After 20 years of the implementation of Contributory Pension Scheme (CPS) in Nigeria, stakeholders including former President Olusegun Obasanjo whose regime instituted the scheme, evaluated it’s performance at a gathering in Lagos. Ebere Nwoji captures their assessment of the scheme
On June 25th this year, it will be exactly 20 years the 2004 Pension Reform Act which gave birth to the Contributory Pension Scheme (CPS) was signed into law.
As such, Nigerian workers and pensioners stand to celebrate 20 years of liberation from old age poverty as a result of retirement without benefits as well as hopelessness and fear of retirement which in the past had compelled many to falsify their true age during the regime of Defined Benefit Scheme (DBS). A major advantage of CPS over DBS is its funded nature which keeps a worker’s retirement benefit intact waiting for his last day in active service either in private or public sector employment.
The CPS in Nigeria has witnessed various stakeholders’ appraisal of its successes and failures.
The latest appraisal came from the originator of the scheme, former President Olusegun Obasanjo in whose regime the Nigeria’s pension system was reformed and the Pension Reform Act 2004 enacted establishing the CPS and its supervisory agency the National Pension Commission(PenCom) which initially licensed seven PFAs, which was later increased to 21.
Existing PFAs
The existing 21 Pension Fund Administrators and Pension Fund Custodians(PFCs) are: Access Pensions Ltd, ARM Pension Managers Ltd, Crusader Sterling Pensions Limited, FCMB Pensions Limited, Fidelity Pension Managers Limited, Guaranty Trust Pension Managers Ltd, Leadway Pensure PFA Ltd, Nigerian University Pension Management Company (NUPENCO), NLPC Pension Fund Administrators Limited, Nurrenberger Pensions Limited, NPF Pensions Fund Administrators Limited, Oak Pensions Limited, Pension Alliance Limited, Premium Pension Limited,
Radix Pension Managers Limited, Stanbic Pension Managers Limited, Tangerine APT Pensions Limited, Trustfund Pensions Limited, Veritas Granville’s Pensions Limited.
In the 20 years of CPS, these firms have harvested the existing N19.5 trillion assets from over 10 million contributors and are currently kicking hard to sweep all informal sector operators into pension net through the Micro pension scheme.
The Pension Fund Custodians in Nigeria are; First Pension custodian Nigeria Limited, UBA Pensions Custodian Limited, and Zenith Pensions Custodian Limited .
The companies have prudent and judicious management and investment of contributors’ funds amassed wealth for the various contributors within the period under review.
Obasanjo’s assessment
Enthralled by the speedy growth and quantum of assets accumulated by the pension sector within these two decades, former President Obasanjo during an interview with the Chief Executive Officer of umbrella body of all PFAs and PFCs, the Pension Fund Operators Association of Nigeria (PenOp), Mr Oguche Agudah, said that when his administration instituted the pension reforms and pushed to have a bill to reform the way pension administration was done in Nigeria, he did not think that the assets would grow this quickly and have the positive effect it has had so far.
He said one of the major reasons for the reform was te pain of seeing so many pensioners queuing up to collect their pensions during his first term in office, especially military men who had served the Nation. With this in mind, he said he had resolved to see how the government could make pension management and administration private sector driven and move in line with global best practices.
Asked why his administration chose CPS for Nigeria, He said ,“It’s simple, we saw what other countries were doing and felt it was good for us and so we copied it and adopted it. There is no harm in copying if we see what other countries are doing and it’s good for them, we can adopt it.”
According to him, what the pension industry needed to do is to see how the pension assets that have been saved over the years could help more in national development, especially infrastructure investments in a safe and sustainable manner that would not jeopardise people’s pensions. Obasanjo spoke in an interview with Agudah as part of the activities to mark twenty years of pension reforms in Nigeria.
NUPCPS Assessment
Obasanjo’s appraisal came on the heels of another appresal of CPS by an important actor in the scheme, the National Union of Pensioners Contributory Pension Scheme (NUPCPS).
