States’ Application of PFA Scheme Lifts Membership to 6.39 Million

The Nigerian Pension Fund Industry experienced an astonishing year-on-year growth in its first five years of new registrations with scheme membership rising by eight per cent in 2014 to 6.39 million.

Pensions Industry report made available to THIDAY by Agusto & Co. revealed that the growth was as a result of the Retirement Savings Account (RSA) registration from states implementing the PFA scheme for the first time.

According to the report, the public sector accounted for 48 per cent of total RSA registration, while the private sector accounted for the balance of 52 per cent.

“In addition, RSA registration by age distribution shows that 30-39 years continues to account for the largest portion of registered individuals with 39 per cent as at 31 December 2014. Total asset of the pensions industry under the Contributory Pension Scheme (CPS) grew by 14 per cent to N4.6 trillion as at 31 December 2014.

“The growth in pension as- sets has created Nigeria’s biggest pool of long term funds. These pension funds serve as a possible way of achieving the transformation agenda of the federal government in providing infrastructure, energy, employment and general development to the economy. Nigeria’s young demography implies that the bulk of pension savers are within the 30-49 age grade thus ensuring these long term pool of funds remain available for investment purposes over the next two to three decades,“it stated.

The report pointed out that the Nigerian pension investment portfolio tends to be biased towards domestic equities and Federal Government Securities (FGN Securities).

“Our analysis indicates that an estimated 70 per cent of pension assets are invested in low risk debt securities. The FGN securities accounted for 51.97 per cent, money market investment accounted for 11 per cent, while the subnational and corporate bonds accounted for 2.86 per cent. The total equities for the year stood at 13.32 per cent, while other investments accounted

for the balance.

Agusto & co also stated that the declining oil revenues will impede the ability of some state governments to remit employee pension contributions.

The inclusion of the informal sector, the report added, will help boost the pensions industry through increased membership and pension contributions. “Developing countries have issues incorporating the informal sector into already established pension schemes. A notable issue surrounding this would be the absence of a database, which is evident in Nigeria and the inability to determine the income of the informal sector,” the report added.