategy, policies, procedures and controls approved by its board by December 31, 2015.

The commission  further mandated all the insurance operators to submit their first yearly financial condition reports on or before April 30, 2016.

Source: The Guardian

Police and Fire Pension Board to meet Monday, consider legislation

By David Bauerlein 

A fresh round of number-crunching on Jacksonville’s evolving approach to pension reform indicates the city could save $1.33 billion over 30 years through a combination of benefit cuts and front-loading several hundred million dollars of extra money into the Police and Fire Pension Fund.

Previously, a preliminary analysis in early December pegged the savings at about $1.25 billion, but the city’s finance department updated the spreadsheet to show a higher amount of savings.

The bulk of the savings would occur in the later years because most of the proposed benefit changes are for new hires.

Even so, Jacksonville City Hall would stand to save almost $167 million in the first decade, compared to what it will cost the city if nothing is changed in the pension system for police and firefighters, according to the spreadsheet.

The new numbers come as the Police and Fire Pension Fund board convenes in a special meeting Monday morning to debate whether it will accept, reject or modify pension legislation approved Dec. 9 by the City Council.

The five-member board will meet at 8:30 a.m. and pick up where it left off at its last meeting in December when board members were going through the City Council’s pension legislation piece by piece.

Rejection would kill the deal outright. Modifying it would require the City Council to agree to changes made by the pension fund board.

Even if the City Council and the Police and the Fire Pension Fund board reach agreement on benefit changes, nothing would take effect unless the city determines how it will accelerate paying down its roughly $1.6 billion debt to the pension fund.

The mayor’s office has been working with business executive Charlie Appleby and former City Councilman Matt Carlucci to come up with a financing plan that doesn’t involve a tax or fee increase.

“The concern has always been how the city can afford this,” Appleby said. “Plenty of people have said the right thing to do is to go out and raise taxes. That’s certainly one way to do it.”

But he and Carlucci said the financial analysis shows raising taxes or fees isn’t necessary to get on top of the funding problem.

“If you compare it to a golf game, our city is like a golf ball stuck in the rough,” Carlucci said. “This plan allows us to get out of the weeds, get the ball out of the rough and onto the fairway without having to burden the taxpayer with any additional taxes, and start hitting the ball down the fairway and hopefully to the green.”

Appleby said he’s hopeful the JEA board will take up its role in the funding plan at its meeting later the month. If the JEA board agrees, it could join the mayor in bringing legislation to the City Council for the financing.

The proposal would front-load an extra $300 million to the Police and Fire Pension Fund so it has more money to invest and thereby generate additional income for paying pension obligations.

The plan would use $61 million from pension fund reserve accounts, another $120 million coming from money borrowed by the city, and finally $120 million from JEA, the city-owned utility.

The financial advantage to the city is that by putting in extra money up-front, it would strengthen the pension fund’s financial health and thereby reduce how much the city must contribute annually in future years. Still, the city would have to repay its $120 million over a 10-year period. In addition, JEA wants to get a substantial reduction in its annual contributions to the city’s budget in return for providing the financial assistance.

The city’s finance department’s bottom-line figure takes into account all those financial benefits and costs, resulting in projected net savings of $1.33 billion.

“I feel very comfortable with these numbers,” city Treasurer Joey Grieve said. “We feel really good about it.”

The city updated its prior, preliminary report after getting a report by Milliman, an actuarial firm advising the city, in December that calculates the city’s pension costs based on the benefit changes approved by the City Council and the impact of the Appleby-Carlucci financing plan. Milliman’s report does not break down how much of the city’s projected savings stem from changing cost-of-living adjustments that current police and firefighters with less than 20 years of service will get on their pensions.

Instead of getting 3 percent COLAs on their pensions in retirement, those current employees would get zero to 4 percent COLAs for benefits earned after a new pension agreement takes effect, according to the version of pension reform approved by the City Council. The amount of COLA would be tied to Social Security’s cost-of-living increases.

The pension fund board is expected to give a hard look Monday at whether it would agree to that change in COLA for current employees.

David Bauerlein: (904) 359-4581

The Rise of Foreign Players in Insurance Sector

Commissioner for Insurance, Fola Daniel

The gradual entry of foreign insurance firms into Nigeria has begun to raise the tempo of an industry formerly plagued by inactivity, reports Festus Akanbi

There are strong indications that a combination of the positive demographics and rising household incomes across Africa has begun to change the fortune of the Nigerian insurance industry for better as more foreign institutions continued to make entry into the country.

