The adoption of the contributory pension scheme by 1,015 newly compliant firms has boosted the total pension contribution in the country with additional N553 billion, BusinessDay findings have shown.
The total value of the nation’s contributory pension scheme increased to N4.61 trillion by December 2014 up from N4.06 trillion as at the end of December 2013.
The analysis done by BusinessDay Research and Intelligence Unit (BRIU) has linked the 14 percent increase in the value of the contributory pension scheme to more firms becoming compliant to the scheme, as well as significant amounts being remitted by firms annually.
Our analysis shows that 1,015 more firms embraced the scheme in 2014. Their entry pushed the number of complaint firms to 2,178 by December 2014 as against 1,163 compliant firms by December 2013, representing an increase of 87.3 percent within that fiscal year.
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“Many PFAs invested in FGN securities and bonds because of their steady returns and safety. And the increasing number of compliant firms shows that PENCOM is living up to expectation by enforcing the rules and regulations that govern the pension industry”, according to Paul Maliki, an industry analyst.
Concerning the remittances of firms on behalf of their employees, 23 firms in 2014 remitted a minimum of N100 million each, as against 15 firms which remitted similar amount in 2013. Julius Berger Nigeria Plc remitted N6.84 billion in 2014 and hence topped the list of compliant firms that remitted the highest amount last year. It was followed by Nigeria LNG, N3.06 billion and United Bank for Africa (UBA), N2.18 billion.
Others are SCC Nigeria, N922 million; KPMG, N438 million; Setraco, N419 million; PWC, N405 million and Seplat, N399 million. On the list also are Reynolds Construction Company, N304 million; Huawei Technologies, N261 million; Dantata and Sawoe, N230 million and AIM Consultants, N215 million.
PW Nigeria, N165 million; Prodeco Property Dev Coy., N163 million; Narelli International, N158 million; Mother Cat,N124 milliom; Salini Nigeria, N117 million; AIICO Insurance, N118 million; ISN Products, N114 million; Accenture, N108 million, BNL Engineering, N107 million, Union Assurance, N104 million and Vodacom Business Africa, N100 million complete the list of compliant firms that remitted a minimum of N100 million each in 2014.
With regards to the components of the pension scheme, our findings show that the Retirement Saving Account (RSA) has gained traction, as it constituted 58 percent and 64 percent of the total pensions remitted in 2013 and 2014 respectively. However, the same thing cannot be said of other components.
This is because the AES which constituted 18 percent of the total pension contribution in 2013 declined to 14 percent of the total pension contributed in 2014. CPFAs accounted for 15 percent of the whole contributory pension in 2013 but marginally declined to 14 percent in 2014 while RSA Retiree Fund remained at 8 percent of the total value contributed in both years.
“It is important to understand that both CPFA and AES are transitional arrangements which do not allow new entrance as provided by the Pension Reform Act, 2014. The Act also provides that membership of the schemes and the funds can be transferred to Retirement Savings Account Fund for onward administration by the PFAs.
The reduction in the size of the AES fund observed between 2013 and 2014 is mainly due to transfer of funds by some AES to RSA Fund” according to Babatunde Alayande, Research and Corporate Strategy Department, PENCOM.
Available data on investment in FGN bond show that it remained the toast of investors all through the years under consideration as PFAs invested over 50 percent of their pensions in these assets. On the other hand, investment in domestic shares was down to 12 percent in 2014 as against 15 percent in 2013.
In the new Pension Reform Act 2014 which was signed into law on July 1, 2014, employee’s contribution was increased from 7.5 percent to 8 percent, while that of the employer was moved from 7.5 percent to 10 percent. Consequently, the overall rate of contribution has increased from 15 percent to 18 percent.
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