Speaking the mind of other pension fund operators, the Chief Executive Officer of Stanbic IBTC Pension Managers Limited, Dr. Demola Sogunle, said they cannot help retirees under the rested schemes. He also said raising the limit of pension funds that could be invested in stocks and bond may not even make any difference at the end of the day. He spoke with Nnamdi Duru

Looking back from when the contributory pension scheme was introduced in the country, how would you describe the scheme and what is the selling point?

So far, it has done quite well although there is always room for further development. The last eight years have been interesting and we have seen the industry grow from zero to about N3 trillion worth of asset under management. We will see more growth in the near future as the confidence level of the general public continues to increase and with the scheme being extended to the informal sector.

With regard to the selling point of the contributory pension scheme (CPS), I would say that the three 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 (RSA) 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. Regarding safety of the funds, the client is assured of capital preservation. The client is also assured of receiving his retirement benefits when due.

How many workers in the informal sector have Retirement Savings Accounts (RSA) and why?

Currently, the contributory pension scheme doesn't cover individuals in the informal sector. PenCom however recognises the need for this and is currently working on the review of the guidelines that will govern the inclusion of this sector of the economy into the scheme. Once this is done, we intend to be at the forefront of registering the individuals in this sector.

Can you truly assure stakeholders that the new scheme, 30 years down the line, will not succumb to the same problems experienced in the old scheme?

In view of the in-built control mechanisms including separation of roles and very tight regulatory oversight, we can confidently say that the scheme 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 (PFCs) 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, 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.

Is it possible for people who retired under the old scheme to be brought under the new scheme and what can operators do to hasten the process of absorption?

While it would be desirous for the old defined benefit scheme to be migrated to the new scheme, we have to understand that both schemes are operating under two very different regulatory jurisdictions and as such cannot be easily merged.

In addition to the different jurisdictions, there are operational issues to consider in merging both schemes such as funding to cover the huge arrears (pension deficits) as well as monthly pensions for the retirees under the old defined benefit scheme; capturing of all relevant details of the existing retirees under the old schemes and the actuarial valuation of the old schemes.

PFAs, being under a separate jurisdiction, cannot effectively hasten this process. What we can do however is to ensure preparedness for such a time as when the migration will be effected, offer our support and give advice where necessary.

Over 15,000 employers are not remitting their employees' contributions while many more are not remitting as at when due. What is the impact of this on the final pension of retirees and how can stakeholders change this situation?

The monthly pension contributions are deductions made on behalf of the employees and remitted into their RSAs. PFAs invest this on behalf of the RSA holders and what the client views at any given day is the contributions plus any investment income which has accrued on the money contributed. It is this amount that the client is able to access upon retirement.

The Pension Reform Act, 2004 however, imposes a penalty of interest payment for all late remittances on defaulting employers. This is meant to mitigate the effect of the time value of money.

Employees whose monthly deductions are not being remitted to their PFAs can be proactive by reporting their erring employers to PenCom. This can be done through letters or emails. The details with respect to where complaints can be made are available on PenCom's website.

In addition, PFAs go the extra mile to report employers who have stopped remitting monthly pensions on behalf of their staff to PenCom on a regular basis.

PenCom has also engaged the services of recovery agents who are going after defaulting employers to ensure that they make good on the remittance of pensions on behalf of their employees. The duties of these agents include enforcing the scheme on defaulting employers by ensuring that remittances are made to the PFAs on behalf of the employees.

What is the level of compliance with the provisions of the Pension Act in both private and public sectors?

I believe that the regulators would be in a better and more informed position to respond to this question. However, from what we have observed, the level of compliance in the public sector is quite high as most of the ministries, departments and agencies (MDAs) have their staff members already registered on the scheme. For the organised private sector, the level of compliance is encouraging although there is a lot of room for improvement.

PenCom may soon review the limit on pension funds invested in equities and infrastructure development. How do you see this working out to the advantage of the contributors?

