Home Insurance Digest PenCom recovers N3.94bn unremitted pensions

PenCom recovers N3.94bn unremitted pensions

Stories by CHRIS EBONG

The Na­tional Pension Commission (PenCom) has said that it recovered N3.94 billion from some private sector organisations which failed to remit the sum to their employees’ Retirement Savings Accounts (RSA).
The revelation came in a report released by the commission recently. According to the Commission a number of recovery measures had to be adopted which led to cumulative recoveries that amounted to N4.9 billion comprising principal contributions of N3.94 and penalties standing at the tune of N1.04 billion after a demand notices were served to the erring companies.
Report on non-remittance of pension savings by some employers has been on the front burner in recent times, a development that has been a source of worry to all concern as this has to do with people’s future, according to analysts.
In another development, the Commission has advised investment managers who would like the accumulated pension fund in the country to be channeled towards the funding of specific industries and projects across the country on how to go about realizing this dream.
The Commission said stakeholders must securitize such investments in such preferred projects in addition to ensuring accountability and transparency in the management of invested pension assets. The regulator said the securitization of investment to attract pension funds, is a challenge for the Market operators, Financial Advisers, Leasing Houses and estate managers to go back to the drawing board and develop instruments to enable PFAs mobilize funds under their custody for this purpose.
The Head of Benefits and Insurance at PenCom, Mr. Olulana Loyinmi made this clarification at the 2015 InsPenOnline Media Nigerian Insurance and Pension Award in Lagos recently with the  theme of the programme was “Redimensioning Retirement Benefits for Growth” agreed that it will be a good idea to use pension fund to grow real estate business and provide home for Nigerians but underlined the major inhibitor in this direction saying, it has to do with the lack of an objective and generally acceptable valuation methods for real estates.
He underscored the fact that transparency and safety are major considerations in pension administration and urged real estate operators to work with relevant professionals to securitize investments in the sector to enable pension operators channel funds to this critical sector.
“PFAs cannot create investment outlets; they are only sublime operators in this aspect of business,” he stressed.
Loyinmi said in as much as it is desirable to use pension assets to finance construction of specialist hospitals, such investment must be well-structured and securitised as well.  “It has to be converted to bonds for PFAs to invest in specialist hospitals,” he said.
The instruments that pension funds could be invested in must ensure transparency, accountability and safety of pension assets such that the aims of pension reform will not be defeated, he said.
Loyinmi also responded to demands by retirees and other stakeholders for health insurance and other social security programmes to be incorporated into the CPS, saying the pension reform envisaged in the Pension Reform Act, 2004 and 2014 respectively provides for only pension for retirees and not health insurance. He said another government agency; National Health Insurance Scheme (NHIS) is statutorily empowered to provide health insurance for workers and other citizens of the country. He also assured that PenCom would continue to improve on its awareness programmes.  It may not have been adequate but we all have this responsibility, he stressed.
Presenting the theme paper, the Managing Director of Lancelot Ventures Limited, Mr. Adebayo
Adeleke noted that the Contributory Pension Scheme has so far pooled over N4.5 trillion from over 6 million workers leaving out about 90 percent of the working population in the country.
He predicted that pension asset is likely hit N140 trillion between 2022 and 2025, about 14 times the current market capitalisation of the Nigerian Stock Exchange (NSE) and queried; “where will these trillions of naira be invested at a positive rate of return without fuelling asset bubble.”
Adeleke observed that 85 per cent of accumulated pension assets were invested in fixed income government securities with the remaining 15 per cent in private equity, mutual and infrastructure fund, indicating that Pension Fund Administrators (PFAs) were either being too conservative or that there are no real alternative investment outlets for pension funds.  “PFAs are constrained by regulation to be extremely conservative,” he stressed.
He also observed that growth in pension assets was as a result of new entrants into the scheme since the yield on the investment has been wiped off by the rising inflation and devaluation of the national currency.
He emphasised the “need to search, structure, develop and invest in alternative asset classes that have the potential to beat inflation sustainably” and made a case for the use of pension fund to finance Infrastructure including electricity and tolled bridges, specialist hospitals (on Kidney & Cancer, etc) and  short rail system, among other developmental projects.
He also made a strong case for pension funds to be channelled into real estate, agriculture and manufacturing as well as Small and Medium Enterprise sectors respectively.  He advised PFAs to stop playing in the capital market as merely speculators but graduate to assume their rightful position as institutional investors.
Any organisation which fails to re­mit its workers’ pension contribu­tions to their RSAs ought to know that this dereliction places the na­tion’s pension scheme and the future of the workers in great jeopardy. It is, indeed, a form of economic sabo­tage.
The haunting images of retired se­nior citizens forced to live in dehu­manising circumstances because of non-payment of their gratuities and pensions are very fresh in our memo­ries. These are men and women who had served the nation and private or­ganisations for many years but were denied their retirement entitlements in their twilight years. Senior citizens deserve their due benefits. There­fore, any attempt by any category of employers in the country to jeop­ardize the retirement benefits of its workers should be guarded against, resisted and punished.
In this regard, we commend PEN­COM for its presence of mind and its diligence which led to the recovery of the unremitted sums. This is a good service in the interest of Nigerian workers. The nation’s pension law is fairly straightforward on the matter of remittance of pensions contribu­tions. The employer is empowered to deduct at source the monthly contri­bution of the employee and remit it, alongside its own contribution, to the custodian specified by the Pen­sion Fund Administrator, not later than seven working days from the day the employee’s salary is paid. The custodian then credits the em­ployee’s retirement savings account. There is a two per cent fine on any employer who defaults each month on total contributions.
This regulation is mostly observed in the breach. Considering the amount the commission recovered in the third quarter of last year, there is ample evidence that so many or­ganisations are not sending the pen­sions savings to the custodians as due. It is also clear that the savings are not paid along with the salary as they should. This is probably respon­sible for the situation in which some employees are unable to get their re­tirement entitlements, several years after they had stopped working.
The non-remittance of these due sums is not only insensitive, it is wicked, considering its inevitable consequences. It is often a result of the employers diverting the pension contributions to other endeavours, at the detriment of their employees.
We believe the reason for this is that the two percent penalty for non-remittance of the due sums is not de­terrent enough. It is a mere slap on the wrist that does not reflect the se­riousness of the offence.
We advise that the commission should take a second look at this as­pect of the law and send recommen­dations for stiffer penalties to the National Assembly. It should also de­vise other effective methods of get­ting employers to remit the pensions savings at the right time.
We need to emphasize that a healthy pension scheme is an indica­tion of a good economy and all Nige­rians who have anything to do with Nigeria’s macroeconomic manage­ment should encourage a strong pen­sion scheme. A workforce sure of a secure retirement is likely to be bet­ter motivated to work hard and with integrity. Moreover, a strong pension scheme ensures substantial capital savings which, if skillfully invested, can be an engine of economic devel­opment.

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