For instance, at the end of November 2014, France’s Axa announced that it had acquired a 77 per cent interest in Mansard Insurance, formerly Assurance, for €198m.

According to a report by FBN Capital Research, Axe is not the first foreign entrant into the Nigerian market. It joins Old Mutual (Oceanic Insurance), Sanlam (FBN Life Assurance), NSIA Participations (ADIC Insurance) and Greenoaks Global Holdings (Union Assurance).

The research firm noted that Axa has taken the well-trodden path to insurance companies in sub-Saharan Africa, following Swiss Re in Kenya (Apollo Investments) and Prudential in Ghana (Express Life).

Foreign Firms Taking PositionsIn a report titled, Insurance, a Strong Flavour for the Year, FBN Capital Research noted that one driver behind the deals in Nigeria has been the decision by the Central Bank of Nigeria (CBN) to reverse universal banking licences, which has forced banks to divest insurance subsidiaries unless they opt for the holding company structure. This, the report said, led both GT Bank and UBN to sell off their insurance companies.

“The main driver, however, has been the positive demographics and rising household incomes across Africa, sometimes dressed up as the emergence of the middle class. The new national accounts with a base year of 2010 were helpful in this respect. The same investment rationale can be applied to banks, retail, telecoms, consumer goods manufacturing and advertising,” the report said.

It added that “South Africa’s Sanlam views Nigeria as one of its star markets in Africa, noting that the operation achieved breakeven after little more than two years. It cited figures showing that insurance penetration stands at about 10 per cent in South Africa yet less than 2 per cent in Nigeria.  It might have added that the authorities are supportive, and we give the example of the requirement for all companies with at least five employees to provide life cover.

New Dispensation

“Foreign companies can own insurance firms in full, and we can see their becoming the dominant players in the industry within this decade. This is obviously not the case with banking.”

The report said the industry regulator, the national insurance commission (NAICOM), reported a total of N258 billion in gross premium income for 2013 and expects N1 trillion for 2018. The Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, has projected N5trillion within 10 years.

NAICOM data for 2013 show that the unlisted Leadway achieved the largest gross premium income (N41.8billion). The next four are all quoted on the Nigerian Stock Exchange: AIICO (N22.8billion, Custodian and Allied (N20.5billion), Continental Reinsurance (N13.8billion) and Mansard (N13.6billion).

According to figures from the National Insurance Commission, foreign equity holdings have risen to 62.8 per cent in at least seven insurance firms.

Many investors are also negotiating with the underwriters on how they can invest in the local market.

The Commissioner for Insurance, Mr. Fola Daniel, confirmed that there had been an increase in foreign equities in the country’s insurance industry.

“Companies with foreign equities have increased in the insurance sector, generating substantial foreign direct investment,” he said.

The Chief Executive Officer, Sanlam, Mr. Heinie Werth, said a major point of attraction for investing in the Nigerian market was the visibility of developmental projects and prospects for growth in the economy.

With the vast experience and exposure that Sanlam has in doing insurance business internationally, he said it was bringing in lots of experience to assist the local industry to develop faster.

The company, he added, was also adding value because it believed in working through the local people thereby creating employment opportunities in the society.

Sanlam, Werth noted, had huge spectrum of products, which it planned to introduce into the country through FBN life.

The Managing Director, Niger Insurance Plc, Mr. Kola Adedeji, was quoted as saying that some multinationals were coming into the country to explore the potential in its huge population.

“They believe the insurance industry is still very weak. The insurance industry has been around for a very long time, but we are still evolving,” he said.

According to him, the coming of the multinationals will bring with it keen competition in the market and engender growth.

“They are coming in with better technology, capital, ideas, expertise and products. Those of us that have been in insurance, we need to really brace up. These people are coming in stronger terms,” Adedeji said.

Successful Reforms

According to a recent report published by THISDAY, some of the reforms introduced by the insurance regulator in the last five years include the Enterprise Risk Management (ERM), corporate governance, risk-based supervision, International Financial Reporting Standards (IFRS), as well as the Market Development and Restructuring Initiative (MDRI) and enforcement of the old law of ‘No Premium No Cover’ policy among other things.

