The Director-General, Lagos State Pension Commission, Mr. Adekunle Hussain, speaks on prevailing issues in the Contributory Pension Scheme, in this interview with NIKE POPOOLA
How would you assess the Contributory Pension Scheme since inception, eight years ago?
If there is a score sheet, I will say the National Pension Commission, after the first eight years of operations, has done very well. It was an upstart commission; it wasn’t as if there was anything on ground for them to do the work. They came up with the law and implemented it almost to the letter. They have been able to establish a presence in many states now, and the number of states subscribing to it continues to improve. Of course, there are quite a number of states yet to come onboard but you can see that many are at the level of development, either already drafting their laws, or setting up their structures. What we have done now in the industry is that we have set standards through the implementation of the CPS spearheaded by PenCom, trying to establish best practices.
What is the impact on the private and public sectors?
With respect to the private sector, the rate of uptake is still not as encouraging as it should be. But PenCom has introduced inspectors who are trying to find out and inspect some companies in the private sector; I think in the New Year, the compliance level will improve. In eight years, they have amassed assets, which is around N3tn. That is a huge chunk of money in the pension industry. We can only go forward from there.
Again, in the whole of the eight years of implementation, there has not been a case of fraud anywhere, either at the federal or state level, which is a good one. It shows that there is every hope that the industry will continue to grow to the ultimate satisfaction of retirees in the country. Particularly, with the public sector, it is difficult to find operations that involve a huge amount of funds all over the nation and no single case of fraud has been reported anywhere. It shows that the people that thought about this scheme had done a very good job right from the assembly where the law was passed. I think they have done very well and it is important that they continue to improve on the operations of the scheme across the country so that ultimately, we will find an industry where one can readily say retirees are being treated right.
Are you satisfied with the management of the growing pension funds?
In the area of investment of the pension funds, it is true that we are at the elementary stage really, given that what we have done is to try to move away a little bit from traditional areas of accepted classes of investment in the pension industry to introducing infrastructure, for example. But the implementation is another thing. We all go through this learning process. What is desirable is to ensure that investment in the pension industry impacts positively on the economy of the nation as a whole. For instance, creation of jobs and wealth is important in ensuring that you maintain value at all times. In spite of investors’ activities, you should have sufficient liquidity to meet up with the pension obligations. There must be no time people retire that funds are tied up with long term investment and you don’t have money to pay the retiree as at when due. Once you are able to do that, I am sure that the industry will continue to improve. And we can actually attract investment across the border but you need experienced and tested hands to handle such investment. To investment managers, what I will advise is that we should continue to improve, get deeper in applying a wide range of knowledge towards investment decisions, such that we don’t run down the value of the investment that we have amassed. It is not advisable for us to have large funds that are idle, therefore investment managers will roll up their sleeves and get to work on this respect of pension assets.
How has the regulation of the PFAs fared in the period?
Again, one finds that the Pension Funds Administrators have done quite well, because of the oversight that we have. We keep ensuring that we are on top of what they are doing. We have guidelines set for them that they are strictly adhering to and I must say that you can see spirited efforts on the part of the PFAs in improving the administration of the pension funds. They have an association where they meet regularly to discuss issues affecting them, and they are forming a fairly strong pressure group in the industry, all towards improving the operations of pension in the industry as a whole.
My submission is that the industry is improving at a rate that has to be satisfactory, but of course, there is always room for improvement. You can still improve a great deal on service delivery to pensioners; you can reduce the time for pensioners to receive their dues than what they are doing now. There is really nothing to stop any pensioner from getting his dues on his last day in office; but again the work is in progress.
How has the Lagos State Pension commission developed over the years?
LASPEC has been in operation for about three years. We spent the first year in trying to set up the commission effectively. We started operations early in 2010 and we have gone through operations up to 2012. Really, we have been able to establish our redemption bond in recognising the past liabilities of workers under the old scheme, as accrued pension rights. And we have paid about N14.4bn as at the end of 2012 to a total of 2,604 workers in Lagos State. This year, we are projecting that that number will almost double because all the hiccups that we found in processing pension files and applications are now being treated faster than before. What that means is that the processing time is going to reduce, and most of the pensioners will be getting their pension rights even faster than before. And, everybody that retires from Lagos, we still assure that no service is lost, there is regular payment into their RSAs for every worker regardless of where they are working in the state; be it in state parastatals or local government, the funds are promptly remitted to the PFAs without fail. All we are trying to do really is to ensure that we continue to improve on service delivery to workers of Lagos so that people can actually look forward to retirement with their full benefits paid and their post retirements life is assured.
What are you doing to help other states to develop CPS?
We are open to other states that want to understudy our operations. In 2012, we approached not less than five states, and they sent some delegates to come and understudy what we are doing. We tried as much as possible to assist them; we gave them copies of our laws; we took them round our setups; some actually stayed a couple of days so that they could have a handful of how we deal with files. We are quite open. One thing we are going to do this year is to establish a faculty for training intending states that are willing to send their management staff members to understudy what we are doing; the more states that adopt it, the better for the country and the industry.