Kunle Adeboye is the General Manager, Business Development Radix Pension Managers, the newest Pension Fund Manager in the country.Â He spoke toÂ Ebere NwojiÂ on the performance of the Contributory Pension Scheme 13 years down the line, andÂ the journey towards transforming the IGI Pension Fund Manager to Radix Pensions. Excerpts:
Nigeria, has experimented on the Contributory Pension Scheme for 13 years. How can you assess the performance of the scheme?
ItÂ has been a wonderful journey considering the fact that when we started, there was so much skepticismÂ among Nigerians particularly in the public sector. Labour was against it, they felt it was not going to work. But before then, you knowÂ there was pension deficit ofÂ close to N3 TrillionÂ that is pension arrears under the pay as you go scheme. Now looking down the road 13 years after, you can seeÂ it has been a success story. There are no more cases of People cueing up to access their pensionÂ benefits. The administration of pensionÂ is quicker and faster. ItÂ is transparentÂ and basically what peopleÂ look out for is safety of their funds, good returns on their funds investmentÂ and excellent customer service from whosoever that is managing the fund. And that has been the story from the beginningÂ and it can only get better.
Are you satisfied with the investment pattern?
Absolutely yes, in the sense that from theÂ onset, PenCom,Â said it will put in place safety net for every PFA. We manage the funds, the pension fund custodians keep custody of the pensioners’ funds and PenCom as the regulator ensures thatÂ we play by the rules. For us, howÂ we invest the funds depends. Now, we are tailored towardsÂ particular asset classes that we areÂ permitted to invest in and it is in ratios. There are certain amount to invest in government instruments like bonds and treasury bills and certain percent you are allowed to put in capital market. Just to ensure that people’s money is not invested inÂ unbridled manner.
Radix Pension Fund ManagersÂ was launched in LagosÂ recently. Can you shareÂ the chronicles of the transition from IGI pension to Radix Pensions?
IGI pension has been operating in the industry for seven years now prior to acquisition of the majority stake by Radix capital .Radix, wasÂ given approval by PenCom to acquire the majority shareholding in February this year and approval was also given by PenCom to go ahead to change the name from IGI to Radix Pension managers in the month of March.
In the same month of March,Â the board was reconstituted and now we have a new board and new management and things are taking shape in terms ofÂ brand name, business focus, effectivenessÂ of ourÂ operations. Before now, IGI hadÂ some impediments in terms of finance but all that now isÂ a past there is new board, new management ,Â our capital is far above the minimum requirement.
What attracted you intoÂ coming into pension business now that there are a lot of challengesÂ such as state governments not being able to pay salaries regularly, companies shutting down operations, moreÂ peopleÂ losing jobs and wanting to withdraw from their pension savings instead ofÂ contributing .WhatÂ actually is your motivatingÂ factor?
Before now like you said, things were moving on smoothly until Nigeria went into recession in 2016 with problem of irregular payment of salaries. Even the pension assets itself experienced the shock because more people were agitating to withdraw from their pension savings rather than contributing because of loss of job. The good thing is thatÂ with economic recovery and growth plan of the federal government, things are beginning to look up because before now, over reliance on oil was what plunged us into recession. The oil reduction and the price went down and thatÂ negatively affected the exchange rate. Now Nigerians are looking more towards agricultureÂ and other sectors of the economy that was hitherto abandonedÂ andÂ you sawÂ the National SMEs clinicÂ that the federal government piloted sometime in July and any economy that the youth , the SME are the mirror turns out to succeed.
After the last recapitalisation in the pension sector, out of the existing 26 PFAs, five failed by the way side what is your driving force in choosing to invest in IGI Pension managers?
For most of the PFAs that failed by the ways side after the exercise, recurring reasons, among all of them isÂ that they didn’tÂ have enough capital for operations, to expand, to access the marketÂ more. So in such cases, you have cases of people not being prudent with shareholders funds. For us, why are we here, why is Radix capital going into this business, Radix capital as a brand itself hasÂ over 20 yearsâ€™ experience in the financial space. And most of what it is doing is to help people recover from their business. They are into mergers and acquisitionÂ so they have the experienceÂ they know the market soÂ they see the opportunityÂ and if you lookÂ you see our niche is the youthÂ which is the driving force ofÂ every economy. Our youth are notÂ captured in the scheme and each year, you have a good number of themÂ passing out from NYSC.Â For us there is still opportunities and it keeps growing it is not static. Like I said earlier on we have excellent operations, our systems are up to dateÂ specified by PenCom and our peopleÂ are our driving force.
