What is the new Pension Scheme in Nigeria

The new scheme is a contributory, privately managed pension
scheme esterblished in the year 2004 for all employee. Every eligible Employee (private or public) shall maintain a Retirement Savings Account in his name with the Pension Fund Administrator (PFA) of his choice. The employee shall notify his employer of the PFA chosen and the identity of the Retirement Savings Account (RSA) opened. The employee and employer contribute a minimum statutory percentage (usually 7.5%) of the employee’s monthly emoluments (comprising basic salary, housing allowance and transport allowance with others depending on grade level & employemt service structure type) into the Retirement Savings Account of the employee.
The contributions would be managed and administered by
Professional Fund Administrators and held in custody by licensed Pension Fund Custodians.
At retirement, the amount in the employee’s Retirement Savings Account would be the total contributions plus income and capital gain earned on the contributions made.(Edited)

culled from http://www.ieianchorpensions.com/

Foe More Info: http://www.trustfundpensions.com/index.php?option=com_content&view=article&id=167&Itemid=167#

Pls feel free to share your experience about it if you are already integrated into the programme.

Examining Contributory Pension Scheme’s impact in eight
years
DECEMBER 24, 2012 BY NIKE POPOOLA


When the 2004 Pension Reform Act was promulgated, it was
meant to establish a contributory scheme for the payment of
retirement benefits of employees in the public and private sectors.
The law sought a system that would correct the failures of the old scheme, in which workers were subjected to undue hardship, especially in the non payment of their pensions. Under the old scheme, such expected beneficiaries had to queue for days to get their pensions, with many of them dying in the process without getting paid.
Under the contributory scheme, every employee is mandated to
open and maintain an individual Retirement Savings Account in
his or her name with any Pension Fund Administrator of his
choice and notify his employer of it, according to Section 11 of
the 2004 PRA.
PFAs are, by law, mandated to manage the RSA accounts, but these funds and pension assets must be kept with Pension Fund
Custodians, who are guaranteed by banks. They are to be
regulated by the National Pension Commission.
The employer, according to the law, must always deduct 7.5 per
cent of the employee’s remuneration and add another 7.5 per cent to it for such an employee; making a total of 15 per cent, which should be paid into the RSA as salaries are paid monthly.
On retirement, a worker can have access to the funds when he
reaches the age of 50 and is no longer in paid employment or,
when he gets to the retirement age stipulated by his employer.
However, he would not be allowed to withdraw the total balance in his RSA, as he can only be given certain percentage of the fund known as lump sum, while the rest will be utilized either as
programmed withdrawal or as annuity.
If the retiree opts for programmed withdrawal, his PFA will be
paying him monthly pensions for a maximum period of 18 years.
On the other hand, if he opts for annuity, the remaining balance in his RSA, after deducting the lump sum, will be transferred to an insurance company chosen by him, and the insurance company will pay him for life.
Major events, which had really impacted on CPS eight years after
its inauguration, can be analysed in different areas, including
coverage, assets, asset management, impact on retiree, impact on economy, challenges to the scheme, safety measures,
recapitalisation, setbacks and future prospects.
According to figures from PenCom on Friday, coverage of the CPS revealed that 5.28 million workers have been registered under the scheme.
The figures also revealed that 21 state governments have already
adopted the CPS, while 14 others are at various levels of enacting their CPS laws.
The President, Pension Fund Operators Association, Mr. Dave
Uduanu, said that only a few of the states had been fully
compliant with the deduction and remittance of monthly
emoluments of their workers to the PFAs.
According to him, the present figure of registered RSAs is far lower than what was set as target for the scheme at the onstart.
He said, “I expect the number of RSAs to increase soon by the
number of states that have enrolled in the scheme. I don’t think
that there are more than seven states that are fully compliant with the scheme now, which shows that there is a lot of work to do.” Interestingly, the asset of the CPS has continued to be on the increase according to PenCom.
Figures from the commission showed that the total pension fund asset rose from N405m, N815m and N1.09bn to N1.5bn in 2006, 2007, 2008 and 2009 financial periods. Between 2010 and 2011, it rose from N2.03bn to N2.4bn, while it stood at N2.8bn as at the end of August 2012.
The funds, which cannot be left idle, are being invested in
different assets to yield profits.
As at September this year, the statistics revealed that N1.7tn,
representing about 63.07 per cent of the funds, had been invested in Federal Government of Nigeria’s securities. According to the statistics, a sum of N275.58bn or 10 per cent of the funds is in local money market securities; N273.29bn or 9.99 per cent of the funds is in domestic ordinary shares; with N171.87bn or 6.28 per cent of the funds invested in real estate property.
The figures enumerated that 3.99 per cent or N109.16bn is in
state government securities; 2.61 per cent or N71.36bn in
corporate debt securities; 1.33 per cent or N36.4bn is in foreign
ordinary shares; while 1.2 per cent or N32.68bn was invested in
other assets. Similarly, 0.85 per cent or N23.37bn of the funds is in private equity; 0.41 per cent or N11.2bn in open and closed fund; while 0.18 per cent or N4.8bn has been invested in foreign money market securities.
On profits made from the investments, the figures revealed that
the industry recorded 19.37 per cent, 0.34 per cent, 11.41 per
cent and 11.64 per cent average returns on investment of RSA
funds in 2007, 2008, 2009 and 2010.