Whilst pension fund belong to contributors and the investment horizon is medium to long term, we typically seek to achieve reasonable risk-adjusted returns for them and so we will be chasing investment opportunities that guarantee optimal returns. Where the stock market can satisfy this objective, PFAs will be encouraged to invest.

Some key considerations for PFAs aside from strong financials are the issues of corporate governance and quality of management of listed companies. Thus, increasing the bar in itself will not automatically translate to increased investments in the equities market.

Pension funds are also allowed to invest in infrastructure either through infrastructure funds or infrastructure bonds. However, despite the allocated limit to this asset class, investment by PFAs is presently very low because of lack of eligible instruments. Therefore, raising the bar is not the problem but availability of eligible investment propositions.

What is your take on the agitation for the investment of pension assets in infrastructure?

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 it 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 PFAs to invest in this asset class but with a well-guided approach and caution for many obvious reasons.

How is Stanbic IBTC Pension different from other PFAs and what initiatives are your organisation introducing to move the industry forward?

We are constantly at the forefront of new initiatives aimed at developing the industry. We are also actively involved in the activities of Pension Fund Operators of Nigeria (PenOp) and we engage the regulators on innovative ideas aimed at moving the industry forward.

Stanbic IBTC Pensions is unique because it is part of a strong, reputable financial institution and is a member of the 150 year-old Standard Bank group. In addition, Stanbic IBTC group has over two decades of experience in the efficient management and administration of wealth for several companies and individuals. We are available to service our clients in multiple locations in every state of the federation and our customers can easily access their accounts via several service channels like the internet, telephone, e-mail and SMS.

We are transparent in every aspect of our business; with transaction notifications on all contributions, quarterly statements and with our quarterly pension notes and newsletters. We make it easy for our customers to understand everything that affects their accounts with us as we position ourselves to be the nation's foremost pension solution provider.

Hence, apart from the provision of the widest customer accessibility with over 210 branches nationwide, our uniqueness is also reflected in the safety of funds under our management; a high degree of liquidity in our assets; reasonable investment return over medium and long term and a robust risk management framework.

Stanbic IBTC Pensions crossed the one millionth customer mark recently, what is the implication of this milestone given that one million is not significant when compared to the over 50 million working people in Nigeria?

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.

Personally, I feel honoured to be leading the team in such a reputable organisation as Stanbic IBTC Pensions 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.

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 8 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 the average Nigerian on the other hand are enormous.

The National Pension Commission (PenCom) is currently reviewing the guidelines which will govern the inclusion of this set of people into the contributory pension scheme (CPS). By the second quarter of the year, we should see some progress in this area. Our Pension business, on the other hand, 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 scheme. We believe that continued awareness of the scheme will also go a long way in getting more people on-board.

What difference has the customer contact centre and other information technology initiatives which you introduced recently made in the system?

Our multi-lingual 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 as 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 build confidence in our business and in the pension industry as a whole.

Some of these initiatives make things easier goes without saying. Most people today (our customers inclusive) desire convenience in their everyday engagements and interactions and this is one key feature of most IT-driven innovations. In the course of our various customer interactions it is clear that many of our customers desire convenience in accessing information about their pension and that is why we have put in place a number of alternative communication channels through which customers can access such information at their convenience.

Such channels include our SMS short code service, RSA-ATM service which allows customers to access information about their pensions on any Stanbic IBTC Bank ATM nationwide and of course our website which can be accessed even on mobile devices. At Stanbic IBTC Pensions, our decision to leverage our services through these technology platforms is in keeping with our commitment to helping our customers retire well.

What are your expectations in the medium to long term, for Stanbic IBTC Pensions and the industry in general?

In the medium to long term, our expectations is that or company would remain the leaders in the industry in terms of safety of funds, risk adjusted returns and quality of service.

We expect the pension industry in Nigeria to have tripled in size in the next 5 to 10 years especially as the plans to extend the reach of the scheme 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 for the 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.