‘With growing pensions, there is potential for increased liquidity, investment in Nigeria’s financial market’

After emerging from the business combination of Sigma Pensions and First Guarantee Pension in December 2022, Access Pensions Limited, a subsidiary of Access Corporation has scaled up its assets under management (AUM), making it the fourth largest Pension Fund Administrator (PFA). Afolabi Folayan, executive director, Technical at Access Pensions in this interview with Modestus Anaesoronye highlights the company’s growth strategy, market insights and future of the pension industry.

Access Pensions recently crossed N1 trillion in assets under management, can you speak on how you were able to attain this feat?

At the heart of our drive towards N1trillion was a strong commitment to partnering with clients to shape their future. Our strategy rested on three key pillars: a technology-driven service delivery model to enhance user experience, a disciplined approach to investment management, and the leveraging of our membership within Nigeria’s largest financial ecosystem, The Access Corporation. This three-pronged foundation provided us with the framework to offer our clients an unparalleled retirement planning experience. In summary, I would say having a client-centric approach has played a significant role as we look to match our clients’ needs and aspirations, building trust along the way.

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Nigeria’s pension sector recently crossed 10 million registered contributors, what does this mean for the sector and the economy at large?

It has taken the industry nearly twenty years to get to 10 million, which is around 13 percent of Nigeria’s labour force. Achieving this milestone means improved retirement planning and reduced reliance on public balance sheets for a sub-set of Nigerians as they approach retirement. It has the potential to stimulate economic growth by channelling funds into investments and capital markets, boosting investor confidence, and creating jobs. Pension funds are a significant source of long-term investment in capital markets. With more contributors and funds, there is potential for increased liquidity and investment in Nigerian financial markets. This can contribute to a more dynamic and resilient capital market. A robust pension sector can contribute to long-term economic stability. As individuals save for retirement, pension funds accumulate significant assets. These funds can be invested in various sectors of the economy, including infrastructure, which can drive economic growth and development. Overall, this development has significant implications for both the pension sector and the broader economy in Nigeria.

Despite the size of the country’s workforce, the pension industry’s reach remains limited. What strategies should be implemented to enhance pension penetration?

A crucial revelation from the recent NBS (National Bureau of Statistics) unemployment report highlights the significant size of Nigeria’s informal economy, estimated to encompass 92.6 percent of total employment in Q1 2023. This underscores the relative success of the pension industry in reaching formal sector employment. To expand pension coverage, it is imperative that the industry adopts a targeted approach to engage with the informal economy, notably through the micro-pensions scheme. Achieving this objective will necessitate harnessing the power of technology, particularly mobile technology, given the widespread telecommunications coverage.

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Access PFA is working to become the largest PFA, what is the goal behind this move?

In the global asset management industry, a significant correlation exists between size and the realisation of economies of scale. Expanding the size of pension funds presents opportunities to leverage economies of scale, enabling the delivery of fund management services at a more cost-effective rate for our customers. However, it is crucial to emphasize that our pursuit of growth is not an end unto itself; rather, it is a means to enhance the overall service we provide to our customers. Through the expansion of our fund’s assets and resources, our aim is to bolster our capacity to invest in technology, talent, and systems. This strategic growth enables us to offer competitive returns, effective risk management, and ensures the long-term sustainability of the pension fund. The pursuit of scale is to ensure we can deliver a better value proposition to our customers, encompassing both price and service quality.

Are there any plans by Access Pension to acquire another PFA?

Our primary focus is in achieving organic growth through the delivery of an enticing value proposition to our customers. This includes the promise of superior investment returns and exceptional user experience, powered by cutting-edge technology, enabling our customers to shape their retirement futures. We firmly believe that this approach is the proven path to sustainable growth over time. However, as with every business, we may occasionally evaluate opportunities and strategies that align with our commitment to delivering the best possible outcomes for our customers and key stakeholders. This includes considering various options, such as partnerships or acquisitions, when they align with our long-term goals.

How do you intend to enhance outreach through the micro pension plan?

To be able to deliver a retirement savings product to employees in the informal sector, one needs a product design that is relatively easy to on-board and bundled offerings which include a combination of other financial inclusion products such as healthcare, credit, and insurance. Working with our regulators and other stakeholders, we are working to deliver a technology platform that allows for frictionless on-boarding of workers in the informal sector, digital account management and easy withdrawals.

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Can you share your thoughts on how the pension transfer window has helped in service delivery in the industry?

The onset of the transfer window aligns with the rights enshrined in the PRA 2014 and international standards, wherein customers are afforded the freedom to select a pension provider of their choice. We view this as a positive development for the industry, as it introduces an element of choice that is conducive to improved service standards and increased innovation among market participants. This shift is expected to drive greater adoption of digital channels as PFAs (Pension Fund Administrator) seek to provide customers with more comprehensive information regarding their retirement savings. Moreover, the possibility of losing customers due to suboptimal investment returns is likely to incentivize PFAs to make substantial investments in personnel, technology, and systems. This, in turn, will facilitate the delivery of enhanced risk-adjusted returns.

Could you provide information about the program that permits utilising RSA balances for residential mortgages? Are the eligibility criteria overly strict, and what has been the reception of this initiative among your customers?

The RSA mortgage equity program is an excellent and welcome initiative designed to help defray the housing deficit in the country and provide a home to RSA holders yearning for a residential property. The way it has been designed is to ensure that the withdrawals from RSAs (Retirement Savings Accounts) are utilized for the purpose it is required for. The interest shown by RSA holders has been very positive and encouraging. However, the completion of each transaction requires the fulfilment of some key elements including the existence of the desired property at the right price, a willing mortgagor at the right interest rates and tenor. Notwithstanding, interests from customers have been very encouraging and completed transactions are ramping up daily.

Can you give a projection of the pension sector in the next five years, looking at the current economic situation, job losses, and Japa syndrome?

We are strong believers in Nigeria and even more bullish about the prospects of the pension industry. We view the recent economic conditions as part of the typical business cycle that many developing economies experience. As pension funds, we are inherently designed to adopt a long-term perspective. When we examine the broader trends, Nigeria’s economy demonstrates a continuous march forward, driven by robust secular factors such as a youthful demographic, the increasing digitization of financial services, growing urbanization, and widespread technology adoption. We firmly believe that there remains ample room for growth, and we anticipate that pension industry assets will increase from their current 8 percent of GDP to a substantial 10-11 percent of GDP by the conclusion of 2030.

Read also: Access Pensions targets informal sector in push for top PFA spot

Lastly, what can your customers expect from you in the coming months?

Our mission remains to help individuals shape their future as such in the coming months, our customers can expect an enhanced user experience with increased focus on user-friendly technology. We will introduce innovative services and maintain transparency in our operations, offering readily available customer support across various digital channels. Our commitment to a disciplined investment management program will continue, prioritizing competitive returns and risk management. In addition, we will look to engage with our customers in the area of financial literacy education to empower them to make informed decisions. In essence, our focus remains on the retirement well-being of our clients and the days ahead will see us unveil more avenues for our customers to shape a secure and prosperous retirement future.