Chief Executive Officer, Stanbic IBTC Pension Managers, Dr. Demola Sogunle, spoke with NIKE POPOOLA on major issues affecting the new pension scheme
What is being done to introduce all workers into the Contributory Pension Scheme?
As we all know, a high percentage of Nigeria’s working population is operating in the informal sector of the economy. And it is important to bring workers in this sector into the new pension scheme in order to raise the coverage ratio from the current level of less than eight per cent of the working population. We need to extend the benefits of the new scheme to many Nigerians and a coverage ratio of about 25 per cent will translate to touching the lives of about 18 million Nigerians. The impact of this on the economy on the one hand, and the social wellness of average Nigerians on the other, is enormous. The National Pension Commission is currently reviewing the guidelines which will govern the inclusion of this set of people into the CPS. By the second quarter of the year, we should see some progress in this area. Our pensions business is not relenting in getting the message of the CPS out there. We will continue in our drive to register customers even in the formal sector who are yet to come under the CPS. We believe that the continued awareness of the CPS will also go a long way in getting more people onboard.
What are the most important things an employer should consider before joining CPS?
The most important factors to consider, which are of course in favour of the scheme, are transparency, portability and safety. With regard to the transparency of the scheme, clients under the CPS have access to their retirement savings accounts and they can also monitor the contributions and growth of their pensions over the period of their active years in service.
The portability of the scheme allows the client to change jobs without having to open another RSA. Also, in the not too distant future, the transfer window will open and the client is at liberty to change his PFA once in 12 months where he feels the need to do so.
Regarding safety of the funds, by and large, the client is assured of capital preservation. The client is also assured of receiving his retirement benefits when due.
How would you assess the performance of CPS?
The CPS so far has done quite well although there is always room for further development. The last eight years has been interesting and we have seen the industry grow from zero to about N3tn worth of asset under the management. We will see more growth in the near future as the confidence level of the general public continues to increase and with the CPS being extended to the informal sector.
Considering the failure of the old pension scheme, how safe is the future of workers under the CPS when they eventually retire?
In view of the in-built control mechanisms, actual separation of responsibilities and very tight regulatory oversight, we can confidently say that the CPS will not witness the same issues as the old defined benefit scheme.
The regulations governing the operations of the PFAs and the pension fund custodians are strong and adequate enough to avoid or prevent a breakdown in the system. For the past eight years, the industry under the Pension Reform Act of 2004 has flourished and grown remarkably. Stanbic IBTC Pension Managers, as a company, promptly and consistently pays over 25,000 retirees on a monthly basis and this number keeps growing steadily. The only intrusion into the privacy of our customers is the alert they receive through their cell phones monthly telling them that their pension has been credited to their designated bank accounts.
What can an employee do if his monthly reductions are not remitted to his PFA by his employer?
The employees, whose monthly deductions are not being remitted to their PFAs can be proactive by reporting their erring employers to the National Pension Commission. This can be done through letters or emails. The details with respect to where complaints can be made are available on the commission’s website.
In addition, PFAs go the extra mile to report employers who have stopped remitting monthly pensions on behalf of their workers to the commission on a regular basis. In recent times, the commission has employed the services of recovery agents. The duties of these agents include enforcing the CPS on defaulting employers by ensuring that remittances are made to the PFAs on behalf of the employees.
Do you feel pension funds should be invested in infrastructure?
In the infrastructure space, while we recognise the significant impact that pension funds can play in infrastructural development, it is important that the appropriate structures to guarantee safe investments are put in place. Products that meet the investment guidelines also need to be made available for the investment of pension funds. Currently, such structures barely exist and any investments made without them may not positively influence the fund value.
However, in so much as infrastructural investments are long-term, and they match the long-term liabilities of pension funds, it is in the overall interest of the economy and the contributors for pension funds to invest in this asset class but with a well guided approach and caution for many obvious reasons.
What is your expectation for CPS in the nearest future?
We expect the pension industry in Nigeria to have tripled in size in the next five to 10 years, especially as the plans to extend the reach of the CPS to the informal sector are already in place. We also anticipate greater participation by individuals in the management of their retirement benefits with the introduction of multi-fund structure, which caters to different risk appetites and ideologies of contributors. With these changes, we believe that the pension industry will be a strong sector in the financial industry as a major employer of labour and a source of long-term funds for economic and infrastructural development.
We also anticipate that the days of pensioners waiting in long queues for their retirement benefits would be a thing of the past, as the administration of the old pension scheme would be under the effective management of PenCom as anticipated in the Act, even as defined benefits schemes are gradually phased out. We believe strongly that the informal sector will play a major role in building a bigger and more robust industry. This is simply because it is generally an untapped market and we have majority of the active Nigerians in that space.
Stanbic IBTC Pension recently announced meeting a millionth customer target; what is the motivation?
From a professional point of view, it is an exceedingly great achievement for the company to hit this milestone, especially as we are the first PFA to cross this mark. It reinforces our leadership position in the industry and clearly sets us ahead of others.
On a personal note, I feel honoured to be leading the team of such a reputable organisation as Stanbic IBTC Pension Managers, and at such a time to witness the attainment of this feat. I have been fortunate to work with a world-class team of hardworking professionals with brilliant ideas, commitment, intrinsic passion and energy, which are the key drivers of the business today.
How have you been able to use your multilingual customer centre to boost confidence in CPS?
Our multilingual contact centre is designed to provide our customers with an avenue through which they can contact us in their preferred language. The impact this has had is really tremendous. Many of our customers who hitherto had unanswered questions about their pension benefits now have ample opportunities to speak with us in a language they are comfortable with and get answers to their questions. This has helped to build confidence in our business and in the pension industry as a whole.