Pointing to an evidence of successes of insurance reforms in the country, the Deputy Commissioner for Insurance (Finance and Administration), Mr. George Onekhena, observed that before the enforcement of the no premium no cover foreign investors making enquiries on how to come in as a player in the industry usually ask about the industry’s “gross premium income on cash basis. Investors used to enquire about the gross premium income on cash basis but they don’t ask again because we have resolved this.”

Also, the Chairman of NAICOM, Chief Chibudom Nwuche, was quoted as saying that the increase in the number of foreign investors in the industry is an affirmation of successes recorded in the market.

According to him, the number of foreign investors in the industry has risen from three five years ago to 10 with many other foreign insurers still making enquiries on how to come into the market.

“The commission has historically implemented a number of regulatory and developmental initiatives that have significantly improved the conditions in the Nigerian insurance sector and enhance its attractiveness to investors.  A good evidence of this is the increased number of foreign investors that have taken equity interests in insurance institutions in Nigeria.

“In specific terms, there are now 10 Nigerian insurance institutions with significant foreign ownership as against just three five years ago and more foreign investors are making enquiries on requirements for participation in the Nigerian insurance sector,” Nwuche said.

Such economies, including the Nigerian economy, are assumed to have low or middle per capital incomes and they do not have the level of market efficiency and strict standards in accounting and securities to be at par with developed economies.

In the case of Nigeria, many global insurers and financial services groups are already playing actively in the sector.  While many of them have invested directly, many others play indirectly using private equity funds.

THISDAY report also showed that the leading direct investors include Old Mutual, which acquired a life office and about to acquire a non-life insurer in the country, New India Insurance Company Limited, Sanlam Group and Metropolitan Momentum Holdings that have subsidiaries in the country.

There are other several private equity firms in the sector, including Assure Africa in Mansard Insurance, NSIA in ADIC Insurance and International Finance Corporation (IFC) in Leadway Assurance Company Limited among others.

Non-Remittance of Contributions - PenCom to Sue 101 Firms

Daily Independent

By Sola Alabadan

Due to failure to remit pension contributions on behalf of their employees, the National Pension Commission (PenCom) has concluded arrangements to institute legal proceedings against 101 employers soon.

In the latest report released by PenCom, the Commission informed that it re-appointed 123 Recovery Agents (RAs) in order to conclude the recovery of outstanding pension contributions and penalty from employers.

As a consequence of the demand notices issued to defaulting employers whose liabilities had been determined by the RAs, PenCom confirmed that some employers had remitted their outstanding pension contributions and penalties. "Subsequently, the sum of N367.436 million representing principal contributions and penalties were recovered by the RAs. This brought the total recoveries made so far by the RAs to N4.099 billion comprising of principal contributions of N3.47 billion and penalties of N628.36 million," PenCom noted.

PenCom added that "while letters of warning were issued to 316 employers that failed to remit outstanding pension contributions and penalties that were established by the RAs, 27 employers were referred to the Legal Department for prosecution. This brought the total number of employers scheduled for prosecution to 101."

In spite of the fact that Section 11 (5) (b) of the Pension Reform Act 2004 expressly provides that the employer shall not later than seven days from the day the employee is paid his/her salary, remit an amount comprising the employee's and employer's pension contributions to the custodian specified by the Pension Fund Administrator of the employee, many employers were said to be found wanting in this regard.

To address the issue, PenCom appointed recovery agents, which are mainly Accounting and Law firms engaged by the commission to recover outstanding pension contributions with interest penalty from defaulting employers.

In accordance with Section 11 (7) of the Pension Act, in addition to making the remittance already due, defaulting employers are liable to a penalty not be less than 2 per cent of the total contributions that remains unpaid for each month the default continues. Thus, defaulting employers were made to pay interest penalty of 24 per cent per annum on the outstanding contributions.

Equity Bank's Model for Insurance Firms

By Julius Kariuki Nduati

There has been a lot of research and debate on the causes of low insurance penetration (ie the number of people with insurance cover within the population) in the Kenyan, and generally East African, market. Low disposable incomes resulting from slow economic growth, cultural inhibitions (harambees, support from family networks), poor product development and financial illiteracy among the public have all been widely cited for the industry's appallingly low performance.

