Why pensioners now get their entitlements promptly – FCMB Pensions MD

The Managing Director and CEO, FCMB Pensions, Mr. Misbahu Yola, in this exclusive interview explained how First City Monument Bank (FCMB) acquired Legacy Pensions. He also spoke about the transition period, and industry issues among others. Excerpt:

The former Legacy Pensions is now FCMB Pensions. How was the deal struck? A lot of people ask how FCMB Group bought Legacy pension. FCMB didn’t buy it overnight. FCMB has been a shareholder of Legacy Pension since 2008. They initially owned 25% and later 28%. All they have done is to increase their stake to the point where the PFA has become a subsidiary of the group. And as you know, the group is a diversified financial services provider. There is banking, asset management, trustee, micro finance bank and stock broking. So when FCMB invested in Legacy Pension 11 years ago, it was just to put another financial product in their bouquet.

Legacy Pension was incorporated in 2005, and licensed in 2006. Value has been built and pension has become an important part of the financial services sector. The Pension Reform Act of 2004 as amended in 2014, made pension administration a structured and regulated industry. I believe that FCMB saw value in participating and that is what they have done. FCMB Pensions is a full subsidiary of the FCMB Group, the Holding Company. The change of name happened in November 2018 but it became effective in 2019. The whole idea is to align with the rest of the group and seize the strength of the brand to market the pension company.

So we are just trying to leverage our own years of experience and the strengths that FCMB has built over 30 years. I believe First City Merchant Bank was one of the first private banks licensed in Nigeria, more than 30 years ago. It started initially as a stock broking company, CSL Securities, which still exists. So FCMB is just closing the loop, as it were, to offer more wealth management services.

What’s the total shareholding position of the FCMB in the PFA?

Like I said, FCMB initially owned 25% percent and they have been the largest single shareholder since 2008. I think in 2011 or 2012, they raised it to 28%. And now, it’s about 93%. It’s almost wholly owned by FCMB as it were.

How much assets are you managing now?

As at today, we have a little above N275bn as assets under management. Of course we started at zero. In 2006, it was around N700m, so a lot of progress has been made. We have 411,000 retirement savings accounts (RSAs) and we have got about 5,000 retirees we are paying now. We pay close to N200m every month. From inception to date, we have paid about N54bn to retirees in all kinds of benefits. That includes programme withdrawals, small balances, death benefits, and payments made to those who lose their jobs and don’t have another job for four years. One of the benefits of this contributory pension scheme is that since the money is already provided for, by the 18th or 19th of every month, the retiree gets his or her payment. I haven’t heard any complain of any pensioner not getting paid once the programme withdrawal commences. We give standing order instructions to the Custodian.

Is there any significant change from the corporate culture of FCMB Pensions as opposed to Legacy Pensions?

Obviously, there have been some differences initially because we were two different companies and FCMB was the minority shareholder as it were. But now, we are a member of the group. We have since November 2017 when the acquisition was made, set in motion our plans to harmonize and align with not just the culture but the strategy of the group. The name change is part of the culture and brand change.

In terms of service delivery, what should we expect?

With our years of experience and the strength of FCMB Group Plc, things will get better. We will have more distribution channels because FCMB has over 200 branches nationwide. We intend to fully leverage on those. That’s an improvement on the 49 branches and service centres that we used to have. So you can walk into any FCMB branch and you are attended to.

What are the short, medium and long term plans of FCMB Pensions?

The short term plan is aligning with the group’s strategy, the culture, the branding and the rest. The medium term - our objective is to double our assets under management in three years. We also aim to be among the top returns in terms of investments. In addition to that we will seize the opportunity of the group to have more aligned technologies, so we can serve our customers better. In the long run, we aim to be a top tier player.

Still talking about customer experience, many RSA holders still complain of lack of care from PFAs, what’s the experience at FCMB Pension?

We respond to customer issues as quickly and pragmatically as we can. A lot of the times there is misinformation. I personally receive calls from contributors and retirees, I listen to them and pass their complaints to the appropriate places they could be resolved. I also tell them, if they don’t get positive response in 24hrs, they should call me back. Right from the top to the bottom, we attend to whatever complains we get. It is not inconceivable that in a retail business, you won’t have complains but we do our best to resolve issues as best as we could.

The Multi Fund Investment Structure that was recently introduced, are contributors signing on?

The multi fund structure was introduced July 1, 2018. Prior to that time, we had just two RSA funds - the RSA Active and RSA Retiree. Even on the multi-fund structure, not all funds are by choice. There are some defaults. Fund Two is like the existing RSA prior to July 1. It is for all those less than 50 years old. It’s by default. If you are 50 and above and not retired, you go into Fund Three. Naturally, Fund Four is a retiree fund. It’s Fund One that is primarily by choice ab initio. Fund One is by choice if you are less than 50 years. Which means you can decide to go from Fund Two to Fund One but you have to commit to that. But you can’t move from three to Fund One. You can’t move from Fund Two to Fund three until you are 50.

What we have seen is very little desire for contributors to move into Fund One. I’m not sure in the entire industry, if we have up to N20bn in Fund One out of the about N8trn assets. The reason isn’t farfetched. Fund One is the aggressive fund. Which means it has more variable income assets like equities and the rest? And the equities market in 2018 didn’t do quite well. Other than that, everything is running smoothly.

My impression is that people are very conscious of their pensions and wouldn’t want to take too much risk. The argument is that those who are young can take more risks so can do the aggressive fund. The other funds have more fixed income. Those getting close to retirement don’t want fluctuations on their savings.

Yields on the contributors’ investment are still an issue. Contributors raise concern about low yields on their RSAs, what could be responsible?

I want to debunk the issue. For 2018, inflation was about 11.4 percent and the average return for the RSA was over 12 percent, net of fees. Return above inflation is real return on investment. If you are talking about the actual amount people are taking home, that’s a different thing because it is dependent on how much a contributor has in his or her RSA. Whoever has the highest contribution will naturally get higher pension. As for return, at least for 2018, it was real return, higher than inflation.

If you are talking about devaluation of the naira, I’d like to say, the contribution itself has been devalued. In general, the investments have not lost principal. It’s difficult to lose value, even in the Fund One. Something must be terribly wrong for the funds to lose value. You can make less returns. The portfolios have been carefully structured.

PenCom recently licensed a closed PFA for the universities, Nigerian Universities Pension Management Company (NUPENCO), what’s the implication of the proliferation of these PFAs on the CPS scheme. We had the Police PFA and then this?

The police are still within the CPS. It’s just that they have their own PFA. It’s not compulsory to sign on the Police PFA even as a police officer. Some have remained with other PFAs. For the universities, I think it is part of the labour issues between ASUU and the Federal Government. It’s a concession given to ASUU. But the staff also have a choice to choose any other PFA of their choice.

Does it damage the CPS? yes and no. No in the sense that it is still be a part of the scheme supervised by PenCom and subject to the same rules. Will it harm the existing PFAs business? yes it does. Because what has been done is that private entrepreneurship took the risks to build the industry with their money for about 13 years and now it is being cannibalised without compensation. Definitely it harms the Operators. There must be a note of caution. If it continues, other pressure groups may also make demands. It will make a mockery of the entire thing. The regulator will watch this overtime and I believe they will do things in the best interest of the industry.

What should give your customers confidence now as FCMB Pensions?

FCMB Pensions is well placed and with the backing of a financial services group, we can only do better. We will leverage the technology of the group, the branch network and the brand name. There is already a pool of investment skills in the Group and we will leverage on that too. So we are well positioned to grow our share of the market. I can only see the company become one of the best PFAs in this country.