Concerns over Reps’ PenCom probe

The decision of the House of Representatives to probe the activities of the National Pension Commission (PenCom) is creating tension in the industry. For an agency, which has grown pension contributions to N8.49 trillion and raised contributors’ confidence in the industry,  what is needed is consolidation of its successes. Stakeholders have called for caution on the part of the legislators and stressed need for collaboration for sustained growth of the industry, writes COLLINS NWEZE.

the maxim that when two elephants fight, the grass suffers aptly captures the decision by the House of Representatives to probe the activities of the National Pension Commission (PenCom) since April 2017 till date.

That plan appears to have brought about calm to the pension industry and prompted stakeholders to ponder on its grave implications for the sector.

For a sector which thrives on confidence building and trust by the contributors on operators and regulatory agencies, what is needed is consolidation of the success stories in the industry.

An ad-hoc committee of the House of Representatives mandated to probe activities of the National Pension Commission (PenCom) since April 2017 has sent tongues wagging on the exact motives and end game of the investigation.

The Committee headed by Hon. E.J. Agbonayinma, had in a letter to the Acting Director General of PenCom, Aisha Umar, dated January 21, requested confidential information on the Contributory Pension Fund, leading to speculation in the industry on why legislators would request information that breaches the law.

In the letter titled: “Request for Information,” the committee asked PenCom to furnish it with sensitive information on its operations as well as the status of pension contributions in Retirement Savings Accounts, contrary to the provisions of the Pension Reform Act (PRA) 2014 which forbids the Commission and members of the Commission from disclosing such information.

Among the information requested by the legislative committee are “The Net Asset Values of the Contributory Pension Funds, details of supervision and regulations of Pension Fund Administrators and their key instructions and performances, compliances and defaults, annual pension operations of all the Pension Fund Administrators (i.e. details of amount collected from contributors and amount being paid out to retirees, from April 2017 till date).”

The Committee also requested for details of investment percentages and profits from the investment of pension funds, and details of the Federal Government contributions to the Federal Government bonds.

It also asked for the “contributions of retirement savings account holders to Pension Funds Administrators and details of payments from PenCom into the Treasury Single Accounts (TSA) and bank accounts details operated by the Commission” It also requested the PenCom to respond to the request urgently. Stakeholders are worried on the nature of the information that the probe may provide to the public. While some of them see nothing wrong in a probe, they are worried that sensitive and confidential information on the industry would be exposed to the public, stressing that the move may harm rather than help the industry and cause unnecessary anxiety among pension contributors in Nigeria.

Many industry stakeholders who spoke to reporters off-the-record on the planned investigation of PenCom by the House wondered why the lawmakers would ask the Commission to breach the pension law by divulging sensitive and confidential information about contributions of retirement savings account holders.

“Some of us are ready to sue PenCom if this confidential information is given out because it is an infringement on the right of the account holders as well as the business strategies of respective operator companies”, a senior staff of a PFA disclosed.

The source also hinted that the House of Reps probe is capable of causing ripples in the financial industry in Nigeria due to the huge amount of investments by pension funds in various sectors of the economy.

Meanwhile, there are no proofs whether PenCom intends to provide the information requested to the Committee or not. But a member of the Committee contacted said the Commission was yet to respond to their request.

More stakeholders speak

Former President, Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbu, said the information the legislators are asking for are confidential and not something that should be supplied immediately. He said that although the Reps have oversight functions over PenCom, but they may have to approach a court of law to be able to access the level of information being sought.

“The House of Reps have the right to demand such information from PenCom because it is within their constitutional right. But the sensitivity of the information demands caution on the part of the legislators in the interest of the economy and pension contributors,” he said.

Former Executive Director at Keystone Bank, Richard Obire, said he believed the recent report alleging that the Federal Government has borrowed more than its limit from PenCom may have triggered the legislators’ demand on the books of the agency.

“They want to have a good idea of what the funds ought to be and what they are but what they are asking for is a lot of information that will require the involvement of Pension Fund Administrators and PenCom,” he said.

Obire said the the demand for the information is also part of the legislators’ oversight functions, but said it might be difficult to unravel the agenda for the request.

“Election is this month and someone is asking for that level of information. How are we sure the information being demanded is for national interest or politically motivated? Any right-thinking person should know that there is something behind it,” he stated.

A source in one of PFAs who did not want to be quoted said PenCom is not expected to comply with the directive in the interest of the pension contributors and economy.

“I do not expect PenCom to comply. It is protected by law to keep contributors’ information and not disclose them to third parties. Just like a bank or telecom operator cannot disclose information of their customers or subscribers, PenCom is not expected to give out such information,” he said.

He added: “Our legislators have abused the concept of oversight. Although they have right over the law, but as it stands now, they do not have the time to do the work they are seeking on PenCom giving that this is election season. The public should enquire on what they need the information for”.

Continuing, the source said: “It is only the court of law that can order a bank or PenCom to release certain information about a customer or pension contributor. I believe there is no way PenCom will expose such sensitive data that it will not impact negatively on the economy”.