Viewed against the realities of our current times of the explosion of information technology, economic uncertainties and unprecedented threats to personal safety, then indeed the story of insurance growth in Kenya is a sad irony. Kenya is a developing economy with a fast-growing industry, ever-increasing mechanisation, a rapid adoption of modern means of public transportation and lifestyle changes with devastating effects on health. These changes mean that individuals and communities are exposed to risks now more than ever. It then beggars belief that apart from group medical and accident insurance schemes, compulsory classes like motor vehicle Third Party cover and other policies required by contractual engagements, Kenyans, in their tens of millions, are totally uninsured.

But more important is the question of what is required of the industry to reverse this sad state of affairs. The insurance industry here means insurers, intermediaries, the regulator (Insurance Regulatory Authority) and the insuring public. Granted, the uptake of particular classes has been improving - for example medical insurance. However, from an industry perspective this growth is only marginal. So what future does the insurance business have in Kenya?

Important parallels can be drawn from the story of Equity Bank and the change of fortunes in the banking sector in the last decade. Before Equity Bank was licensed to operate as a fully fledged bank in 2004, there were less than a million bank accounts. Most of the account holders were middle class white-collar workers, who essentially used their bank accounts as 'pay-points' through which their salaries went before getting into their pockets. Tens of banks would compete for their business. Some economic analysts even argued that the local banking sector was experiencing 'perfect competition' not unlike the kind evinced in the economic theory of perfect markets.

Then came Equity Bank and banking in Kenya changed forever. From 2004 to date, the majority of adults from all socioeconomic classes have bank accounts, half of them with Equity Bank. What changed when Equity entered the banking market? Basically, the bank reached out to its core customers: tea and coffee small-holder farmers. These were peasants who had not only been neglected but were also unwanted by the mainstream banks. Equity simplified account opening procedures, tailored products unique to these clients and evolved these products with changing customer needs. For example, only high-value clients would be allowed to operate small overdrafts in the mainstream banks. Equity, in contrast, allowed even sweepers and labourers to operate overdrafts proportionate to their incomes. Together with products like microloans, the bank became very popular, and more important, the public started regarding banking as a necessity.

Equity fundamentally changed the model of banking in Kenya, especially the public's perception of banks and the role of banks in their lives. It made banking a necessity, and not a just commodity or service to be bought. This is precisely what the doctor ordered for the insurance sector. Changing not only the perception of the insuring public with regard to the whole business of insurance, but also making, in reality, the service a necessity. The insurance business must be carried out in a way that highlights the importance and necessity of insuring one's health, life, property and prized possessions.

This calls for a revolution in the packaging and marketing of insurance services, for therein lies the remedy to its stunted growth. A massive and intensive campaign to educate the nation on the same would be of great help. A national debate through public media would also go a long way. The cardinal message should be that insurance is not for the rich and neither is it a luxury. That disasters and calamities leave the poor worse off than the rich and the middle-class. That livelihoods need not be lost because of fires, illness, floods, droughts and other perils. This would be key to brightening up the prospects of this vital financial sub-sector.

Julius Kariuki Nduati is a licensed insurance agent with AAR Kenya Insurance. The views expressed are his own.

2015: All eyes on pension industry

Anohu-Amazu

Would the National Pension Commission (PenCom) and pension operators be able to effectively execute the various policies they have outlined to prop the pension industry this year? This is the question they must answer. Chuks Udo Okonta, in this report examines some of the policies and how they will impact the sector if properly implemented.

Since the signing of the Pension Reform Act (PRA) 2014 by President Goodluck Jonathan in July 2014, the public has waited anxiously for the National Pension Commission (PenCom) to come up with guidelines that will enable operators execute the changes introduced by the Act, but the commission seemed to be taking its time to craft the guidelines, which may be introduced in the first quarter of this year.

The guidelines are expected to give the Act the teeth to bite as most of the laws were hinged on what PenCom is to initiate to enforce them.

Another task PenCom has to undertake is to liaise with the states that have embraced the Contributory Pension Scheme (CPS) pushing for amendments in their Acts to accommodate the changes introduced by PRA 2014.   

Some of the major highlights of the Pension Reform Act 2014 include:

Upward Review of the Penalties and Sanctions

The sanctions provided under the Pension Reform Act 2004 were no longer sufficient deterrents against infractions of the law. Furthermore, there are currently more sophisticated mode of diversion of pension assets, such as diversion and/or non-disclosure of interests and commissions accruable to pension fund assets, which were not addressed by the PRA 2004. Consequently, the Pension Reform Act 2014 has created new offences and provided for stiffer penalties that will serve as deterrence against mismanagement or diversion of pension funds assets under any guise. Thus, operators who mismanage pension fund will be liable on conviction to not less than 10 years imprisonment or fine of an amount equal to three-times the amount so misappropriated or diverted or both imprisonment and fine.

