Pension Fund may hit N7 trillion before end of 2017

With the devaluation of the Naira and double digit inflation rate that are stifling businesses at a time of economic meltdown, the value of Nigeria’s Pension Fund may increase to N7 trillion before the end of 2017, The Guardian has learnt.

Despite the fact that there were a lot of withdrawals from the fund on account of massive layoffs last year, the belief is buoyed by the fact that in November 2016, the capital reserve stood at N6.2 trillion up from about N5.1 trillion in January 2016.

However, the N7trillion mark can only be achieved if the Federal and states governments, private sector and employers paid the pension arrears they owe as at when due.

The Guardian gathered that the fund has been growing with an increase of at least N50 billion and in some cases over N150 billion on a monthly basis for the last two years.

The fund is growing notwithstanding the fact that Federal Government has accumulated about N140 billion pension arrears under the Defined Benefit Scheme (DBS) and Contributory Pension Scheme (CPS). Also, most states and companies in the private sector are still defaulting in remittances to the Retirement Savings Accounts (RSAs) of their workers.

The reason for the continued growth in pension assets is not unconnected to the fact that contributions are made on a monthly to employees’ RSAs, while the PFAs also make a lot of profits from investing these funds into Federal Government Bonds, stock market and other less risky investment windows, which also go into the pension funds pool.

Moreover, with some states now ready to join the CPS, the readiness of the federal government to settle some of its arrears, and the National Pension Commission (PenCom) going after defaulting employers, experts believe could push the fund even beyond the anticipated target.

Speaking on the development, the Managing Director, AXA Mansard Pensions, Dapo Akinsanya, said the fact that contributions are made every month and new sets of people are regularly subscribing to the scheme, means the funds will keep growing.

On the investment income that pushed the funds to N6.2trillion, the Chairman, Pension Funds Operators of Nigeria (PenOp), Eguarekhide Longe, said over N2 trillion of the pension funds are investment incomes. This means that the PFAs received over N3 trillion pension contributions over the last 12 years, while the funds operators have added over N2.5 trillion to the pool.

“It shows you that the money has been active. So, the philosophy of managing this money is to add to it. It means that the money has been used profitably. Now, if you think about how pension fund should be used and so on and its objectives, you find out that it is being used by the managers for the right objectives, so that when people retire, they earn their money seamlessly,” he pointed out.

The Director, Centre for Pension Right Advocacy, Ivor Takor, said most of the PFAs are making money from investment of the pension funds and that some of the profits also go back into the fund, which increases its volume.

Takor, who is also a former Board Member, the Pension Commission (PenCom) however, appealed to the Federal and states governments to pay their respective arrears, as this will boost the image of the new pension scheme, which has been recently criticised as a result.