Oil majors, others unbundle privately managed pension schemes for CPS

Major oil companies including the Nigerian National Petroleum Corporation (NNPC), Shell, Chevron, Total and AGIP are unbundling their pension management companies (Closed PFAs) for Contributory Pension Schemes (CPS) managed by Pension Fund Administrators (PFAs), BusinessDay findings reveal.

Consequently, the oil companies are directing their new employees to choose  PFAs and open Retirement Savings Accounts(RSA) for pension contributions, while they will continue to manage their non- contributory (Defined Benefit Scheme) for older employees until the last person in the scheme passes on.

This is in line with the Pension Reform Act 2014 which directs Closed PFA’s managed by privately owned companies still undertaking the defined benefits scheme to close enrolment of new employees.

Section 50(1) (h) of the Pension Reform Act 2014 says “The scheme shall be closed to new employees, and they shall be required to open Retirement Savings Accounts (RSA).

While Section 51 says that “Subject to the provisions of the Bill and any other regulation issued by the National Pension Commission(PenCom), Closed Pension Fund Administrators, licensed by the commission before the commencement of the Bill, may continue to exist, provided that new employees of sponsor companies shall join the CPS and open RSAs”.

Other Closed PFAs affected by this law include Nestle Nigeria Trust Limited, Progress Trust CPFA Limited (owned by Nigerian Breweries), and UNICO CPFA Limited (owned by Unilever Nigeria Plc.)

Analysts say the development is a show of confidence in the integrity and sustainability of the Nigerian CPS, which replaced the defined benefit scheme following the Pension Reform Act 2004 as amended in 2014.

Misbahu Yola, managing director, Legacy Pensions Limited, who confirmed the development that some oil companies are directing their employees to register for CPS with other PFAs, said “it’s a welcome development and good testimony for the CPS.”

Yola said it’s over ten years since the commencement of the CPS, noting that there has not be any known case of fraud or embezzlement of contributors money.

“It’s almost ten years now, but you can’t say you heard of any fraud or somebody hasn’t been paid when he has met all requirements.” 

Once a PFA reports any employee for bad behaviour to PenCom, it is registered in the case file of those who have committed offenses and circulated all over, and such person will never work with any PFA again. It’s as serious as that, Yola said.

Susan Oranye, executive secretary, Pension Fund Operators Association of Nigeria (PenOp) said some of the closed PFAs had started enrolling their new employees into the CPS before the 2014 law, adding that it is an indication of rising confidence in the new scheme.

“Again, complying with the law makes them good corporate institutions that follow the law”.

Oranye however noted that while there is no doubt that most of them managed their schemes very successfully, they also believe that CPS gives employees more freedom and sense of responsibility in managing their pensions.

If you watch well, you will realise that most of the employees being introduced to CPS by these companies are younger people who want information, technology savvy, participatory, given their age, and the CPS meets all of these because it sends regular information and has technology savvy interactive platforms for contributors.       

Like other closed PFAs, Shell Nig. Closed Pension Fund Administrator Ltd (SNCPFA) was incorporated in 1991 as Shell Trustees (Nigeria) Limited (STNL) for the primary purpose of managing the “Shell Nigeria Staff (Non-Contributory) Pension Fund”, the defined benefit pension scheme of SPDC.

The purpose of end-of-service payments is to ensure that long serving company employees who have reached the end of their established working term in Shell EP Companies in Nigeria will be able to enjoy a regular monthly income to enable them  maintain a reasonable standard of living in retirement.

Lump sum payments are made to employees whose period of service or conditions of departure do not qualify them for a monthly pension.

As the name implies, the scheme is non-contributory, thus employees are not required to make any financial contributions. It is also a Defined Benefit (DB) scheme and as such, all benefits payable from the scheme are computed based on pre-defined criteria. The Fund currently caters for almost 3,000 pensioners and more than 4,000 active employees of SPDC.

Modestus Anaesoronye