AS Uncertainties Trails Pension Sector Recapitalisation Deadline

With just two weeks remaining for the National Pension Commission to draw its cotton closed for the recapitalisation exercise in the pension sector, Ebere Nwoji reports how operators have fared in the face of the exercise.

Exactly two weeks to the expiration of April 20th, 2022 deadline given to pension fund operators to upgrade their minimum operating capital from the present level of N1 billion to N5 billion, the entire atmosphere of pension market is very cloudy regarding the status and fate of the operating firms in the face of the new capital regime.

Indeed, there are lack of information in the industry regarding the number of operating firms that have made the new capital regime and the number of those that could not make it.

Neither the umbrella body of Pension Fund Operators (PenOp) nor the regulator, the National Pension Commission (PenCom) is ready to give information on the recapitalisation update.

When THISDAY contacted the Director General and Chief executive Pension Operators Association of Nigeria (PenOp), Mr Oguche Aguda on the matter, he simply replied that he was not in position to provide answers as it was the duty of the regulator PenCom to give out such information since it was the body that approves operating firms’ annual account.

When THISDAY called the PenCom Director General’s office, to give an update on the situation, the PenCom Chief Executive Officer, Aisha Dahir Umar did not pick the call. 

The lack of clarity on the matter has left the entire industry in the dark.

Operating firms

Currently, there are 22 licensed PFAs operating in the system and four Pension Fund Custodians. They are AIICO Pension Managers Limited, APT Pension Fund Managers Limited, ARM Pension Managers Limited, CrusaderSterling Pensions Limited, FCMB Pensions Limited, Fidelity Pension Manager

First Guarantee Pension Limited, IEI-Anchor Pension Managers Limited, Investment One Pension Managers Limited, Leadway Pensure PFA Limited, Nigerian University Pension Management Company (NUPEMCO), NLPC Pension Fund Administrators Limited, NPF Pensions Limited

OAK Pensions Limited, Pensions Alliance Limited, Premium Pension Limited, Radix Pension Managers Limited, Sigma Pensions Limited, Stanbic IBTC Pension Managers Limited

Tangerine Pensions Limited, Trustfund Pensions Limited and Veritas Glanvills Pensions Limited.

Investment of the funds generated by the PFAs is determined by the PFC as stipulated by the laws guiding pension fund investment.

The PFCs are; First Pension Custodian Nigeria ltd, UBA Pension Custodian Ltd, Zenith Pension Custodian Limited, and Access Pension Custodian Limited.   

They Play the role of undertaking the responsibility for keeping safe custody of pension assets on trust on behalf of contributors.

The main functions of PFCs are to receive pension contributions on behalf of PFAs; settle transactions and undertake activities relating to the administration of pension fund investments on behalf of PFAs and to notify the PFA within 24 hours of the receipt of pension contributions from employers.

The above firms were in April 2021 mandated by PenCom to upgrade their capital from N1 billion to N5 billion. The commission gave them April 20,2022 to get the new capital or cease from operating in the system.

Mergers and acquisition

Few months back, THISDAY findings revealed that talks on mergers and acquisition were going on among some firms.

Later it was discovered that some firms have been taken over by stronger operators in form of acquisitions while talks on mergers between some operators have reached advanced stage. Competent industry sources informed THISDAY that fresh discussions on possible mergers by more firms who were hitherto indifference were on at the time.

On acquisition, already, PenCom had granted a “no objection” approval to Guaranty Trust Holding Company to acquire 100 per cent shareholding of Investment One Pension Managers Limited.

It has also granted a “no objection” approval to FCMB Pensions Limited for the next phase of acquiring 60 per cent shareholding of AIICO Pension Managers Limited while AXA Mansard Pensions has also been bought over by the Verod Capital Alliance and has been renamed Tangerine Pensions Limited.

THISDAY also gathered that four new merger talks were on going in the industry while others who were yet to meet the new capital regime were weighing different survival options.

At the last count on the financial status of the operators going by their September 2021 annual report and financial statements released by PenCom, the regulator.

In terms of market share, PenCom said five high performing PFAs have continued to hold their lion share positions of the entire market with the Stanbic IBTC Pension Managers maintaining the lead.

Operators’ Performances

PenCom report showed that as at 31December, 2020, the largest four operators have met the requirement while in June 2021, that is two months after the new capital regime was announced, four more firms hit the N5billion mark.

