Pension funds may hit N7.2trn by year end

By Abdul Olalekan

Despite the devaluation of Naira and double digit inflation rate that have impacted businesses negatively and put the economy in recession, the nation’s Pension Funds may hit N7.2 trillion by December 2017, Business 247 News Online exclusively learnt.

As at November 2016, the funds stood at N6.2 trillion from about N5.1 trillion it was in January, 2016, gaining over N1 trillion in 2016.

Industry sources disclosed to this medium that the fund could increase by a minimum of N1 trillion in the current year as well, while they expect it to grow even beyond N7.2 trillion, if some states and Federal Government as well as private sector employers pay the pension arrears they owe.

However, Business 247 News Online investigation shows that the fund has been growing with an increase of at least N50 billion and in some cases over N150 billion on a monthly basis for the last two years.

The fund is growing despite the fact that Federal Government has accumulated about N140 billion pension arrears under the Defined Benefit Scheme (DBS) and Contributory Pension Scheme (CPS), even as most states as well as some companies in the private sector are still defaulting in remittances to the Retirement Savings Accounts (RSAs) of their workers.

The reason for the constant growth in pension assets, Business 247 News Online learnt, is not unconnected to the fact 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 into Federal Government Bonds, stock market and other less risky investment windows, which also go into the pension funds pool.

Moreover, with some states now ready to join the CPS, as well as the readiness of the FG to settle some of it arrears, and the National Pension Commission (PenCom) going after defaulting employers, experts said this could push the fund even beyond the aforementioned amount.

Speaking in an interview with Business 247 News Online, the Managing Director, AXA Mansard Pensions, Mr. Dapo Akinsanya, said the fact the contributions are made every month and new sets of people are regularly subscribing to the scheme, means the funds will keep growing.

On investment income that has further soar the volume of the pension funds to N6.2trillion, the Chairman, Pension Funds Operators of Nigeria (PenOp), Mr. Eguarekhide Longe, said, over N2 trillion of the pension funds are investment incomes, meaning that the managers (PFAs) of that money have received over N3 trillion pension contributions over the last 12 years and that they (pension funds operators) have added over N2.5 trillion to it from investments they made.

“It shows you that the money has been active. So, the philosophy of managing this money is to add to it. It means that the money has been used profitably. Now if you think about how pension fund should be used and so on and its objectives, you find out that it is being used by the managers for the right objectives, so that when people retires, they earn their money seamlessly,” he pointed out.

In an interview with Business 247 News Online, the Director, Centre for Pension Right Advocacy, Mr. Ivor Takor, said most of the PFAs are making money from investment of the pension funds and that some of the profits also goes back into the fund, which increases its volume.

Takor, who is also a former Board Member, PenCom, however, appealed to the Federal Government and states to pay their respective pension arrears as this will go a long way 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, just like what was happening in the old scheme.

He applauded the steps taken by PenCom by partnering with the Economic and Financial Crimes Commission (EFCC) as well as other relevant  agencies to prosecute defaulting employers, stating that this will also ensure more compliance in the private sector and make sure the fund keeps growing from time to time.

Meanwhile, the Director-General, PenCom, Mrs. Chinelo Anohu-Amazu, said what has kept the funds was the prudent way by which it is being managed, adding that no fraud had been recorded under the scheme.

She explained that the Pension Reform Act, 2004, which was the governing legislation of the CPS, was repealed and re-enacted in July 2014.

She said the new law re-enacted the copious provisions of the repealed 2004 Act, which included 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, ensured the 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,” Anohu-Amazu said.