Concerns over proposed pension funds investment

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The plan by the Federal Government to invest N2 trillion out of the current N10 trillion available pension fund in developing infrastructure, through the creation of products that Pension Fund Administrators (PFA) would be attracted to invest in is unsettling for the stakeholders, writes RUKAYAT ADEYEMI.

 

Reactions ranging from worries to expectations have continued to trail the plan by the Federal Government to utilise N2 trillion of the current N10 trillion available pension fund in developing infrastructure, through the creation of products that Pension Fund Administrators (PFA) would be attracted to invest in.

The government plan was aimed at improving infrastructure such as railway, road and electricity, among others, while also creating opportunities of investment for the PFAs.

Following the proposed action, stakeholders, especially pensioners and several labour unions, have insisted that the government should hands off the pension fund in line with the law that established the Contributory Pension Scheme (CPS).

This resulted from fear of returning the payment of retirees’ entitlement to the messy situation that existed during the defunct Defined-benefit Pension Scheme (DPS).

Senator Ibrahim Shekarau, the Chairman of the Senate Committee on Establishment and Public Service said in December last year that the Federal Government owed retirees an accrued pension fund of over N400 billion.

Concerns over proposed pension funds investment
Aderonke Adedeji

Mrs Aderonke Adedeji, President, PenOp, however, said the proposal by the government was for the pension funds to be invested in instruments and securities.

Adedeji said the proposal was in tandem with what was being done with the Federal Government’s bonds and treasury bills that the PFAs currently invest in.

“The major difference in this case is that the proceeds will be used specifically for infrastructure.

“We believe that the Federal Government has a name and credit rating to protect.

“A default on their obligation to investors will be extremely damaging to the government and the economy as a whole, both locally and internationally,” she said.

According to her, the plan, when implemented, will be to the benefit all.

Adedeji noted that every individual under the CPS since its establishment has a Retirement Savings Account (RSA) and knows how much he or she has in the account.

She said investment by the PFAs, according to the law, will not deter payment of their accrued rights as and when due.

“We must all fight to ensure things remain this way,” she said.

The PenOp’s President further explained that since the PFAs were already investing in government’s securities, which had been successful, the plan to invest in infrastructure would not affect the industry or pensioners negatively.

Adedeji said that government, with help from the industry, must work out modalities that will ensure that the infrastructure investments are safe.

She said the government must also follow the investment guidelines laid down by National Pension Commission (PENCOM) and provide decent returns for the pension funds, and ultimately the contributors and retirees.

On the backlog of over N400 billion accrued pension fund owed by the Federal Government, Adedeji said it related to the pension liabilities that the Federal Government had before the reforms that culminated in the Pension reform Act of 2004.

“The Act states that those employees in the public service of the federation who had accrued pensions before the enactment of the law will have the Federal Government’s retirement bonds in the amount they are being owed issued to them by the Debt Management Office (DMO).

“The Act further stated that the debts will be funded by the Federal Government and paid into a redemption fund not less than five per cent of the total monthly wage bill payable to employees in the public service of the federation,” she said.

According to her, it appears that the funding has not been sufficient, and that is why there is a backlog.

Adedeji said the government had claimed to have earmarked some amount in this year’s budget to redeem part of the liability, which is a good start.

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She urged the government to ensure that the entire outstanding is cleared quickly and also return to the days when accrued rights were credited to RSAs within a month or two following retirement.

“In addition, the government can explore the payment of this accrued rights through a one-time bond issue,” she said.

A retiree of the Nigeria Building and Road Research Institute (NBRRI), Mr Mark Ogbonna, said it is not a bad idea for government to borrow from the idle pension funds if there was sincerity of purpose with the plan and implementation.

“The problem with the government is sincerity of purpose.

” We are aware that there is a lot of  idle pension fund and there is nothing bad if the government borrows the money and invests it, as it is expected to be for the good of us all,” he said.

According to him, the apprehension of the pensioners and their demand that the fund should be left untouched, so that beneficiaries can have access to them as and when due, is due to the fear of uncertainty.

Ogbonna, however, urged the Federal Government to pay up the accrued pension fund it owed the pensioners because the increment in the minimum wage which automatically affects the pensioners was already accruing.

In an article posted on the Twitter handle of PenCom, Mr Ivor Takor, Director, Centre for Pension Right Advocacy, praised the government for setting up a committee that is currently studying and working out modalities of how a huge sum of the pension fund can be invested in infrastructure.

“To us at the Centre, we see the development as a welcome one because the law and guidelines for investment of pension fund makes provision for investment in infrastructure,” he said.

Takor said the government must, however, carry along critical stakeholders in the industry, especially workers who are the owners of the fund, through their representatives, industrial unions, the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC).

He said: “It should be noted that their understanding and buy-in in such huge investment is extremely important.

“This is because PFAs who are businesses have the interest of their shareholders first and other people or individuals are secondary, while trade unions have the interest and welfare of their members as their principal objective, as this is reason that they are established.”

According to him, the Pension law does not confer on the federal or state governments, the power to decree or order how the funds in private individuals’ Retirement Account should be invested.

Takor said the government could only negotiate the terms and conditions under which they are ready to do business with those who have legal ownership and power to invest the fund.

 

  • Rukayat Adeyemi is of the News Agency of Nigeria (NAN)