Nigerian Pensin System By Chinel Anhu-Amazu Directr General Natinal Pensin Cmmissin Nigeria
Outline Nigerian Pensin Scheme Institutinal Framewrk CPS at a Glance 2014 Refrms Why Fcus n Infrastructure? Impact f the CPS n the Nigerian Ecnmy Sustainability Strategy 2
Nigerian Pensin Scheme The System Emplyee driven based n individual Retirement Savings Accunt (RSA) Mandatry fr rganisatins with at least 3 emplyees Private Sectr Management Planned Withdrawal f Savings Prgrammed Withdrawal r Life Annuity Life Insurance Cver fr cases f death in active service Strng Regulatry Framewrk New Refrms Intrduced in 2014 The Regulatr Regulatins guided by internatinal best practices Cnsultative apprach in rule making Supervisry apprach is Risk Based Authrized markets and trading platfrms Investment limits & risk rating requirements Daily reprting and examinatin f investment activities Fit and Prper Persns requirements fr pensin funds management Strict crprate gvernance and disclsure requirements 3
Institutinal Framewrk PenCm PenCm Regulates & supervises all pensin matters in Nigeria Maintains database f all pensin matters Enfrce cmpliance, sanctins & penalties PFA/CPFA Registratin/Transfer f Cntributrs Administratin f RSA & Custmer Supprt Reprting t PenCm and Cntributrs Taking Investment Decisins Administratin f Retirement Benefits PFC Hlds pensin fund assets in safe custdy n trust Executes transactins and undertakes ther related activities n behalf f PFA PFA CPFA PFC PTAD PTAD Crdinates the activities f Pensin Offices/Bards in the Federal Public Service Emplyer Remits mnthly cntributins Emplyee Registers with a PFA f his/her chice 4
The CPS at a Glance Initially licensed 26 PFAs, 7 CPFAs and 5 PFCs Presently reduced t 21 PFAs, 7 CPFAs and 4 PFCs due t mergers and acquisitins Number f registered cntributrs was 7.13 millin as at June 2016 This represents abut 11.43% f ttal labr frce in Nigeria and 3.95% f ttal ppulatin The grwth trajectry f the pensin fund shwed a mvement frm abut $15 billin deficit in June, 2004 t abut $27 billin in assets under management as at the end f 2015 An unprecedented grwth f ver 300% within a decade Average mnthly inflw f $200 millin Average annual grwth f 20% 26 States f the Federatin had adpted the scheme and are at different stages f implementatin while the remaining 10 States are at bill stage At least 200,000 private sectr emplyers f labur are implementing the CPS Over 145,000 had retired under the Scheme as at June 2016 and are currently receiving pensins as and when due 5
Dmestic Ordinary Shares Freign Ordinary Shares FGN Securities State Gvt. Securities Crprate Debt Securities Lcal Mney Market Securities Freign Mney Market Securities Open/Clse-end Funds Real Estate Prperty Supranatinal Bnds Private Equity Funds Infrastructure Funds Cash & Other Assets 2011 Pensin Assets ($ Billin) 2012 2013 2014 2015 CPS at a Glance: Prtfli f Nigerian Pensin Funds Value f ttal prtfli grew frm 1.4% f GDP in 2006 t 7% in 2010 and was estimated at abut 5.58% f the rebased Nigerian GDP as at 31 December, 2015 20 18 16 14 12 10 8 6 4 2 0 Asset Classes 6
2014 Refrms: New Initiatives Cnsistently Achieve Excellence in Service Delivery The Cmmissin is targeting 70% cntributrs and retirees satisfactin level acrss all dimensins f service Payments f retirement benefits within 24 hurs frm date f applicatin, with a target f 90% f all cases Drive Inclusive & Expanded Cverage Target 20 millin cntributrs by 2019 The Cmmissin has cmmenced engaging all relevant stakehlders t ensure the target is achieved Deliver Lw Cst & Efficiency Emphasis is being given t reducing the cst f peratins f the Industry Industry is wrking n shared services platfrm in nn-cmpetitin areas t enhance industry capacity and reduce csts f peratins Achieve Psitive Real returns & Visible Impact n the Ecnmy The Cmmissin has utlined several strategies t drive the grwth f the Pensin Fund Asset t a minimum size f 10 percent f the Nigerian GDP by 2019 Finished wrk n plicy dcument t intrduce Multi-fund structure t allw the funds make measurable impact n the Nigerian ecnmy thrugh infrastructure and husing develpment Build Human Capital & Capability T realise all the initiatives in the key pririty areas, the industry is wrking t build the required human capital, cmpetencies and experiences Wrk is nging t intrduce pensin educatin as a curriculum item frm primary schls right up t tertiary institutins 7