Power to Institute Criminal Proceedings against Employers for Persistent Refusal to Remit Pension Contributions

The 2014 Act also empowers PenCom, subject to the fiat of the Attorney General of the Federation, to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time. This was not provided for by the 2004 Act.

Corrective Actions on Failing Licensed Operators

The Pension Reform Act 2004 only allowed PenCom to revoke the licence of erring pension operators but does not provide for other interim remedial measures that may be taken by PenCom to resolve identified challenges in licensed operators. Accordingly, the Pension Reform Act 2014 now empowers PenCom to take proactive corrective measures on licensed operators whose situations, actions or inactions jeopardize the safety of pension assets. This provision further fortifies the pension assets against mismanagement and/or systemic risks.

Restructuring the System of Administration of Pensions under the Defined Benefits Scheme (PTAD)

The Pension Reform Act 2014 makes provisions for the repositioning of the Pension Transition Arrangement Directorate (PTAD) to ensure greater efficiency and accountability in the administration of the Defined Benefits Scheme in the federal public service such that payment of pensions would be made directly into pensioners’ bank accounts in line with the current policy of the Federal Government.

Utilization of Pension Funds for National Development

The Pension Reform Act 2014 also makes provisions that will enable the creation of additional permissible investment instruments to accommodate initiatives for national development, such as investment in the real sector, including infrastructure and real estate development. This is provided without compromising the paramount principle of ensuring the safety of pension fund assets.

Enhanced Coverage of the CPS and Informal Sector Participation

The Act expanded the coverage of the Contributory Pension Scheme (CPS) in the private sector organizations with three (3) employees and above, in line with the drive towards informal sector participation.

Upward Review of Rate of Pension Contribution

The Pension Reform Act 2014 reviewed upwards, the minimum rate of Pension Contribution from 15 per cent to 18 per cent of monthly emolument, where 8 per cent will be contributed by employee and 10 per cent by the employer. This will provide additional benefits to workers’ Retirement Savings Accounts and thereby enhance their monthly pension benefits at retirement.

Access to Benefits in Event of Loss of Job

The Pension Reform Act 2014 has reduced the waiting period for accessing benefits in the event of loss of job by employees from six (6) months to four (4) months. This is done in order to identify with the yearning of contributors and labour.

Opening of Temporary RSA for Employees that Failed to do so

The Pension Reform Act 2014 makes provision that would compel an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee that failed to open an RSA within three (3) months of assumption of duty. This was not required under 2004 Act.

Consolidation of Previous Legislations Amending the PRA 2004

The Pension Reform Act 2014 has consolidated earlier amendments to the 2004 Act, which were passed by the National Assembly. These include the Pension Reform (Amendment) Act 2011 which exempts the personnel of the Military and the Security Agencies from the CPS as well as the Universities (Miscellaneous) Provisions Act 2012, which reviewed the retirement age and benefits of University Professors. Furthermore, the 2014 Act has incorporated the Third Alteration Act, which amended the 1999 Constitution by vesting jurisdiction on pension matters in the National Industrial Court.

Transfer window

Pension contributors over the years have been anxiously waiting for the transfer window to port from their fund managers to other service providers who they believe will offer them better services.

Inspen gathered from a reliable source that the National Pension Commission (PenCom) and operators are battling with some challenges especially biometric issues which are considered a clog to the transfer process.

The Managing Director of a pension firm said in an interview that operators are all concerned about having the window opened and that due to some challenges, operators and PenCom would not commence the process when things are not in proper shape.

The source noted that part of the process of the transfer window is ensuring that operators’ records are complete and accurate, adding that as part of the process, the identification method must be had, and to achieve a seamless transfer, the biometrics must be carefully done.

“We are all concerned, it is important we get it in place. We have made significant process. As at now, we can give you assurance that it is upmost in our minds and it is receiving a lot of attention from the regulator and operators.

“We have engaged consultants, done costing and have made significant process. PenCom also has its side of the transfer window and they are working seriously too. The true is that they are not ready and we are also not ready yet.

“If I want to transfer my account from Pension Fund Administrator A to B, the PFA had to identify me to ensure that it is my account that is being moved from A to B. The only way to have a seamless transfer is to have biometrics. That is the crust of the transfer window; otherwise, you would find that in moving a subscriber’s account from a point to another, you may move the data of another person. 

