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Pension contribution up 14.2% in Q3 on salary raise, state’s compliance

Pension contribution up 14.2% in Q3 on salary raise, state’s compliance

Nigeria’s pension sector recorded 14.2 percent increase in monthly contributions between the second quarter (Q2) and third quarter (Q3) of 2023.

The rise according to Pension Fund Operators Association of Nigeria (PenOp) was due to salary increments by many employers in response to rising cost of living at that time, and the proactive measures taken by some states to address pension arrears.

Data from the National Pension Commission (PenCom), according to analysts from PenOp showed that contribution rose from N494.21 billion Q2 to N564.12 billion in Q3, which the association said signifies a healthy increase in inflows.

Oguche Agudah, chief executive officer, PenOp responding to enquiries on the growth in contributions said, “In Q3:2023, monthly pension contributions for RSA Funds I, II, III, V, and VI Active reached a noteworthy total of N564.12 billion, marking a substantial increase of N69.91 billion (14.15 percent) compared to the N494.21 billion recorded in Q2:2023.

Agudah said this surge in pension growth during Q3 can be attributed to various factors, primarily the notable increase in the salaries of many workers.

“Recognizing the challenges posed by the rising cost of living, employers have responded by enhancing the compensation packages for their employees. This salary increment has naturally led to higher monthly pension contributions”

He said, additionally, some states began clearing their outstanding pension arrears during this period.

“The resolution of these arrears likely prompted increased participation in pension schemes and contributed to the overall growth in contributions observed in Q3.”

“In essence, the salary increments, and the proactive measures taken by certain states to address pension arrears have played a role in fostering the notable growth in pension contributions during the third quarter”, Agudah said.

On sources of Portfolio growth for the pension industry, PenOp said on its Twitter handle that Interest and Coupons increased by approximately 2.61 percent from Q2 to Q3, suggesting a modest improvement in returns on the fund’s invested in fixed income instruments assets during the third quarter.

The figure rose from N327.69 billion the previous month to N336.22 billion, which it noted was a result of increased yields as the apex bank attempted to fight inflation.

Dividends and rental income according to the industry trade body decreased by approximately 53.88 percent from N42.79 billion in Q2 to N19.75 billion Q3.

Net realised gains on equity /bonds moved from N12.64 billion Q2 to N23.16 billion in the review period, while net unrealized gains decreased by approximately 66.01 percent from 203.24 billion Q2 to 69.154 billion Q3.

This fall in unrealized gains in equities and bonds were as a result of a slowdown in the bull run on the equities market in the third quarter of 2023, PenOp said

“In all, pension assets marked significant inflows in the third quarter of 2023, setting the table for an exceptional year for the Contributory Pension Scheme (CPS).

Further, look into the third quarter report from PenCom shows that the cumulative pension contributions from inception to the end of the third quarter of 2023 amounted to N9.66 trillion, with the public sector contributing N5.02 trillion and the private sector N4.63 trillion.

The ranking of Pension Fund Administrators (PFAs) by cumulative pension contributions received from the inception of the Contributory Pension Scheme (CPS) to the end of Q3:2023, indicates that the top five ranked PFAs received 69.57 percent of the total contributions as at the end of Q3:2023.

Similarly, the top ten ranked PFAs accounted for 90.02 percent of the total contributions, and in comparison, the bottom five and bottom 10 PFAs accounted for 3.39 percent and 9.98 percent of the total pension contributions, respectively.