PenCom and pension matters arising

Mrs. Aisha Dahiru-Umar was recently announced as the Ag. Director General of the National Pension Commission pending the confirmation of the DG designate, Dikko Aliyu Abdulrahman, by the Senate. Controversies continue to trail the announcements with all the attendant implications for the nascent pension industry and the plight of millions of accrual and potential pensioners in the country. As a contributor to the 13 year old Compulsory Pension Scheme (CPS), spokesperson of millions of worker-contributors in organized labour movement and as an Interim Chairman of a PFA, my interest on the developments in pension industry is a total commitment. Devil is in the details of the termination of the appointments that cut short legally prescribed tenures of Mrs. Chinelo Anohu-Amazu, former Director General and some commissioners. Yours comradely once reflected on the implications of appointment of operators as regulators when my dear friend, Mallam Sanusi Lamido, former MD of First Bank, was appointed CBN governor. Since then, Godwin Emefiele, also a friend, who once served as an operator/ Chief Executive officer and Group Managing Director of Zenith Bank emerged as the CBN governor in 2014. The proclaimed principles of change and commitment to the rule of law must definitely must task Buhari administration. However my first reaction is that of safeguarding a nascent scheme in the wake of outstanding accrued rights due to some retirees and income inadequacy of pensioners with rising inflation and Naira devaluation. There have been globally acknowledged achievements and gains recorded of two Directors General of the National Pension Commission namely; Mr. M.K. Ahmad and Mrs. Chinelo AnohuAmazu.

The point cannot be overstated. Pension Reform Act was enacted on 25th June 2004 and came into effect on the 1st July 2004 after extensive deliberations by all the stakeholders. Before the new Act, the old scheme had pension deficit of about N2.3 trillion in 2004. Pensioners were not being paid entitlements regularly. Pensioners died on verification queues while billions of pensions fund were looted.

The Act’s laudable objectives include saving for old age, workers receive their retirement benefits as and when due, halt the growth of outstanding pension liabilities. The new scheme is fully funded with employers contributing 10 per cent and employees contributing 8 per cent deducted directly from workers’ salaries and promptly transferred to workers’ retirement saving accounts. The scheme meets global best practices with respect to pension reform.

Today Pension assets have grown from N2.9 trillion in 2012 to over N6.5 trillion in 2017, thanks to the efforts of the past leaderships of the National Pension Commission (NPC).

One of the major achievements of PenCom under Mrs. Chinelo AnohuAmazu was the amendment of the Pension Reform Act in 2014. Not without its controversy especially with the age experience of the Director General. But it was a legal Act nonetheless. Significantly the Act was amended to widen the scope of coverage to include the informal sector, tighten sanction for non-compliance and review the rates of contribution among others. The rates were also made equitable with employers paying more than the workers. Employers contribute 10 per cent while workers contribute 8 per cent making a total of 18 percent as against the previous 15 percent (7.5 percent each). Equally, PenCom under the last leadership shored up the Retirement Savings Accounts (RSAs) subscriptions from 5.39 million to 6.89 million within a period of three years. There was also a successful establishment of PENCOM offices in the six geopolitical zones to make the office easily accessible to workers for enquiries rather than traveling to Abuja.

Most informal sector workers were captured by the old 2004 Act. With the amended PRA 2014, PenCom initiated the framework for the Micro Pension Scheme that targets the informal sector which will be rolled out soon by PenCom. One of the key achievements of PenCom under both Mr. M.K. Ahmad and Mrs. Chinelo AnohuAmazu was the intervention to save First Guarantee Pension Limited. First Guarantee Pension Limited is one of the registered Pension Fund Administrators (PFAs) in the country following the enactment of the Pension Reform Act 2004 as amended. The National Pension Commission (PenCom) in exercise of its powers under the Pension Reform Act constituted the Interim Management Committee (IMC) of First Guarantee Pension Limited in August 2011 following the removal of some Directors of the PFA for unsound corporate governance practices which significantly undermined the pension assets under the management of the PFA.

The IMC was given the mandate to superintend over the affairs of the PFA under the direct supervision of the Commission. The fortune of the PFA has since been turned around for better. Before the Committee came on board in August 2011, First Guarantee Pension’s Net Asset Value (NAV) was 38 billion naira and cumulative loss carried forward was to the tune of 385 million naira. This net figure almost eroded the shareholder’s fund. The Interim Management Committee (IMC) has successfully reversed this trend and returned FGPL to profitability.

Today, FGPL’s Net Asset Value (NAV) has moved from #38 billion in 2011 to N138 billion as at December 2016. This excludes the N20 billion refunds to police PFA. The company’s profit has grown from N385 million negative losses to over N3.5 billion profit within the period under review. The Interim Management Committee (IMC) has not only stabilized the operations of the PFA consistent with its terms of reference but added considerable value that has made First Guarantee Pension Limited (FGPL) one of the leading PFAs in the country. The challenge before the Acting DG and the DG Designate lies in deepening the gains that have been recorded under the contributory pension scheme. The over 6 million workers already captured under the reform are commendable. But this number is a far cry from over 80 million potential work force in Nigeria. The 6.5 trillion Naira funds contributed so far can hardly meet the future income adequacy of retirees, which underscores the need for an intensified effort by all stakeholders.