A plan by the National Pension Commission (PenCom) to boost funds contributions from N6.4 trillion to N7.2 trillion by the end of 2017 may be jeopardised by the current pension outstanding estimated at N140 billion.
The Guardian learnt that the Federal Government’s agencies are on top of the list of pension debtors, while private entities are following the trend.
This situation, according to experts, would truncate the PenCom’s agenda if urgent actions are not taken to recoup the debts. Also, the Federal Government that has failed to remit its workers’ contributory pension is under a moral burden that may prevent it from sanctioning other employers that are guilty of the same offence.
Experts alleged that the N140 billion government’s debt has already been deducted from workers’ salaries but it is now a liability for the government to remit it into the PenCom account.
Stakeholders in the sector who spoke to The Guardian on the development said the funds could have increased by a minimum of N1trillion in the current year, while they expect it to grow beyond N7.2 trillion, if the debtors remit funds as at when due.
An industry analyst who spoke on condition of anonymity expressed concern that the funds should have been growing with an increase of at least N50 billion and in some cases even more on a monthly basis in the last two years.
The source alleged that the Federal Government did not help matters by the accumulation of about N140 billion pension arrears under the Defined Benefit Scheme (DBS) and Contributory Pension Scheme (CPS), even as some states and companies in the private sector are still defaulting in remittance to the Retirement Savings Accounts (RSAs) of their workers.
The reason for the constant growth in pension assets, according to The Guardian source, is that pension contributions are made on a monthly basis to the RSAs of employees, while the PFAs also make a lot of profits from investment of these funds in Federal Government bonds, stock market and other less risky windows, which also go into the pension funds pool.
However, with some states now ready to join the CPS and the readiness of the Federal Government to settle some of its arrears, as well as the PenCom going after defaulting employers, experts said this could push the fund even beyond the targeted amount.
The Director General, Ondo State Pension Commission, Jaiyeola Olowosuko, said because the contributions are made every month and new sets of people are regularly subscribing to the scheme, the funds will keep growing.
On the investment income that has increased the volume of the pension funds to N6.2trillion, the Chairman, Pension Funds Operators of Nigeria (PenOp), Eguarekhide Longe, said that of the amount, over N2 trillion is investment incomes, meaning that the managers (PFAs) of that money have received over N3 trillion pension contributions in the last 12 years and that they (pension funds operators) have added over N2.5 trillion to it from investments they made.
“It shows that the money has been active. The philosophy of managing this money is to add to it. It means that the money has been used profitably. You will find out that the money is being used by the managers for the right objectives, so that when workers retire, they earn their money seamlessly,” he pointed out
The Director, Centre for Pension Right Advocacy, Ivor Takor, said it was possible for the PenCom to realise the N7.2 trillion target before the end of this year, revealing a plan by PenCom to establish a micro pension scheme as part of plans to grow the contributory funds.
According to him, some PFAs are making money from investment of the pension funds and some of the profit goes back into the pool, which increases its volume.
Takor, who is a former member of board of PenCom, appealed to the Federal Government and states to pay their pension arrears to redeem the lost image of the new pension scheme that has been recently criticised for various reasons, among which is the multitude of arrears owed, as was the case in the old scheme.
He applauded the steps taken by PenCom by partnering the Economic and Financial Crimes Commission (EFCC) as well as other relevant agencies to prosecute defaulting employers, stating that this would boost compliance in the private sector that will make the funds grow more.
On what has kept the funds safe, PenCom cited prudent management, noting that no fraud has been recorded under the scheme. According to the regulator, the Pension Reform Act, 2004, which was the governing legislation of the CPS, was repealed and re-enacted in July 2014. The new law re-enacted some crucial provisions of the repealed 2004 Act, including the establishment of the CPS as well as PenCom as the sole regulator and supervisor of pension matters in the country.
“Among other significant revisions, the PRA 2014 introduced some innovations in the pension system, instituted a stiffer regime of sanctions and penalties for infringements, made upward review of the minimum rate of pension contribution in order to enhance the value of pension pay-outs, and expanded the coverage of private sector employees under the CPS,” it stated.
The Founder and Promoter of the First Guarantee Pension Limited, (FGPL), Nze Chidi Duru, during a visit to the Rutam House, corporate headquarters of The Guardian in Isolo, Lagos urged PenCom to invest the funds in infrastructure to boost economic development of the country. He attributed the large infrastructure deficit in key sectors of the economy to population growth, demographic changes and urbanisation which have increased the demand for social amenities in the country.
“Infrastructure is a potential avenue for pension funds to reap higher and consistent returns on investment. If adequate policies, structures and regulations are instituted, investment of pension funds in infrastructure and real estate development provide veritable avenues for portfolio diversification as well as properly matching pension assets with their future liabilities,” he said.