Pension funds’ investment

The PenCom has clarified that pension funds are not lent out but invested in Federal Government of Nigeria (FGN)  Bonds, Treasury Bills and other financial instruments yielding profit over time.

The funds which stood as at N8, 499,891.97 trillion as at November 2018 have depleted through borrowing to corporate entities, states among others.

Data from PenCom showed that the FGN Bonds gulped N4, 439,561.29 trillion, representing 52.23 per cent of the total amount, while investments in Treasury Bills amounted to N1, 685,453.27 trillion which is 19.83 per cent.

The total investments in FGN Bonds totaled N6, 162,999.71 trillion which is 72 per cent of the funds. Investment in domestic ordinary shares took N584, 321.06 or 6.87 per cent, while foreign ordinary shares got N60, 529.26 or 0.71 per cent.

N9, 407.22 or 0.11 per cent was invested in agency bonds, while N23, 919.32 or 0.26 went into Sukuk bonds. Also, Green bonds got N4, 658.60 or 0.05 per cent, as state government securities got N143, 841.37 or 1.69 per cent invested in it.

Similarly, corporate debts got N522, 511.51 or 6.15 per cent, corporate bonds got N515238.67 or 6.06 per cent investment, corporate infrastructural bonds got N7, 272.83 or 0.09 per cent and supra-national bonds got N6, 201.65 or 0.07 per cent investment.

Also,  N705,786.76 or 8.30 per cent was invested in local money market securities, bank placements got N636,987.62 or 7.49 per cent investment, just as N68,799.14 or 0.81 was invested in commercial papers.

It was further gathered that foreign money market securities got N2, 914.14 or 0.03 per cent, while N15, 765.26 or 0.19 per cent was invested in mutual funds.

Open/close-end funds, PenCom said, got N10, 256.36 or 0.12 per cent investment during the period, while REITs had N5, 508.90 or 0.06 percent and real estate properties got N226, 289.65 or 2.66 per cent investment among others.

The regulation on investment of pension fund assets prescribes allowable asset classes and investment limits for pension fund assets.

Commenting on the initiative, Acting Director-General PenCom Mrs. Aisha Dahir-Umar said to promote a stable and sustainable pension industry, the agency adopted zero-tolerance for non-compliance and consultative supervisory philosophy in the issuance of guidelines and the review of existing ones.

This, she said, was to further promote sound corporate governance in the industry and ensure the security of the pension assets.

”We believe this will promote better risk management in licensed pension operators,” she said.

The PecCom boss also said the commission released the framework and guidelines for the implementation of the micro-pension scheme in 2018.

“Similarly, circulars on pension enhancement and processing procedures of deceased benefits entitlement were also released by the commission.”

She further said monitoring and reporting of non-compliance remained part of the responsibilities of the compliance officers.

Other milestones by PenCom

PenCom has seen the  Retirement Savings Account (RSA) Multi-Fund Structure conceived by the commission to align with contributors’ risk appetite with their investment horizon, at each stage of their life cycle.

The RSA Multi-Fund Structure are to achieve optimum returns for contributors by aligning their pension savings with their individual risk/return profiles, provide investment portfolio choices to Contributors, and enhance safety of pension assets through adequate portfolio diversification, through increased investment in equities and alternative assets, such as infrastructure and private equity. We have recorded some successes so far.

As at December 31, 2018, the RSA Fund had been successfully split into four funds, while the sensitisation of RSA contributors is still ongoing to create awareness on the features of the RSA Multi-Fund Structure. At present, RSA contributors  now have the opportunity to choose a Fund that best suits their risk-return profile. I would say the challenges so far have been low public education and awareness. There is low public awareness of the workings and benefits of the  Contributory Pension Scheme (CPS).

Recovering Outstanding

Pension Contributions

The commission, in line with the provision of the PRA 2014, has developed a Framework for Recovery of Outstanding Pension Contributions with penalty for defaulting employers.

Based on the Framework, the commission has engaged recovery agents for continuous enrollment into the CPS and recovery of un-remitted pension contributions plus penalty from defaulting employers.

The recovery, which has been largely successful, has boosted the confidence of contributors and by extension encouraged non-participating employees and employers to embrace the Scheme. Through the initiative of recovery agent,  N15.31 billion representing a principal contribution of N7.85 billion and penalty of N7.46 billion have been recovered from defaulting employers.

Both the principal contributions and penalty have been credited into the workers’ RSA accounts. The penalty is meant to compensate for the income that would have been earned if the contributions were remitted as and when due. The commission is also prosecuting recalcitrant employers who fail to remit their employees’ pension contributions into their RSAs.  As at today, the commission has instituted legal actions against 167 recalcitrant employers. Of that number, 78 have opted to settle out of court, 34 judgments have been obtained and 23 are at different stages in the courts.

Besides, the commission has a fully functional Complaints Monitoring and Resolution Team, which attends to complaints on non/late/under-remittance of pension contributions into employees RSAs.