N4 trillion pension assets under threat as FG grants police pullout

Nigeria’s pension industry with total assets of over N4.2 trillion, faces a major threat, should the Federal Government succeed in compelling Pension Fund Administrators (PFAs) to transfer an estimated N302 billion in bulk, belonging to personnel of the Nigeria Police Force ,to the newly established NPF Pensions Limited, analysts have said.

 The implication of this move, is that the statutory right of individual contributors, including police personnel, (to choose their PFAs by themselves) under the contributory pension scheme, as provided in the Pension Reform Act 2004, would have been compromised.

This again undermines the provision of the same Act, which allows movement from one PFA to another, only when the transfer window becomes operational.

 Analysts who spoke to BusinessDay about the development, said compelling existing PFAs to transfer in bulk, a whopping N302 billion, to a new PFA belonging to the police, would create portfolio risks and endanger the stability of existing PFAs. They observe that the fact that the police have had a long history of pension fund mismanagement and embezzlement, makes matters worse.

 Obinna Chilekezi, principal partner, Independent Insurance Researchers, said the Federal Government or PenCom, cannot give such directive, considering the provisions of the law, otherwise they would have trampled on contributors right to elect PFA of their choice.

Chilekezi noted that such decision is capable of killing existing PFA’s, particularly those that have relied heavily on the police account.

 Government and the National Pension Commission (PenCom) should consider the risks taken, effort, and hard work of shareholders and management of existing PFAs in the registration, asset creation and value addition, made over the last seven years in building this fund, he said.

Industry operators who preferred not to be mentioned, said there have been significant accumulated losses, running into several hundreds of millions of naira, incurred by some PFAs over the years, and that some were only just recovering from the losses.

They added that following the exit of military government, a further loss of police assets would have significant impact and drawbacks  on the PFAs, as potential loss of income from this development would be about N5 billion per annum collectively.

This will invariably have attendant knock-on effect on the overall operations of existing PFAs to varying degrees, the operators argue.

BusinessDay also gathered that in a response to the National Pension Commission’s (PenCom) directive on the transfer of the Police pension fund, the operators have requested that for an orderly transfer, as stipulated in the Pension Reform Act and guidelines issued by the Commission, the Police should be restricted to enrolling new employees for now, until the transfer window is open, at which point, officers and men can choose to move, or compensation be given by the Police PFA to existing PFAs in the form of asset purchase, as in the case of operator buy out.

 The operators also believe that the transfer should be made in an equitable manner, and neither favour the Police PFA, nor harm existing Retirement Savings Account (RSA) funds. “We must also ensure that transfers of assets, cash and near cash form, to a single player, within a short period of time, does not cause systemic risk for the market”, operators said.

 Industry stakeholder who reacted to the development, said it would be very risky to move the contributions of the men and officers of the Nigeria Police, all at the same time, to a PFA that has not been tested.

“We have read and seen how police pension funds were embezzled, and nothing was done to recover them, or bring perpetrators to book. This is why government should not trade with the future and sufferings of Nigerians in the name of politics, the stakeholder noted. 

Modestus Anaesoronye