Government has no direct access to pension funds — Fajemisin

7 years ago

Government has no direct access to pension funds — Fajemisin

In this interview with NIKE POPOOLA, the Chief Executive, Stanbic IBTC Pension Managers Limited, Eric Fajemisin, speaks on major developments shaping the Contributory Pension Scheme

Many states have not yet adopted the CPS while some only recently signed the laws to join. How will this affect the value of the retirement benefits of the state retirees and what should be done to encourage states that are reluctant to join the CPS to embrace it?

One of the defining attributes of the CPS is that the retirement benefits to be paid to individuals at retirement are a function of the contributions made to the scheme during the working phase of life. To that extent, the duration and value of contributions has an impact on the amount available for payment at retirement.

With regards to the states that are yet to join the CPS, I think it is important for the industry to continue to engage such states in a bid to encourage them to do so for the benefit of the workers in their states.

To what extent would you say that Nigeria’s current economic situation characterised by plummeting oil prices and foreign reserves has affected uptake of customers as well as operations of PFAs in general?

To the extent that the plummeting oil prices have a significant impact on the performance of the Nigerian equities market, the performance of the Nigerian economy has impacted the performance of the funds in the industry. It has however not affected the uptake of customers because people are aware that the benefits of the scheme are in the long run.

In addition, as operators we remain committed to bringing our investment management expertise to bear for the benefit of the contributors to ensure that they continue to derive maximum value from their contributions.

With about N5.7tn assets under the CPS, there has been an increasing clamour for deployment of pension funds to finance infrastructure. While considering operational modalities, security of assets and safety of contributors’ funds, how do you think this should be handled?

As I stated earlier, any investments in government infrastructure will be properly structured to ensure that the funds remain safe and liquid. The key is to ensure that terms of engagement are properly and carefully spelt out so the funds and assets are not in any way compromised to the detriment of the contributors.

What really are the objectives of the Contributory Pension Scheme?

The key to understanding the workings of the Contributory Pension Scheme is to appreciate the primary objectives of the scheme which include assisting individuals by ensuring that they save in order to cater to their livelihood in old age and to ensure that persons who are employed in the various sectors of the economy receive their retirement benefits as and when due.

These objectives drive the rules of engagement in the scheme. For instance, an individual should ideally only have access to their retirement benefits when they are no longer capable of engaging in gainful employment such as when they are old and retired or due to incapacitation as a result of health challenges.

Similarly, the primary focus of investing pension funds is to ensure the safety and liquidity of the funds so that workers have access to their retirement benefits when due.

How will you assess the implementation of the Contributory Pension after 12 years that the scheme started?

The pension reform has been largely successful given the ground that has been covered in the last 12 years. The 2004 Pension Reform Act was repealed and replaced with the 2014 Act to address most of the deficiencies observed in the former.

There were issues that were not addressed in the 2004 Act, which were addressed in the 2014 Act such as applying a portion of pension assets towards the payment of equity for a residential mortgage by the Retirement Savings Account holder and the inclusion of the informal sector, among others.

However, there is always room for further development as pe