With over 5.2 million registered Retirement Savings Account, RSA, holders and 200,000 retirees under the Contributory Pension Scheme, CPS, Pension Fund Operators, PenOp, in this interview, are of the opinion that the recapitalisation exercise that ended last year has strengthened the industry.
State of the pension industry after recapitalisation
Dave Uduanu, Chairman, PenOp: Regarding recapitalisation, you will notice that a lot of the 'medium to big' PFAs already had close to N1billion before the recapitalisation programme was announced. They didn't need to bring in a whole lot of money, which is why you don't see that a lot of things have changed; even though the law and the guideline stipulated N150 million, a lot of PFAs were already capitalised to over N800 million or N1 billion or more and they anticipated that there will be increase in capital.
So the PFAs that control at least 90 per cent of the market did not see material inflow by way of new share capital. Now the pension business is not about brick and mortar, unlike banks where everyday people go and withdraw money. The more electronic payment channels are developing, the fewer branches we are going to have because pension is not money that you need for day to day living. So, the transactional aspect of the business is much lower than in banking, therefore the need for brick and mortar is not as high as banking.
The pension funds also have distribution network through the custodians. So if you are with First Bank or with UBA or with Zenith, you have opportunity to have your pension desk in these branches. However, PFAs are putting brick and mortar in some of the more remote locations.
In Nigeria, there are six geo political zones and most people look at it and say 'ok we are really sure of this geo political zone where the commercial capital is or where we have the most customers, so I will put in a location.' Pension funds that are owned by banks ride on their parent company network.
So don't look for the brick and mortar, look for quality of service, customer contact point, it could be call centres, cell phones, or e-mails that will resolve problems. Even the banking industry is moving from brick and mortar, the world is moving away from brick and mortar to electronic payment channels.
What I believe will drive employment level in the PFAs is when the informal sector opens up. You can't say, 'now I have N1 billion, let me go and hire people.' Employment is driven by business needs and business needs is driven by the opening up of the market and the size of the market.
So I think that the recapitalisation has made PFAs to be stronger entities, it has also made them to invest in the things that you don't see like risk management systems, and quality of people. Overall, the industry is better off because of the recapitalisation.
Misibau Yola, MD, Legacy Pensions: Whenever branches are mentioned in the financial services industry, it's the banking perspective that is usually on our minds. For pension, remittances are made by employers; they are not even by individuals. What you find is that as the number of retirees' increases, you are going to have the likelihood of more physical branches opening.
Now what we have is 5.2 million registered RSA holders or probably less than 200,000 retirees. It is a small number because it is the retirees that you actually sit with a lot of the time. I believe that as the number of retirees increases we will see more branches. But as it is now, I for example, I have UBA, as my custodian, all over Nigeria, in any UBA office; people will sit there and interact with customers. So you will see the number of branches increase as the size of RSA grows.
Idu Okwuosa, Stanbic/IBTC Pensions: There is also a guideline from PenCom based on the number of RSAs you have, you must have an office in the state. So if you have a certain number of RSAs you have to have an office in that state.
When the transfer window will become operational
Ronke Adedeji, Leadway Pensions: On the issue of transfer window, a lot of work is being done to date. The transfer window is quite a complex exercise, on the face, it always appears very simple. People always say, 'I want to change my PFA and move from A to B,' but its complex from the perspective that when you are moving an account from one PFA to another certain processes need to take place and the major one is the identification process.
We want to make sure that when you are transferring account from one entity to the other, you are transferring correctly and that you are not transferring somebody else's account simply because they have common names. So the issue of biometrics is very key.
As such, the identification process to ensure that the transfer is secure and correct has to take place. In Nigeria, we really haven't sorted out identification, but in more developed parts of the world, identification is quite simple and straightforward. So a major criterion for us is biometrics.
There are various initiatives going on regarding biometrics. The federal government has an initiative, the banking sector has an initiative, and we are also looking at it and at the end of the day, we want to come out with a process that will ensure that it is comprehensive, effective and cost effective.
So it's a large exercise in terms of getting the biometrics right, but that is even a part of the whole thing. There is also the software and the data bank process from the National Pension Commission, PenCom's perspective. So there are still a lot of issues that we are trying to sort out. We are working hard on the biometrics, to sort out software, databank issues. We may end up doing collaboration between the PFAs; we may look at other stakeholders such as federal government and the banks to work with so that the process can be complete and effective.
Accessing 25 per cent of retirement contribution
Yola: As a contributor to the CPS, be reminded that it is six months after you had lost your job that you can access 25 per cent of your pension contribution. If you resigned by yourself, the law does not allow you to have access to that 25 per cent. The objective is to make it look like some insurance benefit if you lose your job.
The truth is that you didn't plan to lose your job, so the 25 per cent payment will help you until you get another job. If you resigned on your own, presumable, you had other plans like going to self-employment, or you want to set up your own newspaper, there wont be any 25 per cent initial payment for you. The law states that it is only when you lose your job and you have stayed out of employment for six months, then you can take 25 per cent while you are looking for another job. So when you get another job, you continue with your pension contribution.
Appointing a substantive board for PenCom
Uduanu: It is the duty of the federal government to appoint a substantive board for PenCom. Clearly you don't want a vacuum in any organisation whether it is a regulator, parastatal or even government itself. The government has not appointed a permanent board for PenCom, however, there is an acting Director General and I will say that there is high level of continuity in PenCom because of the way PenCom is run.
It is very consultative giving that everything and anything that is done, the regulators deliberate with the operators. So they just don't wake up and issue guideline or make amendments to regulation without carrying the operators along.
PenOp is also strong and is getting stronger and is the voice of the industry and serves as a bridge between the regulator and the industry. Whilst we have desired that there will be no vacuum anywhere, we are mindful of the fact that government is always government and I believe that they will appoint a substantive board for PenCom very soon.
We are working with the acting DG and they are people we are very familiar with and there is a high level of continuity. Substantially, it is not affecting the management of pension funds or what we plan to do with the funds. If there is a new leadership in PenCom, as with all new leaderships, they will take the plans and all the guidelines and bring their own experiences and views to the table and we discuss. If their views are consistent with the progress that is being chart for the industry, they will be implemented, otherwise, it will be difficult for somebody to come to PenCom today and change things completely.