How Pension Sector Weathered 2024 Storms

Ebere Nwoji narrates how players in the pension sector weathered the storm in 2024 to stand tall amidst economic downturn

The pension sector currently sitting on N21.9 trillion assets is one sector of the economy that can be relied upon for providing long term investible funds.

The sector is one of the few sectors of the economy that dared the prevailing economic downturn in the country to stand tall in terms of long term investible fund accumulation. The sector as at October 2024 accumulated N21.9 trillion assets registered 10.5 million contributors. This was a significant improvement on the N17.66 trillion assets accumulated by the sector in the same period in 2023.

The Contributory Pension Scheme (CPS), going by its performance since inception, especially in the Q2 up to last Q4 2024 has apparently positioned the pension sector as one of the few sectors that have weathered the storm in the face of the ravaging economic downturn plaguing businesses and high inflation rate affecting businesses in the country.

Indeed, the sector’s performance during the year and various initiatives implemented by the regulator the National Pension Commission (PenCom) has proved that the CPS which Nigeria copied from Chile 20 years ago is, after all, not a mistake, having to a large extent improved the condition of pensioners in the country.

However, the sector operators said one of the major challenges of the CPS scheme over the years has been the need to get Nigerians see the value of financial planning through pension savings. According to the operators, after these 20 years of its existence, many Nigerians know little or nothing about pension. They added that even those who know about the scheme do not have the trust as to understand that the sector is a protected industry as such there should be no fear of loss of the saved funds.

The fund keeps growing as it is invested in various portfolio that yields interest with the result that today, the pension assets has grown from N2 trillion deficit to N20.48 trillion assets under management.

CPS performance

According to report released by PenCom, in the second quarter 2024, the sector witnessed significant growth in the second quarter of the year compared to what it was in the first quarter. PenCom in its report said remittance of contributions increased by 20.26 percent during the period from N314.17 billion in Q1:2024 to N377.83 billion in Q2:2024.

The commission in the report dated September 10, 2024 said overall pension funds and assets witnessed 4.17 percent growth from N19.66 trillion as at Q1:2024 to N20.48 trillion as at Q2:2024.

“The Nigerian economic landscape in Q2 2024 continued to experience a mix of growth and significant challenges, particularly with the rate of inflation, increasing to 34.19 percent in June, 2024 from 33.20 percent in March, 2024. The increase led to an upward adjustment of the Monetary Policy Rate (MPR) by the monetary authority from 24.75 percent in Q1:2024 to 26.25 percent in Q2:2024. Many other factors including depreciation of the Naira, sluggish agricultural productivity and increased transport costs due to fuel subsidy removal and regional instability has continued to affect the economic landscape and ultimately disposable incomes,” it said.

Paid Benefits Via CPS

Giving a breakdown of benefits paid to retirees during the year, the Chief Executive Officer, Pension Operators Association (PenOp), Mr Oguche Aguda, said in the past 15 years Pension Fund Administrators (PFAs) have paid a total sum of N1.63 trillion to retirees in both public and private sectors under both programme withdrawal and annuity.

He said the above figure was paid to 442,000 Nigerians who retired from services in various employments in the country during the period. Aguda said out of the N1.63 trillion lump sum paid on both life annuity and programme withdrawal, in the second quarter 2023 total life annuity payment stood at N665.1 billion. This, according to him, was received by 111.708 applicants. He said in third quarter 2022, a total of N595.22 billion was paid to 102,696 applicants as annuity lump sum.

Also in Q2 2024, 2024, a total of 2941 Retirement Savings Account holders under the CPS requested to access up to 25 percent of their RSA balance for payment of equity contributions for residential mortgage. PenCom said out of this, approvals were granted to 2,305b requests amounting to N18 billion while 186request were rejected due to incorrect documentations.

Micro Pension

In 2024, PenCom said development and deepening of the Micro Pension scheme was a task that must be achieved by all means. PenCom said a total of 16,624 Micro Pension Contributors (MPC) were registered in the second quarter of the year by 15 pension fund administrators, bringing the total number registered MPCs from inception to 143,565 as at 30 June, 2024.

PenCom Director General Ms Omolola Bridget Oloworaran, at the 2024 media retreat organised by the commission in Lagos said: “Micro -Pension initiative in particular, is something we are very passionate about. It is our way of saying that no one should be left behind, no matter how small their earnings might be.”

She noted that technology plays a vital role in driving the scheme from mobile enrollment to real-time account management to benefits administration.

The PenCom DG said she intends to use technology to scale the micro-pension plan.

Highlighting some of the major achievements recorded by the sector during the year under review the PenCom boss said: “This year, we achieved a major milestone with the launch of the e-Application Portal for Pension Clearance Certificates (PCC) in October. This initiative replaces the previous manual process, enabling companies to seamlessly apply for and receive PCCs online. “

Benefits of PCC Initiative

On the benefit since its deployment, she said: “We have issued over 38,000 PCCs, significantly enhancing ease of doing business and ensuring compliance. Additionally, the Pension Industry Shared Service Initiative is in advanced stages of implementation. This initiative will digitise pension contributions and remittances, ensuring seamless processing of contributions and resolving discrepancies caused by incomplete remittance details.”

She said to further enhance contributors’ experiences, PenCom has introduced a revised programme withdrawal template, simplifying access to voluntary contributions and revising the threshold for en-bloc payments in line with the new minimum wage. These measures she said were designed to make retirement processes more efficient and user-centric

Also during the year, operators established a new Pension Contribution And Collection system to institute the regime of electronic remittances without schedule.

The commission during the year intensified efforts to put to an end delays seen in payment of accrued rights ensuring that government released a whooping N44 billion to pay workers’ accrued rights.

PenCom said it’s target was to ensure that issue of delay in payment of accrued right of retiring workers becomes a history.

“Moving forward, we are working with the Federal Government to put in place a sustainable solution that ensures retirees receive their benefits promptly and without undue stress.Since assuming office, my team and I have been focused on strengthening compliance, enhancing service delivery, diversifying pension assets to optimise returns, improving benefits, and expanding coverage to include more Nigerians, especially those in the informal sector.” PenCom DG stated.

Other initiatives implemented by the commission during the year include lifting restriction on 50 percent maximum lump sum access to RSS balance .Also the commission during the year lifted restriction placed on LPFAs on commercial papers and directed PFAs to resume investments in commercial as well as grants approval for retirees whose monthly or quarterly pensions are less than N23333representing one third of the current minimum wage .

The commission said the reason for all these initiatives and their implementations is to ensure that Nigerians work and retire seamlessly.

QUOTES

“This year, we achieved a major milestone with the launch of the e-Application Portal for Pension Clearance Certificates (PCC) in October. This initiative replaces the previous manual process, enabling companies to seamlessly apply for and receive PCCs online.We have issued over 38,000 PCCs, significantly enhancing ease of doing business and ensuring compliance. Additionally, the Pension Industry Shared Service Initiative is in advanced stages of implementation. This initiative will digitise pension contributions and remittances, ensuring seamless processing of contributions and resolving discrepancies caused by incomplete remittance details.”