Suleiman: Employment Generation is Good for Pension Industry

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Usman Suleiman is the Managing Director/CEO of FUG Pensions. In this interview with Ebere Nwoji, he explained why employment generation is the surest way to boost the pension sector. Excerpts:

Could you give an assessment of your company’s performance vis-a-vis the pension industry in 2015. How have you been able to keep the business going given the present economic challenges?

Future Unity Glanvills Pensions Limited (FUG Pensions) actually held a management and board retreat at the beginning of 2014 where we came up with a medium term strategic plan for the company that was to run through 2014 to 2016.This is with the intension of holding the session in the fourth quarter of 2016 to review how we have fared within the context of the medium term strategy.

2015, as a year, was at the middle of that period, but was generally a difficult year for the economy as a whole for obvious reasons. The year was an election year and there was a lot of apprehension as to the future of the country particularly when the election dates were shifted over period of weeks. However, as it turned out, the elections were concluded successfully. The country overcame crisis and the new administration took off. That no doubt brought some tension, but a lot of investors regained confidence in the future. They began to look at the focus of the new administration.

However, it took a little bit of time for the administration to fully settle, get the cabinet running and came up with clear political direction. That really dragged on to the end of the year and for that reason, the economy was very slow. For us in the pension industry, that will naturally affect our performance in terms of growth in registration. We are in the contributory pension, effectively meaning that unlike the defined benefits, it is totally and completely dependent on employment generation and employees opening their RSA’s.
As a consequence, the slow pace of economic activities, there was a loss in employment generation over the period, not only in the private sector, which is supposed to be a major employer of labour but also in the public both federal, states and for that reason there was no significant growth in employment generation into the system.

As a company, how did you cope with business?

However, in spite of the circumstance, for us in FUG Pensions, we have been able to weather the storm and move into 2016 with the confidence of being able to move towards meeting our projections in the medium term strategy.

Now at the beginning of first quarter of 2016, the direction was being identified particularly in relation to policies that have to do with exchange rate and petroleum prices, and by the beginning of the second quarter, even though without clear cut policy statement, it is clear that the exchange rate regime is now in place, petroleum pricing has also come into effect, therefore investors now have a direction. They would now be able to anticipate and focus unlike the later part of 2015. With that we expect that the second half of 2016, that is, third quarter, fourth quarter of 2016 are going to see a rejuvenation of activities in the economy.

We anticipate that investors having now seen the direction, will bring in their funds for investment, they now have a window where the liberalised exchange regime will enable them repatriate their capital and profit, even then, we anticipate that fund companies that have been looking for investment regenerating activities will now be able to attract partners. We also anticipate that portfolio investors will also look at staging a comeback into the capital market in the third and fourth quarter of the year. We also anticipate that petroleum marketers will now be ready to really commence the importation of fuel particularly aviation fuel because they now can sell at N145 per litre.

With the pricing regime, they have an avenue of taking care of both the import and transportation costs and their margin, we anticipate less pressure to that effect.
For us in FUG, we continue to maintain our optimism to sustain the expectation that we will be able to achieve our medium term goals. In the second quarter of this year, we have seen that we have actually been able to cover part of what we did not achieve in 2015.

How is the tough business environment, loss of jobs in different sectors affecting your growth?

A lot of shops have closed down and that has seriously affected our business in two ways. One is the drop in the rate of employment, which automatically affected our business in terms of the new accounts and enrolment. Secondly, in terms of having to service employees who are now out of job and will have to sustain themselves. The law has provided that in the event of the loss of job and inability to get another job for a period of four months and above, he can apply to access 25 per cent of the balance in his account. Now this is an amount that would have been in the account to be invested for growth but because of his being laid off, the owner of the account can come to withdraw 25 per cent for consumption, meaning that only 75 per cent will remain to be invested.

Besides, no new employee is coming into the system, and until that retrenched employee gets another job and start contribution again, if the employee fails to get another job up till 50 years, he will now come back as a retiree to fully access that account at lump sum as pension which normally he would not have done depending on the balance in the RSA.
These are the two fronts by which our business is affected. It is a reality on ground, but we anticipate that as these companies commence investing again, the laid off workers will be called back to work. For us, generation of employment in all sectors is good for our business because everybody working will be expected to have a savings for their retirement.

Again, given the current economic situation, many employers are not remitting pension deductions. What is your position on this?

We cannot say remittances are not coming in. Remittances are coming as long as companies continue to exist even those companies that have downgraded their operations and laid-off their workers. For workers who continue on employment, they continue to remit. However, it is the public sector you have this practice because a number of states that have keyed into the system also in recent times are facing difficulties paying salaries and have defaulted in remitting pension. I know a state that has not paid salaries for several months, but surprisingly they pay pension deductions up to date, while some of the states are finding it difficult to remit. The significant exception is of course Lagos State. The state has not defaulted in any way. At the federal level, government has made efforts to get funding for remittance, but as you probably are aware, there are arrears of several months, the last remittance is probably September 2015. We are aware PenCom is making efforts to get the arrears paid and we expect the reduction of the arrears very soon.

Your company recently won the ISO certification quality award, what does it mean for your business.

Our board has always emphasised the need to achieve the objectives of safety of the funds we are managing, ensuring significant returns on those funds, ensuring effective service delivery to our clients. Every RSA holder actually will be concerned with returns on their investment and the service delivery particularly at the point of retirement. Having accepted that challenge we have to achieve, we positioned ourselves to be able to realise the most competitive returns in the industry.

On the service delivery, we now decided that how do you achieve it. How will you be ranked as the most significant player in the industry? We then came to the conclusion that, the way to go is to achieve international best practice, and to be measured with any other organisation anywhere in the world. To be an ISO quality standard, we made ourselves available to be measured by the organisation that regulates standards worldwide. It is a certification that is given centrally and recognised globally to certify that an institution has achieved a certain minimum standard that is accepted globally. We voluntarily on our own decided to be measured, without prompting by anybody or the regulator. We commenced the process of being certified when we met their standard that is considered as minimum.