2014 Refrms: New Initiatives Extending Cverage with Emphasis n: States and Lcal Gvernments Infrmal Sectr Micr Pensin Plan Designed t cver the SMEs, self-emplyed and infrmal sectr Already engaged Trade Unins and Assciatins Creating awareness and engaged in sensitizatin Wrking ut the relevant technlgy Champining the initiative t create instruments that wuld allw pensin fund investments make visible impact n the ecnmy Special fcus n Infrastructure and Husing as nly 5.4% f the ttal allcatin t infrastructure financing was utilized as at December 2015 Largely due t nn-availability f investment instruments that meet the requirements fr pensin fund investments Industry ready t supprt develpment f such instruments as part f ur crprate and industry strategies Engagement with relevant stakehlders t supprt the Gvernment s pwer refrms by investing in pwer infrastructure 8
2014 Refrms: New Initiatives Intrduced Pensin Prtectin Fund (PPF) T be funded by: Annual Subventin f 1% f mnthly wage f FGN emplyees Annual Levy n PenCm and Pensin Operatrs Incme frm investment f the fund Utilizatin f PPF Funding f Minimum Pensin Guarantee (MPG) Cmpensatin fr shrtfall r financial lsses frm investment activities Any ther eligible purpse RSA Balance t secure Residential Mrtgage: Subject t Guidelines a percentage f RSA balance may be applied fr payment f Equity Cntributin fr residential mrtgage Pensin Fund Investment Incme nw tax exempt Bard f the Cmmissin was expanded t include Trade Unin Cngress, Nigeria Stck Exchange and Natinal Insurance Cmmissin The Bard reprts directly t the President f the Federal Republic f Nigeria Cnflict f interest issues nw heavily sanctined 9
Why Fcus n Infrastructure? Estimated requirement fr infrastructure develpment in Nigeria ver the next 10 years is ver $100bn n p0wer, rads, railway, bridges and seaprts Husing deficit requires apprximately $228 billin t address Several prmising prjects currently nging including the Abuja and Lags light rails There is stability in the demcratic prcesses with imprved electins and smth transitin f Gvernments Urgent need fr ecnmic diversificatin ccasined by decline in il prices, which heightened the clamur fr investment in infrastructure t fully explit ther surces f incme Existing favurable demgraphics abut 60% f Nigeria s ppulatin f ver 170 are under the age f 30 years Due t the rising imprtance f pensin investments in ecnmic develpment, the plicy n pensin refrm has been sustained by fur successive Gvernments 10
Impact f the CPS n the Nigerian Ecnmy The CPS has facilitated the develpment f: Crprate bnd market Insurance market Grup Life Insurance Life Annuities Alternative asset classes Currently prmting c-investing frm the diaspra Mrtgage market Nigeria Mrtgage Refinancing Cmpany s $254 millin bnd Prvides fr a prtin f the pensin funds in an RSA t be utilized as equity cntributin fr payment f residential mrtgage fr primary hme Crprate gvernance in cmpanies where pensin funds have been invested Rating Agencies 11
Expanded Cverage f the CPS t the underserved Infrmal Sectr thrugh the Micr Pensin Initiative Nigerian Pensin Funds t incrprate Envirnmental, Scial and Gvernance principles in investment decisins Implementatin f Multiple funds t: Bst develpmental investments Allw cntributrs make chices n hw their pensin cntributins shuld be invested Imprved Service Delivery T leverage n Technlgy T establish shared services fr efficiency Prvided a platfrm fr prmtin f CPS acrss Africa thrugh the Wrld Pensin Summit Africa Special and the African Pensin Awards Sustainability Strategy f the Pensin Refrm This year s summit is scheduled fr September 27 28 at Abuja 12
Thank yu 13