BY NANA MUSA
Pension management has become a critical issue globally, especially as significant portions of the workforce age, raising concern about their financial security during retirement.
In Nigeria, pension payment is not only a motivating factor for public service employees, it also influences their work behaviour significantly.
According to the World Health Organisation (WHO), a pension is a regular payment made to retired individuals to provide them with guaranteed income or support during retirement.
The perception of Pension Fund Administration (PFA) in Nigeria has evolved significantly since the implementation of the Pension Reform Act (PRA) in 2004 and its subsequent amendments.
While many believe that the PRA has established a foundation for improved pension fund management, public sentiment still reflects ongoing concerns about its efficiency and accessibility.
This historical context highlights a transition from a problematic old system to a more structured approach. However, achieving widespread satisfaction and trust remains a challenge.
As Nigeria marks two decades since the enactment of the PRA, stakeholders in the pension industry are reflecting on significant achievements while addressing ongoing challenges.
The Pension Fund Operators Association of Nigeria (PenOp) asserts that the PRA has transformed the pension landscape, significantly improving retirees’ lives and enhancing the overall economy.
According to the Chief Executive Officer of PenOP, Mr Oguche Agudah, PRA has effectively tackled the mounting pension liabilities that previously plagued the country.
Agudah said that before the PRA, pensioners were often left waiting for their benefits, leading to dire situations where many queued for payments, some even dying before receiving their dues.
He said that the introduction of the Contributory Pension Scheme (CPS) has fundamentally changed this narrative.
“With private sector fund man- agers now overseeing pension contributions, there has been a marked improvement in efficiency and reliability.
“Today, we have a system that is not only funded but also transparent and sustainable,” Agudah said. He said that the growth of pension fund assets under the CPS was a testament to its success.
According to him, as of October 2024, pension assets exceeded N21 trillion, reflecting a Compound Annual Growth Rate (CAGR) of over 20 per cent since 2007.
He attributed the growth to consistent contributions from both public and private sectors, and strict compliance enforced by PenCom.
He also identified Micro Pension Scheme, launched in 2019 as one of the notable innovations introduced under the PRA.
Agudah said that the initiative, which targets individuals in the in- formal sector, allows them to contribute flexibly based on their earnings.
“The Micro Pension Scheme is designed to foster financial inclusion among those who traditionally lack access to formal pension systems,” he said.
He encouraged informal sector workers to take advantage of this opportunity for their future security. He, however, said that in spite the success stories misinformation remained one of the challenges facing the pension sector.
“Misinformation and misrepresentation have been an issue in the scheme because people have not taken their time to understand the scheme, they are used to the old model and change is difficult.
“A large number of people still do not understand the workings of the scheme and that is why we are working with the media to change the narrative,” he said.
He also addressed proposals to transition police personnel from the CPS back to a Defined Benefit Scheme (DBS), warning that such a move would lead to fiscal unsustainability and delayed payments for police pensions.
He said that reverting to the DBS model would not resolve police concerns but, instead, create deeper financial and operational challenges for the country.
“Moving the police out of the CPS will require a staggering N3.5 trillion annually to fund pensions for approximately 400,000 personnel, in a budget already burdened by deficits, this is simply unsustainable.
“It will also divert resources from other critical needs, including mini- mum wage adjustments and public services,” he said.
The CPS currently holds over N21 trillion in assets and is considered a critical component of Nigeria’s economic infrastructure Agudah said that the target was to ensure that all pensioners were paid on time.
The Director-General of PenCom, Ms. Omolola Oloworaran, highlighted significant achievements over the past 20 years, including over 10.5 million contributors and pension assets exceeding N21.9 trillion as of October 2024.
However, she acknowledged ongoing challenges such as inflation eroding retirees’ purchasing power, and delay in paying accrued rights.
“Moving forward, we are working with the Federal Government to put in place a sustainable solution that ensures that retirees receive their benefits promptly and without undue stress,” Oloworaran said.
She expressed excitement over the micro-pension scheme initiative, noting that it is the commission’s way of fostering financial inclusion.
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