CPS: Asset growth strengthens confidence in new scheme

With the pension assets peaking at almost N11.35 trillion in August, there is every reason to sustain the momentum in order to reinforce public trust. SUNDAY OJEME reports

The anguish, pains and disillusionment that hallmarked the nation’s pension atmosphere in the past have continued to change for good as more Nigerian workers key into the Contributory Pension Scheme (CPS).

While more workers are still being enrolled by the Pension Fund Administrators (PFAs), the steady rise in asset under management is also reinforcing public confidence in the scheme currently being supervised by the National Pension Commission (PenCom). Specifically, the recent report released by PenCom put the total assets at N11.35 trillion as of August 2020.

No doubt, the successful berthing of the micro pension plan by the commission under the supervision of the Director- General, Mrs. Aisha Dahir- Umar, has been identified as a further elixir to boosting the assets and also expanding the investment portfolio.

At the end of 2018, it was reported that the Global Pension Industry had an estimated asset under management of $41.4 trillion, which represents 53.9 per cent of global assets under management. Optimism In the global equation when the pension assets rose to $32 trillion in 2019, Nigeria also made its mark.

For Nigeria, the pension industry has witnessed a new deal as PenCom has effectively regulated and supervised the industry to ensure that retirement benefits are paid as and when due. Dahir-Umar, who was recently confirmed as substantive director-general, attributed the boost in pension assets to the support of the organised private sector (OPS) and organised labour.

“The pension industry is one of the fastest growing industries in the country with the support of the organised private sector and labour. “The Contributory Pension Scheme (CPS) plan currently has over N11 trillion pension assets.

This feat could not have been achieved without the support of the organised private sector,” she said. She explained that the commission had developed a software application that tackled the problem of multiple registrations and urged employers to encourage their employees to avail themselves to their respective pension administrators for data recapture and regularisation.

“The commission recently developed a robust application to enhance contribution registration system for the pension industry.

The application has been deployed and pension practitioners are currently using it for new registration and recapture of data for contributors who previously had retirement savings accounts. “The application is linked to the National Identity Management Commission and will assist in addressing issues of multiple registrations in the database of pension funds administrators.

“Accordingly, all employers are asked to encourage their employees to present themselves to their respective pension administrators for recapture,.” she posited. Investment spread The PFAs, as usual, invested a major chunk of the fund in Federal Government Bonds; Treasury Bills; Agency Bonds (NMRC and FMBN); Sukuk Bonds; Green Bonds and state government Securities.

Regulator’s view

The director-general attributed the successes achieved since the inception of the CPS to the commission’s esteemed contributors. According to her, “the achievements recorded by the commission in the last 15 years would not have been possible without the support and understanding of all stakeholders, especially you, our esteemed contributors who are about to retiree. “I, therefore, urge you to contribute positively towards the success of the pension peform programme.”

Analysts also view positively the commencement of the micro pension scheme as increasing the industry coverage ratio and helping to ramp up AuM. Sustained campaigns Despite the period the scheme has been on ground, PenCom is still carrying out massive campaigns through various channels to enlighten the public, even at the grassroots, to embrace CPS at all stages of their business growth in order to guarantee a better life in retirement.

The introduction of the micro- pension plan has also become a game influencer in the scheme. The micro pension scheme covers farmers, teachers, hair dressing saloon owners, petty traders, musician, actors/ actresses, shoe shiners, bricklayers, among others. Income earners from age 18 qualifies and can contribute based on his income even as the contributions can be daily, weekly or monthly.

Besides, should anything happen to a contributor’s business, such a person can get 40 per cent of the total contributions back to begin a new life. Also, in case of death, the contributor’s next of kin will be paid the total balance left in the account of the contributor.

The extension of the CPS to the informal sector and the flexibility of its operation is one of the incentives expected to encourage participation and growth of the pension industry. Drivers of asset growth PenCom has under current management projected the asset to hit N15.1 trillion by 2023. Among other initiatives, it introduced the Enhanced Contributor Registration System (ECRS) meant to solve the challenges faced with the existing Contributor Registration System (CRS).

Besides helping to lift contributors’ confidence in the industry and bringing in more people, the enhanced application is expected to open up transfer window for RSA holders to switch PFAs. “Electronic submission of employer code requests by Pension Fund Administrators (PFAs) on employers and the full automation of the process of issuing employer codes. Updates and edits of contributors’ information on the national databank maintained by the National Pension Commission by the PFAs.

The deployment of the ECRS is a major step towards the introduction of the transfer widow, which will enable contributors change to the PFAs of their choice, in line with Section 13 of the Pension Reform Act (PRA) 2014,” it said said. Section 2(3) of the Pension Reform Act, 2014 (PRA 2014) provides that employees of organisations with less than three employees as well as the self-employed persons shall be entitled to participate in the CPS in accordance with guidelines issued by the Commission. Majority of these categories of persons are found in the informal sector and have generally low and irregular incomes.

“As you are aware, the informal sector workers constitute the larger percentage of the working population in the country, there is therefore no doubt that robust participation would result to exponential growth of the ension funds which would consequently, provide funding for allowable and relevant investments that would impact positively on the economy.

The MPP would contribute immensely to archiving the Pension Industry’s strategic objective of covering 30 per cent of the working population in Nigeria under the CPS by the end of 2024. “The low income earners, the high income earners and the SMEs, each of these categories is going to be targeted with appropriate MPP products and sensitization programmes that meet their peculiarities. As earlier mentioned, the commission is engaging relevant unions and associations in its enlightenment drive.

“Some of these unions and associations cover the artisans and grassroots operators. The commission is aware that public enlightenment and pension education are key success factors and as such is working assiduously with the Pension Operators Association (PENOP) to ensure effective coverage.”

Reinforced confidence Speaking further on the workings of the scheme, Head of Communication Department of PenCom, Peter Aghahowa, said the scheme, introduced in 2004 by the Federal Government, was a process where certain percentage of enrollees’ salaries was saved on monthly basis in a pool with the employers also contributing.

Aghahowa said the scheme had made the life of retirees much easier, unlike the defined benefits scheme, which it replaced. Last line To instill more confidence in the system and the nation’s pension arrangement, it is expected that the commission would continue to protect contributors’ funds and drive compliance by private sector employers through public awareness campaigns and engagement

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