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Addressing Regulatory Challenges Confronting Pension Industry



The pension industry may have recorded massive achievements in the last 13 years, but experts said pensioners may be affected negatively if the pension industry regulator, the National Pension Commission (PenCom) fails to address some challenges bedeviling the industry, especially in the area of policy implementation. ZAKA KHALIQ writes.

History will never forget the liberation that took place in 2004 in the pension industry as pensioners were rescued from captivity and given a new lease of life.

The enactment of the Pension Reform Act (PRA) 2004, which paved way for the introduction of the Contributory Pension Scheme (CPS), brought great relief to pensioners as they were saved from the hardship suffered by their colleagues who retired under the Define Benefit Scheme (DBS).

Within 13 years, the pension assets, under the CPS, grew astronomically from a deficit of about N2 trillion in 2004 to N7.52 trillion as at the end of December 2017, a feat achieved through proper implementation of regulatory policies and initiatives.

While applauding the feat recorded under CPS, the director, Centre for Pension Right Advocacy (CPRA), Mr. Ivor Takor, said, as at December 2017, the Net Assets Value of Pension Assets under the Contributory Pension Scheme was N7.5 trillion. Of the N7.5 trillion Net Assets Value, he said, 70.42 per cent was invested in FGN Securities, adding that, investment of pension fund in Federal and States governments’ securities, has assisted these governments to cost-effectively manage their national debts, thereby contributing in the solving of their financial needs. This is one out of several advantages of the new pension scheme.

Despite the success of the new pension scheme, there are still some grey areas begging for serious attention.

For instance, key initiatives such as: Transfer window, mortgage financing, consumers engagement, management of annuity, micro pension scheme; pension debt recovery amongst others, have stalled, as the National Pension Commission (PenCom), in the last one year, has done little or nothing to implement some of these laudable initiatives.

Pension Initiatives Begging For PenCom’s Attention

For instance, Section 82(1) of the PRA 2014 provides for the establishment of the Pension Protection Fund (PPF) which is, amongst others, to be utilised for the funding of the Minimum Pension Guarantee (MPG) to be paid to all Retirement Savings Account (RSA) holders who have contributed for a number of years to a licensed Pension Fund Administrator (PFA) and for the payment of compensation to eligible pensioners for shortfall or financial losses arising from investment activities.

The sources of funding of the PPF includes an annual subvention of one per cent  of the total monthly wage bill payable to employees in the Public Service of the Federation, which shall be utilised strictly for the funding of the MPG. Yet, as laudable as it sounds, the pension industry regulator, PenCom, has failed to mount any serious pressure on government to implement this directive.

Moreover, the Pension Reform Act(PRA) 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 months of assumption of duty. But it is pathetic that nothing much has been done to engage employers in a bid to implement this provision.

In the same vein, while pension contributors, over the years, have been anxiously waiting for the transfer window to port from their fund managers to other better service providers, the future looks gloomy, as the waiting game continues, even though, the regulator is not making any tangible move to kick start the transfer window.

Also, 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 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, but this dream is fast fading as little or nothing is being done presently to make it work.

While the Pension Act expanded the coverage of the CPS in the private sector organisations with three employees and above, the previous administration at PenCom did a nationwide awareness and education campaigns across the country in a bid to mobilise trade groups to embrace the initiative, but the steam has gone down as the present administration has failed to commence from there.

Meanwhile, the Pension Reform Act 2014 reviewed upwards, the minimum rate of monthly pension contribution from 15 per cent to 18 per cent, where eight per cent is contributed by the employee and the remaining 10 per cent by the employer. However,  the failure  to implement this section of the law by states and federal governments has left retirees with just 15 per cent benefits.

On the other hand, the feud between pension operators and life insurers has continued to linger as the leadership of PenCom has been unable to finalise with insurers on the way forward for annuity business. Reliable sources said nothing has been done by the present administration to finalise the discussion which was in place before the change in leadership at PenCom last year.

Proffering solution, the Director General, Lagos State Pension Commission(LASPEC), Mrs. Folashade Onanuga, advised that PenCom and PFAs to display the list of annuity service providers on their website while annuity service providers should also be able to display similar list on their website.

“Marketers of both industries need to be sanctioned where they have been accused of de-marketing, whilst sharp practice by any employee aimed at boosting market share should be exposed and appropriate punishment meted out,” she added.

The Way Forward

Chairman, NTA Association of Contributory Pensioners, Alhaji Gbadebo Omolaja,said the commission is not proactive to the complaint and observations of the pensioners about the shortcomings in the system, adding that several pensioners were yet to receive their entitlements almost a year after retirement from service. He called on PenCom to address this loophole.

While appealing to the federal government to recall PenCom from its sabbatical on the affairs of pensioners, since the welfare of all retired civil servants is one of the major responsibilities of the commission, industry players equally implored the National Assembly to extend their over-site functions to the welfare of contributory pensioners and make necessary amendment to Pension Act on all the shortcomings observed.

According to them, “It is our hope that PenCom would be alive to its responsibilities and the welfare of the contributory pensioners, because the secrecy under which PenCom operates is unexpected and worrisome.”

Following recent move by PenCom to enhance pension of pensioners who are on Programmed Withdrawal under CPS, Takor, in a statement made available to LEADERSHIP over the weekend, said the current enhancement, appears to be a token, which may not meet the yearnings and expectations of these pensioners, even though it resolves issues around Programmed Withdrawal, arising from misinformation from certain quarters.

To him, “We wish to submit that political will on the part of the federal and states governments, effective regulation and supervision of the industry by PenCom and compliance with the provisions of the PRA 2014 as well as regulations, rules and guidelines issued by PenCom from time to time by all stakeholders is what is required to sustain the reform of the pension industry.”

Until and unless the current administration in PenCom leads by example by addressing all the highlighted challenges, the commission could be working through a tight rope.

Implementation of policies had make pension industry grows in leap and bound over the years, but that growth could be retrogressive if the commission under the current management continues its ‘Sit down dey look’ attitude.





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