BusinessDay

Deepening the pension system for sustainable growth

The success of the nation’s pension industry and sustainability of stakeholder’s confidence, beyond the achievement of the Contributory Pension Scheme (CPS) also depends on successful transition of pensioners under the defined benefit scheme.

These retirees under the old pension scheme before the CPS was established following the Pension Reform Act 2004 and recently amended in 2014, to a large extent formed the mental picture of many Nigerian’s home and abroad on how pension and social welfare has fared.

This impression however has changed significantly with the successes recorded in the last 10 years of promoting the Contributory Pension Scheme and indeed growing efforts to resolve the problems associated with the old pension schemes.

With the coming on board therefore of the Pension Transition Arrangement Department (PTAD) and the opening of zonal offices of PenCom in the six geopolitical zones of the country,the industry has received a major boast towards achieving sustainability.

Establishment of PITAD

The Federal Government two years ago brought the residual schemes under the purview of the National Pension Commission (PenCom) to permanently resolve these problems, and so established Pension Transition Arrangement Department (PTAD) to take over the management of three pension offices overseeing the residual defined benefits pension schemes.

Bukar Goni, then head of the Civil Service of the Federation announced that President Goodluck Jonathan has approved the establishment of a Pension Transition Arrangement Department (PTAD) and has also appointed Nellie Mayshak as the Director-General of the Department.

Read also: Potential issues that can jeopardize growth of pension industry – Mohammad Ahmad

In the circular, the Head of Service explained that the establishment of the new pension department is in line with Section 30, Sub Section (2a) of the Amended Pension Reform Act, 2004, and it will take over the management of three of the offices presently running the old pension scheme.

These are the Civil Service Pension Department, the Police Pension Office and the Customs, Immigration and Prisons Pension Office (CIPPO).

Accordingly, the director-general is expected to spearhead the smooth transition of the three offices into a single pension administration and management under the supervision of the National Pension Commission (PenCom), which will directly report to the Office of the Coordinating Minister for the Economy and  Minister of Finance for coordination and control.

Establishment of Zonal Offices

National Pension Commission (PenCom) on their own part expanded the scope of its services, bringing it closer to the grassroots through the opening of zonal offices to ensure that stakeholders do not have to travel very far to get their pension problems resolved.

Besides that, pension regulator also made efforts to enhance the quality of its services and in addition to restructuring its operations, employees of PenCom were also groomed and retrained to bring their skills up to date with modern day regulatory realities.

PenCom said it did this with a view to changing the mindset of its employees and to make them see hard work and attainment of set goals as the only way forward for them and not who they know or who they are relating with.

It established a call centre which would be open to the public in October 2013 in order to enhance its service delivery through an efficient complaints resolution process.

All of these have ensured consistent payment of retirement benefits to all employees who retired under the scheme since 2007 without the characteristic bottlenecks experienced in the past.

Meanwhile, the pension industry last year tried to persuade states not only to embrace contributory pension scheme but also to comply with all mandates of the Pension Reform Act, 2014.

Looking into the future

Notwithstanding the success recorded in the pension sector the previous years, there is need to further deepen the penetration and one of such has to do with the fact that only 36 per cent of Nigerians have a pension plan.

NOI Polls Limited, one of leading opinion polling and research organisations in the country, said last year that the Nigerian pension market was largely untapped with only 36 per cent of the citizens having one form of retirement savings plan or the other.

It said 64 per cent of Nigerians do not have any form of pension plan, 73 per cent of those who had were satisfied with the services of their Pension Fund Administrators (PFAs) while dissatisfied ones complained about not getting updates on their Retirement Savings Accounts (RSAs).

“More than 6 in 10 Nigerians (64 per cent) do not have pension plans, indicating a potentially huge untapped pensions market in Nigeria. Also more than half of the Nigerians who currently have pension plans (54 per cent of 36 per cent) are subscribed to the contributory pension schemes for public organisations,” NOI Polls said.

Related to this is the fact that not even highly rated Nigeria’s contributory pension scheme could make the list of the 20 best national pension schemes in the world as Melbourne Mercer Global Pension Index; an initiative of the Australian Centre for Financial Studies releases its report on the pension schemes globally.

A Principal Consultant at Mercer, Scott Pollack confirmed that a recent study of state pension schemes globally, indicate that none of the pension schemes in Africa ranked among the 20 bests in the world.

Meanwhile, stakeholders in the pension industry, particularly the regulator and regulated should ponder over these revelations and find ways to reverse the ugly trend going forward.

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