“Biometrics is the crux and it is what we are waiting to put in place. There is a PenCom leg and operators leg in the biometrics process. If you look at it on our attempt in Nigeria to have an identity, you would see that it is complicated process.”

The source stated that data process has remain a challenge in Nigeria, adding that as the nation lacks identity process, having a good biometrics process would take some time.

She said the operators having considered the extent of work and cost required to build a reliable database, decided, to put effort together, stressing that while the operators are working on the process, they are also pursuing collaboration with other industries that are considering a biometric system.

Mortgage financing

One of the unique features of the PRA 2014 is the law that empowers contributors to access parts of their contributions for residential mortgage.  

The PRA 2014 made provision that allows contributors seeking to own their primary homes, to apply part of their retirement savings account balance balances as equity contribution for residential mortgage, subject to the guidelines issued by the commission.

PenCom has assured that when the act is implemented the development would assist in bridging the housing deficit in Nigeria.

 

Informal Sector Participation

The Act expanded the coverage of the CPS in the private sector organisations with three (3) employees and above, in line with the drive towards informal sector participation.

This is one development if properly harness, would expand the frontier of the scheme as more money will be injected into the coffers of the operators.

 

The initiative would also help boost the saving culture of people who are not in structured employment. It will also help improve their life at old age.

 

States involvement in the scheme

   

Ondo State is the newest state to have embraced the scheme in recent times.

The Governor, Dr Olusegun Mimiko, in a bid to ensure immediate implementation of the Contributory Pension Scheme (CSP) has approved the appointment of 12 Pension Fund Administrators (PFAs) and Jayeola Olowosuko, as pioneer Director-General for the state pension commission.

The PFAs already appointed by the state include: Oak Pensions Limited; Trust Fund Pensions; PAL Pensions Limited ARM Pensions Limited; Premium Pensions Limited and Legacy Pensions Limited.

Others are APT Pension Managers Limited; Pension Alliance Limited; LNPC Pension Fund Administrators Limited; Leadway Pensure PFA Limited; Sigma Pensions Limited and Fidelity Pension Limited.

 

Efforts to sanitise the pension system is seriously been resisted by  the refusal of many state governments to enact their laws and embrace the contributory scheme, which is adjudged the best way to eradicate corruption and ensures better lifestyle for retirees at retirement.

 

Available statistics revealed that only six states - Lagos, Ogun, Niger, Kaduna, Delta and Jigawa are the ones contributing to the scheme.

In the South-East Zone, Abia, Ebonyi and Enugu were yet to enact the law on the CPS. Imo State enacted its law on CPS in 2008 and appointed Pension Fund Administrators (PFAs) to register its employees but information available showed that the State has suspended the implementation of the Scheme.

 

Anambra State, it was learnt only recently enacted its law on the Scheme and is still expected to carry out the next necessary steps like setting up administration structure, appointment of PFAs, registration of employees by the PFAs, remittance of pension contributions and determination of accrued pension liabilities of workers among others.

 

States in the South-West Zone have made reasonable progress in the adoption and implementation of the CPS. Lagos State is one of the pioneers in implementation of the CPS, having enacted its law in 2007. The State had fully implemented the CPS with a total of 45,730 employees registered and pension contributions remittance of N46.50billion as at July, 2013.

 

Furthermore, the State had issued retirement benefit bonds of N18.9billion to its retirees and these bonds have been fully redeemed and proceeds paid into the employees’ individual RSAs; while 2,242 employees from the State have retired under the Scheme as at August, 2013.  

 

In the case of Osun State, it adopted the CPS and enacted its law in 2009. It had also made significant progress in its implementation of the CPS, having so far registered 45,106 employees under the Scheme. It had also remitted N4.15 billion as pension contributions, while the sum of N1.90billion had been remitted into the Retirement Benefits Bond Redemption Fund Account. However, the State is yet to renew the Group Life Insurance Policy for its employees in 2013 and had also not carried out an actuarial valuation to determine accrued pension rights of employees. 

 With regards to Ogun State, it adopted the CPS and enacted its law in 2007. It had also made significant progress in its implementation of the CPS having so far registered 24,902 employees under the Scheme and remitted N10.90billion as pension contributions, while the sum of N3billion had been remitted into the Retirement Benefits Bond Redemption Fund Account held at the Central Bank of Nigeria. However, the State is yet to put in place a Group Life Insurance Policy for its employees.