The Head Research and Corporate Strategy, PenCom, Dr. Farouk
Aminu, said that the pension funds were already generating
appreciable pool of funds for long-term investible funds.
According to him, the CPS currently has about 56,498 retirees
from the public and private sector, who have collected over
N152.36bn as lump sum, as well as collecting about N1.77bn as monthly pensions.
He noted that 54,558 retirees that opted for programmed
withdrawal had been paid N145.37bn, while only 1,940 had so far opted for annuity and had been paid N6.99bn lump sum.
Economically, the scheme had been making contributions to the
Gross Domestic Product, while happening in the global economy had also had some effects on the funds.
The immediate Past Director-General, PenCom, Muhammad
Ahmad, said that the proportion of the pension assets to Nigeria’s Gross Domestic Product rose from 1.4 per cent in 2006 to seven per cent in 2010.
Some of the harsh effects of the economy on the pension assets
were the effect of economic meltdown, which happened about
four years ago when the crash in the stock market started.
The commission had recorded a paper loss amounting to about
N3.14bn in the stock market, according to Ahmad.
Ahmad said the PFAs took a conservative approach to the RSA
investments and had invested just 15.93 per cent of the funds in equities in 2007, which was reduced to 9.25 per cent in 2008.
He said, the commission took steps to cushion market volatility
on those who had already retired under the CPS and directed
pension operators to establish retiree funds, which were only
invested in fixed income securities since the beneficiaries’
investment horizons were relatively shorter than that of those who were still in paid employment.
Ahmad also noted that the banking sector, which witnessed some reforms, constituted about 60 per cent of traded stock on Nigerian Stock Exchange. The banking crisis, he added, led to a fall in stock market capitalisation, which declined returns on equity investment.
Talking about the safety measures in place, he said that the CPS
has inbuilt safeguards to protect the pension fund from all forms of misappropriation with the functions of custody and
administration of the funds clearly delineated.
While the Pension Fund Custodians handle custody of the
pension funds, he noted that the PFAs handle the administration.
Ahmad said, “The PFAs and the PFCs are mandated by the
commission to maintain high levels of transparency and
accountability that enable individual RSA holders to have full
access to any information relating to the pension contributions.”
According to him, the commission has also put in place strict
regimes, including daily monitoring of the investment activities of PFAs by the commission, and the institution of strict payout
authorisation requirements to ensure that the PFAs are not
reckless in their investment decisions.
Concerning another major event in CPS, in May 2011, PenCom
ordered the PFAs to recapitalise from the initial accepted capital of N150m to N1bn, with June 2012, as the deadline to meet the new requirement.
By June ending this year, 18 PFAs had met the requirement; three were acquired by other PFAs, two failed to meet the deadline, while one PFA was taken over for mismanagement.
While the commission expressed its intention to revoke the
operating license of these two PFAs, it assured its retirees and
contributors that their contributions were still secure.
Some of the setbacks recorded by the scheme had to do with the
fact that as the funds were growing, many workers and retirees
started feeling irritated by the services being offered by the
pension providers. Also, the fate which collapsed the former
scheme, in which workers retired without having any pension
benefits are already reoccurring in the present contributory
pension scheme.
Investigations by our correspondent revealed that many
contributors in the new pension scheme were already retiring with little or nothing in their RSA because their employers, who had been deducting their monthly emolument, had not been remitting such to their PFAs.
Ahmad raised the alarm that at the state level, most of the
employees who are retiring from the services may suffer a
reoccurrence of setbacks that happened in the old pension
scheme, in which workers retired and had no pensions to fall
back on.
He said, “We have about 21 states that are in different stages of
compliance, but unfortunately the compliance is a bit slow and
haphazard. The reason being that it is not mandatory for them, as they enacted their own laws. Ideally their laws should have
compelled them to do that. Some of them that started the scheme have either stopped or are paying the contribution haphazardly.”
The implication of the non-payment of the monthly contributions, he explained, would mean that the workers might not have any savings in their RSA accounts when they retire.
However, the Chief Executive Officer, Riskguard, Pension and
Insurance Consultant, Mr. Yemi Soladoye, said that the greatest
achievement of the scheme was that it had been able to address
problems of funding, pension arrears, future liability, which
crippled the old pension scheme.
Speaking on the future of the CPS, he said, “Definitely, there is a
lot of relevance to the scheme. The major concern now is that they should be able to consolidate on the gains of the past eight years, and address other issues on ground. With the exit of the management that had laid the foundation of the CPS, I pray they appoint the right person who has the right qualities to sustain the scheme.”

http://www.punchng.com/business/insurance/examining-contributory-pension-schemes-impact-in-eight-years/

For more Info:http://www.thisdaylive.com/articles/appraising-eight-years-of-contributory-pension-scheme/133354/

So after 8years is it working in your opinion?

AN EVALUATION OF PENSION ADMINISTRATION IN THE NIGERIAN PUBLIC SERVICE
http://www.bravoprojecthelp.com/public-administration/evaluation-pension-administration-nigerian-public-service/

AN EVALUATION OF PENSION ADMINISTRATION IN THE NIGERIAN PUBLIC SERVICE
http://www.bravoprojecthelp.com/public-administration/evaluation-pension-administration-nigerian-public-service/