Going by this PenCom report, it is apparent that eight PFAs are the only firms that have met the N5 billion mark on stand alone.

Since then, the remaining operators seem to be working slowly underground but the Chief Executive Officer   PenOp, Mr Oguche Aguda, at recapitalisation summit workshop organised by PenOp in January this year, informed that about 50 per cent of the existing pension fund operators were ready to go in the new capital regime.

He however said the remaining 50 per cent have been working hard to ensure they meet the deadline.

THISDAY checks revealed that there has been high tension among the remaining operators as they are earnestly considering various options for survival while industry stakeholders have continued to pester PenOp to engage PenCom for possible extension of the deadline to ensure that no firm falls by the wayside while saving more Nigerians from the pangs of unemployment.

As it stand now, it is not certain whether PenOp succeeded in convincing PenCom on the need to extend the deadline in order to save some of its members from possible demise or whether PenCom is insisting of ringing the capitalisation end bell on the 20th of this month as it stated earlier. 

But judging by their performance track records presented by PenCom in its third quarter 2021 report, Stanbic IBTC Pension Fund Managers from inception to last quarter 2021, out of a total of 9,461,173 contributors into the scheme registered 1,912,891 contributors to control 20.2 per cent of the entire market.

ARM Pension Fund Managers followed the lead registering 845,303 to control 8.2 percent market share.

Trust Fund Pension ranked third, registering 772,830 contributors to be in control of 8.2 percent share of the market.

Premium Pensions ranked fourth with 748,374contributors having 7.9 percent of the market share on its side. Sigma pensions ranked fifth registering743, 522 contributors to be in control of 7.9 percent of the market.

According to the PenCom report, these top five ranking PFAs received 65.12 per cent of the total N13 trillion pension assets, which is the total pension fund generated by the entire 9,461,173 contributors into the scheme from inception of the scheme in 2004 to September 30th, 2021.

The bottom three PFAs namely Radix Pension Managers which registered 37,275 contributors to control 0.4 percent of the market, Tangerine Pension Ltd which registered 92,698 contributors to be in control of 1.0 percent of the market and Nigeria University Pension Managers Ltd with 24,275 contributors to control 3.4 percent of the market, perhaps due to the peculiar nature of its market. These accounted for 3.98 percent of the N13 trillion total pension assets.

Stakeholders’ view

Meanwhile, stakeholders have differed in their views on the adequacy of the capital increase in the sector given the sacrosanct nature of the Contributory Pension funds.

The stakeholders, it was learnt, have therefore demanded for clear explanations by the regulator on how the exercise would contribute to the security of the contributed pension funds.

The development was the second time the regulator is raising the capital base of PFAs since the inception of the Contributory Pension Scheme in 2004.

In 2011, PenCom had raised the operating capital of PFAs from N150 million to N1 billion.

In the present regime, the commission is demanding for a N5 billion minimum capital.

The Director, Centre for Pension Rights Advocacy and Consultant, National Institute for Policy and Strategic Studies, Kuru Jos, Ivor Takor, said both the new capital requirement and the merger and acquisition talks going on in the industry was a very good development.

He said the development would strengthen the industry and get rid of unserious operators.

The development, he added, would afford the industry the economy of scale benefit.

He advised those going for merger to perfect their deals well to ensure smoothness in their operations.

Former South East Regional Manager, Premium Pension Managers, Mr Paddy Ezeala said the importance of huge capital for the pension industry can not be overemphasized, as it will ensure that all existing PFAs were on sound footing.

He however said the new capital regime requirement by the regulator would create the negative impression that the industry was shaky whereas going by the nature and laws guiding management of pension fund under the Contributory Pension Scheme, nothing can endanger the contributed funds because of the nature of security surrounding the fund.

He said it was good to build an all-inclusive industry comprising the small, medium and big scale operators but with the new capital level, the regulator was about building a large scale operating industry.

He said with level of the new capital, it was obvious the regulator wanted only the huge operators with huge capital to exist.

He said in doing this, it needed to explain to the layman how the huge capital would contribute to the security of each company’s asset under management.

He said in spelling out the new capital regime, which according to him is bound to send some PFAs and their workforce out of business, “the regulator should have known that if the fear was on the possibility of any PFA going down, it should not have arisen since going down of any PFA has nothing to do with the pension asset because the assets were not with the PFAs but with the Pension Fund Custodians who in turn have invested the funds.”