In the case of Ekiti State, it enacted its law on the CPS in January, 2011 and has also 37,676 employees registered under the Scheme. Ekiti has conducted an actuarial valuation to determine pension liabilities under the old scheme and put in place a Group Life Insurance Policy for its employees. However, the State is yet to commence remittance of pension contributions into employees RSAs with PFAs.

 

Oyo State, has enacted its law on the CPS in January, 2010. However, it is yet to commence the full implementation of the CPS.

 

In the North Central zone, Niger State had fully complied with the scheme

 

In the North-West zone, Jigawa state which was the first out of the thirty-six states in the federation to enact its law on the Contributory Pension Scheme (CPS) in 2005, had appointed Pension Fund Administrators (PFAs) to manage the Pension Funds which have a total value of N16.49 billion as at September, 2013.

Kaduna state adopted the CPS and enacted its law in 2007. It has also made significant progress in its implementation of the CPS, having registered 143,722 employees under the Scheme, with Pension Contributions of N9.46 billion as at October, 2013. The state had conducted an actuarial valuation and determined the accrued pension rights of its employees for their service prior to the CPS and established a Retirement Benefits Bond Redemption Fund which currently has a balance of N1.6 billion. The state is however, yet to put in place, a Group Life Insurance Policy for its employees.

Although Zamfara state adopted the CPS, enacted its law in 2005 and registered 63,254 employees under the Scheme and remitted N534.4 million as employee portion of the Pension Contributions as at November, 2013, it is yet to commence remittance of employer portion of Pension Contributions from the commencement of the CPS. It has also not put in place a Group Life Insurance Policy for its employees.

Sokoto state enacted its law on the Contributory Pension Scheme in 2007 and registered 46,808 employees with PFAs under the Scheme. The state is yet to commence remittance of the Pension Contributions.

With regards to Kebbi state, it enacted its law on CPS in 2009 and registered almost 38,000 employees with PFAs under the Scheme. It has however not commenced the remittance of pension contributions.

The status of Kano state shows that it enacted its law on the CPS in 2006. It is however, yet to appoint PFAs and has not transferred pension funds for management.

Kastina state drafted a bill on the Contributory Pension Scheme which was reviewed by the Commission and found to be largely in conformity with the Pension Reform Act 2004 (PRA). It has however not translated the bill into law. The compliance status of the states in the North-West zone as indicated clearly shows the imperative for the states to expedite action on the full implementation of the Contributory Pension Scheme.

Director-General, National Pension Commission (PenCom) Mrs

Chinelo Anohu-Amazu, said the PRA 2004 sought to address in a holistic manner, the perennial problems associated with pensions in both the public and private sectors established the new Contributory Pension Scheme (CPS) stressing that the central among the key objectives of the reform are to: stem the growth of outstanding pension liabilities; ensure that every person who has worked in either the public or private sector receives his/her retirement benefits as and when due; establish a uniform set of rules and regulations for the administration and payment of retirement benefits in both the public and private sectors; and promote economic growth through diversification of pension fund investment across financial and productive sectors.

 

New phase of pension

While the regulator and operators are making efforts to move the sector forward, the public are already eying another phase known as defined ambition pension system.

The system according to an expert will enable pension contributors determine the amount they want at retirement, which is contrary to the present defined contributions where contributors do not know the amount they are entitled to when they retired.

Ex-Commissioner, National Pension Commission (PenCom) and Principal Partner/Chief Executive Officer, Retirement Benefits Advisory Dr Musa Ibrahim, while speaking on this new system at the  Conference on Pension Reform Act, 2014 theme: “Sensitising major stakeholders on Developments ushered in by the Pension Reform Act 2014” organised by PenCom in Lagos, urged pension stakeholders in the industry, especially PenCom and operators to begin to work out measures to align with this system which is being entrenched in other climes.

According to him, the need for the new system has become necessary due to some deficiencies in the defined contributions.

He said the new system allows people target what they want at retirement, stressing that that is missing in the present system.

Ibrahim also expressed misgivings over the making of pension a constitutional issue. He noted that pension ought to be a contractual agreement between employers and employees.  

Conclusion

Public expectations from PenCom and operators are high. It behooves on them to properly articulate and follow the set policies so that the sector can move from where it is to the envisaged heights.  

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