According to them, the CPS was the best thing that has happened to Nigeria’s Pension administration.
The NUPCPS members stated this when they paid a courtesy visit to Agudah in his office.
The pensioners who were represented by their executives from various states of the federation confessed that the CPS was framed in the best interest of pensioners if implemented to the later. They said the CPS had eliminated fraud, had given them certainty of payments of pensions, and has also allowed them to be able to plan.
The pensioners however, said there were aspects of the CPS that could be improved upon, and called on the PenOp CEO to engage other stakeholders to ensure that these aspects were looked into.
Some of the new developments they wanted, are; constant engagement with the pensioners by the industry, the enhancement of their pensions and more transparency in terms of how their returns were shown to them.
The pensioners said thet are the reason the industry exists and that all workers in the pension space have the pensioners to thank for their jobs.
Aguda commended the pensioners for giving their service to their country and their organisations in their twilight years adding that the pension industry and the country needed to tap from wealth of experience that they had gathered over the years.
He assured the pensioners that the pension industry was committed to the welfare of the pensioners, would continue to listen and engage with them so often to understand their complaints.
He assured them that the PFAs were working daily to ensure the best outcome for pensioners.
Late in 2023, PenCom and PenOp had appraised the performance of the sector and described the period as years of gainful reforms in Nigeria’s pension system.
They admitted that it has not been wasted 20 years, but years of reforms and achievements. They however noted that one of the major challenges of the scheme over the years has been the need to get Nigerians see the value of financial planning through pension savings.
They recalled that the condition of pensioners during the pre Contributory Pension Scheme (CPS) era was nothing desirable.
They recalled that pensioners were nothing better than destitutes in different corners of the country, where they cluster to wait endlessly to collect their meager benefits .
The situation, they said, continued for many years until in June 2004 when the former President Olusegun Obasanjo instituted a massive reform in the pension sector having adopted the prevailing CPS.
CPS and its objectives
The CPS which is contributory in nature is fully funded and is privately managed and ensures that every one who worked in Nigeria receives his retirement benefits as at when due.
It covered all employees in public and private sector but exempts all workers who have three years or less to retire and persons covered by the provisions of section 291 of the constitution of Federal Republic of Nigeria 1999. The main objective of the CPS is to ensure that every person that worked in either the public or private sector in Nigeria receives his or her retirement benefits as and when due.
Retirement Benefits Paid
Aguda told the pensioners that in the past 15 years, Pension Fund Administrators (PFAs) have paid a total sum of N1.63 trillion to retirees in both public and private sectors under both programme withdrawal.
He said the above figure was paid to 442,000 Nigerians who retired from services in various employments in the country during the period.
Agudah said out of the N1.63 trillion lump sum paid on both life annuity and programme withdrawal, in the second quarter 2023 total life annuity payment stood at N665.1 billion .This according to him was received by 111.708 applicants. He said in third quarter 2022, a total of N595.22 billion was paid to 102,696 applicants as annuity lump sum.
He said in third quarter 2019, a total of N386.30 billion was paid as annuity life lump sum to 71,214 applicants while in the third quarter 2015, a total of N101.96 billion was paid to 20,615 applicants and in third quarter 2011, N1.51 billion was paid to 331 applicants as annuity.
Issues in CPS Management
Also speaking, PenCom Head of Survillance department, Dr Ehimeme Ohioma said the three key issues in pension management which all PFAs must not joke with were adequacy, sustainability and service delivery.
According to him, pension payment must be adequate for retirees to solve their problems.
He however said for pension payment to be adequate, workers and their employers must contribute adequately because a worker’s contributions determine his payment at retirement.
He said the pension system must be sustained to ensure continuity .
He said to ensure that continuity, the managers must ensure that in this period of inflation, return on investment was above inflation.
He said this could be done through right choice of investment instruments and windows.
On service delivery, Ohioma said pension administrators must bear in mind that there must always be complaints from the contributors.
He said this being the case, it behoves operators and regulators to ensure that the complains were perfectly treated.