Nigerians have continued to give kudos to former president Olusegun ObasanjoÂ for putting in place the people that championedÂ the current pension system in the country but we cannot say that the system is perfect now what are those things you would want the present administration to address in our pension system?
Praise must go to Obasajo really for the pension reform that brought out the contributory pension scheme .Kudos must go to PenCom in terms of regulation. If you look down the road, you could see that it has been a smooth sail for every PFA in the industry, mainly because of effective regulationÂ by PenCom. If not for regulation,Â peopleÂ would have been cutting corners doing things as they like. PenCom had guarded against it over the years. If there should be a change in the system, is in the area of education and awareness creation and PenCom is dong excellently well in that area. The Commission has put in place micro pension scheme. It organises enlightenedÂ campaign and workshop for contributors and the entire public.
How prepared are you to play in the micro pension scheme?
We are prepared for the businessÂ in the sense that we will wait for the regulator to kick offÂ action from what we are seeing come the ear 2018, the micro pension scheme will takeÂ off.
There have been much agitation about the take off of window transfer in the industry, yet the PFAs and the regulator keep on delaying ,as a new entrant into the business what have you to say?
It is true people are agitating for the transfer window but PenCom is takingÂ its time to cross all the Ts and dot the Is. When the scheme started, we all went out to register people into the scheme, capture their biometrics to ensure that records are correct and people don’t lose their funds. After a year or so, PenCom again ordered all the PFAs to go back and recapture those biometrics all these are done because PenComÂ does not wantÂ anything to go wrong. Sometimes, it is natural for human beings to be in a hurry to get thingsÂ done but it is equally wise for people to ensure that every thing is set in motion and in proper perspective so that we don’t go back and regret that oh if I had known that this kind ofÂ chaos would come out I would have been more careful. In termsÂ of record keeping ,PenCom has done very wellÂ and I am sure that is the reason they are yet to kick off theÂ window transfer. There is also need for education because when we started, there were a lot of rumoursÂ going onÂ about when you contribute your money, the PFAs will use it to build houses and so on. Now we have got over that and people are agitating oh I want to leave my PFA to go to another one and so on and so forth. Some peopleÂ said they want it later but the truth is that if the system is not right for it, there will be chaos. You have double registration when we started, now that has reduced and addressed by PenCom. So I believe they are on top of the gear and when the time is ripe, everybody will be happy that the right thing has been done.
What specifically are the innovations you are bringing into the industry this time which people especially those who were there before you would look at and say yes this is an innovative company?
That will amount to releasing our strategy into the marketÂ place so that it will not be new to anybody again. But basically one thing that is already out there is that we areÂ passionate about the youths. We are passionate about the fact that the youth should save for the rainy day. For most of us, when we were young, we took savings for granted. Looking back now, we will see why our parents told us that we should put something aside for the rainy day .So we are passionate about seeing the youths understandÂ benefit of savings and that will be good for the economy. When we were allÂ young, we were young and restless.Â But there is this beauty of youthful age, you are creative, you have ideas, you are not afraid to take up challenges you are not afraid of dealsÂ when it comes to ventures you want to go into, butÂ you need money, you need capital and support, if you don’t put something aside now how do you get yourÂ ventures on ground. The reason people in advanced economy like US go further than us in Africa is the fact thatÂ they take some things for granted. While we grapple about where the next mill will come from, they have safety nets in their societiesÂ that they can think outside the box. They have the Silicon Valley and so on. People come up with innovations. Now if you don’t have a system where peopleÂ are comfortable by reason of having something set aside, where people can sayÂ yes I have this money aside I can go into the journey of venturing into this or that and if it doesn’t work, I have something to fall back on ,then people are limited in their thinking, in their creativity and in their achievements .Now for Nigerian youths, I believe starting to save early could also lead to early retirement. You don’t have to grow very old you don’t have to work until you are seventyÂ before you retire. BecauseÂ already you have something set aside and the earlierÂ you start the better. The reason many people don’t appreciate the benefit of the contributory pension scheme is because it started just 13 years ago when some of the contributors have five, six years to retire but when you start and you save for 20 or 25 years before retirement, you can imagine how much you would have saved and you can imagine how much you will have onÂ your own to start business.
