The last fifteen years from 2004 to date, has seen the pension industry grow from negative position to about N10 trillion in assets as the end of October, a significant landmark that makes it’s the highest in accumulation of investible funds in the entire financial services industry.
Now, the biggest challenge confronting the pension industry operators is how to sustain this growth, and perhaps double it in the next fifteen years to N20 trillion, amidst dropping growth in economy, other factors.
Wale Odutola, head, Brand Committee of the Pension Fund Operators of Nigeria (PenOp) and managing director/CEO, ARM Pensions Limited reviewing the state of the industry at the groups 2019 Media Retreat in Lagos said “We have had fifteen decent years within the pension space, which has enabled us pull assets now to almost N10 trillion”.
Odutola noted that the industry was growing at 20 percent in the first 10 years of the operation of the Contributory Pensions Scheme (CPS), nothing that this has continued to drop over a while now.
He raised concern over sustainability of the growth to be able to double the value of assets in the next 15 years.
According to him, the concern is the fact that the micro pensions scheme which should drive uptake is not compulsory, but voluntary in a environment where saving culture is poor, which means a lot needs to be done.
Another concern Odutola raised was the issue of falling spending power of Nigerian’s, drop in employment among others factors.
Ronke Adedeji, president of PenOp and managing director/CEO, Leadway Pensure Limited in her own comment said that the CPS so far has been successful to the extent that it has been able to accumulate savings, invested them successfully, such that people who retired are able to get their pensions as and when due.
Adedeji stated further that the challenge is the slowing growth of the scheme, which peaked earlier but now dropping.
She lamented that there are no new institutions coming up which grow enrollees, no new employments happening, instead unemployment is growing; and no new employees registering into the scheme as it has always been.
According to her, a lot of work needs to be done. “We are embarking on data clean-up, and that is major step towards going beyond where we are now to where we want to go”.
Adedeji however expressed optimism that industry will continue to move forward with the micro pension scheme, and transfer window at the end of the data clean-up.
The total value of pension fund assets based on unaudited valuation reports grew from to N9.03 trillion as at the end of March, 2019, to N9.33 trillion as at June, 2019, representing a growth of 3.27 percent (N 294.91billion). And this figure is about N10 trillion as at the end of October, according to industry.
The growth indicates a decrease in the quarterly growth rate compared to the 4.55 percent for the previous quarter; this was mainly due to market valuation of quoted equities.
A breakdown of the pension industry portfolio indicates that the pension fund assets were mainly invested in Federal Government Securities, with an allocation of about 70 percent of the total pension assets (FGN Bonds: 48 percent, Treasury Bills: 21 percent, Sukuk Bonds 1 percent while Agency Bonds and Green Bonds: less than 1 percent).
The report further indicates that the value of investments in domestic ordinary shares was N536.97 billion (5.76 percent of industry portfolio value) as at 30 June, 2019, indicating a decrease of N53.64 billion compared to the value of N590.61 billion as at 31 March, 2019.
The decrease in the value of investments in domestic ordinary shares was primarily due to the market price depreciation of some stocks during the period, as the Nigerian Stock Exchange All Share Index (NSE-ASI), depreciated by 2.89 percent, from 30,833.56 basis points as at 31 March, 2019 to 29,966.87 basis points as at 30 June 2019.
The Market Capitalization however appreciated by 13.98 percent, from N11.59 trillion as at 31 March 2019 to N13.21 trillion as at 30 June 2019, following the listing of MTN Nigeria.
The value of investments in Treasury bills and FGN Green Bond increased by N1.06 billion (0.36 percent) and N3.62 billion (1.23 percent) respectively while investments in FGN Bonds, FGN SUKUK and Agency Bonds decreased by N19.93 billion (6.76 percent); N8.01 billion (2.72 percent) and N140 million (0.05 percent) respectively.
The reduction in the value of the bond was due to coupon payments and reallocation to other asset classes.
The objectives of CPS is to ensure that every person who worked in either the public Service of the Federation, Federal Capital Territory, States and Local government or the Private Sector receives his retirement benefits as and when due ; and to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.
The provisions of this Act shall apply to any employment in the public service of the Federation, the public Service of the Federal Capital Territory, the Public Service of the state, the public service of the local governments and the private sector.
In the case of the Private Sector, the Scheme shall apply to employees who are in the employment of an organization in which there are 3 or more employees.
Notwithstanding the provision of subsection (2) of this section, employee of organization with less than three employees as well as self-employed persons shall be entitled to participate under the micro pension scheme.
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