There are many ways of starting a business you either get a loanÂ or you have a family member that gave you money. MostÂ of ideas people have that were not implemented, was because of lack of savings. Now, if you start putting money aside early in life what that means isÂ that 20,Â 25 years, you will have more than enough to start something. So my advice to the youths is that they should start early enough. They should take the contributory pension scheme very serious. The good thing about the scheme is that it is backed by law. The moment you start working, you start putting something aside and is notÂ done by the employee, also his employer is setting something aside for him and the money is not static. ItÂ is being managed by the PFA with regular statement being provided to the contributor.
The problem of non remittance among many employees is a big worry to employee and PenCom, what do you think is the solution?
I think PenCom is already on top of that because where there is no law, there is always chaos. Recently, PenCom took one organisation to court overÂ non remittance of employee’sÂ contribution. That itself is a signal to other employers of labour who probably are doing it or have intention of doing it. There is no reason you will deduct someone’s salaryÂ without remitting it.Â If it is because you don’t have the money to remit your own part of the contribution, I think it is only fair that you let the employee know that you have deducted the money and that the money is in certain account and that it will be transferred to his PFA. But the law is clear in that as well. Seven days after salary is paid, the deduction should be paid to the contributor’s account; so, not doing that amounts to running fowl of the law and the laws are there to see to it that such people are brought to book.
From here now what will be the way forward for Radix?
The way forward for Radix is clear. We came in with the goal of ensuring that the youths are captured. There are three things involved in the management of pension assets. People are interested in the safety of their funds, return on their investments; they are interested in excellent customer service. But beyond these,Â people are alsoÂ interested in advice on how toÂ go about spendingÂ their pension assets when they retire.Â For us, it goes beyond just saving the money, getting the best and competitive returns on investment and ensuring that customers are served well. If you look at demography in pension space, you will discover that most of them are youths. In fact, aboutÂ seven percent of the contributorsÂ are less than 40 years and that speaks to the fact that we need more education among the youths. For us, targeting the youths is just the right thing to do. They areÂ going to be here for a long time and pension contribution is not a short savings that you will draw from any time.it isÂ something you keep aside for old age so that when the time comes ,the life style you have built for yourself will not come to an end when you retire. We want our contributors and those related to Radix to keep living the same life they are living now when they get retired.
Recently, there have been bills for amendment of the Contributory Pension Scheme especially exemption of some government agencies from the contributory pension scheme. What is your submission on that?
There is a popular saying that says why fixing it whenÂ it is not broken? We all don’t have short memories; we all remember how people queue up and die while waiting to collect their benefits. It was very pathetic. Now 13Â years down the road, we saw what is happening. Everybody is assessing hisÂ pension benefits easily, even the police saw the beauty ofÂ it and went to obtain license to set up theirÂ own PFA. SoÂ why will anybody want to change the law? change it forÂ what?Â So looking at it from every perspective, there is nothing to change in the law, everything is working and people are happy.
Can you paint a picture of how you will want to see Radix Pension in theÂ next five years?
In the next five years, I want to see Radix as one of the top 10 PFAs in the country. We have the people, we have the passion and we have the system. AboveÂ all, we have the backing of the promoters.
The pension sector as a whole, what do you think the future will be in terms of volume of assets, numberÂ of RSA holders and investmentÂ pattern especially in the face of agitations by the contributors for investment of their assets in mortgage and inclusion of theÂ informalÂ sector into the scheme?
The best way to look at that is to look back, 13 years ago, how many people did we have registered in the scheme? 13 years ago, what volume of assets do we have in the scheme?Â Today, we have over six trillionÂ Naira as pension assets, close to what the federal government has as this year’s budget. The population depends on what statistics you are using. We have 180 million people.
Again the working population, about 73.4 million people and out of that, you have 7.4 million contributors about 10 percent or less of the working population. So when the micro pension comes on board where you have most Nigerians that are not captured by even the banking sector, you can imagine the explosion in the next two to five years. So ifÂ with 7.4 million contributors, we have over N6 trillion assets under management, you can imagine what assets we will have if we capture the SME operators as well as the teaming youths that NYSC push out every year. Like I said, the SME is the mirror of every society and economy and PenCom is working hard to bring them under the scheme.