Stakeholders
say the growing pension funds should be properly channelled into areas
that can guarantee decent living standard for workers in retirement, NIKE POPOOLA writes
As of the end of May, the Contributory
Pension Scheme, which commenced in 2004, had generated funds in excess
of N4.3tn, making it the fastest growing funds in the economy.
While the law mandates the Pension Funds
Administrators to manage the funds and the Pension Fund Custodians to
keep the money, the whole essence of the checks and balances is to
ensure the safety of the funds.
The CPS is a pension system that is becoming very popular and is being embraced by different countries worldwide.
In some countries, the contributors are
allowed to borrow part of the funds for asset acquisition or used as
collateral for mortgage.
These funds, which are accumulated over
time and are available for a long term investment, had been used to
build and develop infrastructure in many countries.
Experts say there is a need for the
operators to increase the public awareness about their participation in
the scheme. They note that the more the contributors, the higher the
pension funds.
For instance, in Kenya, the sector had
been able to introduce more people into the pension scheme through the
mobile phone system.
They could be reached with messages from
the regulator and operators using mobile phones and their contributions
could also be collected drawing from the credits loaded on their phones
in collaboration with mobile telephone operators.
Experts are of the view that this system
can also be developed to accommodate individuals and artisans to save
for the future through the pension scheme.
Stakeholders who gathered at the recently
concluded World Pension Summit- Africa in Abuja underscored the
challenges of managing the growing Africa’s pensions, pointing out that
developing appropriate framework would guarantee sustainability and
national development.
The Acting Director-General, National
Pension Commission, Mrs. Chinelo Anohu-Amazu, said PenCom and other
relevant groups were concerned about the development of retirement
benefits into a veritable instrument of social change.
“We need systems that are relevant to the
fundamental needs of our continent, and which are dynamic enough to
initiate and also respond to developmental challenges facing the
continent in an increasingly interdependent global economy,” she said.
According to her, the existence of
pensions as an instrument of social redistribution is at the core of
contemporary national economies.
Anohu-Amazu said that the shift towards
contributory pensions was a collective resolve to invest a portion of
one’s current earnings, in order to have a more predictable and
prosperous retirement.
The success of the CPS, she noted, had
triggered an exponential growth in the pension funds and the size of
assets under management across the globe.
In Nigeria, she explained that the value
of the pension assets had grown from 1.47 per cent in 2006, to 9.57 per
cent in 2013 of the Gross Domestic Product.
According to Anohu-Amazu, as the
proportion of the retirement income provided by private pensions
continues to grow, the regulatory framework designed to protect those
funds becomes more crucial.
She stresses the need to institutionalise
a risk-based approach for the supervision and control of pension
markets across the continent.
This risk-based approach, she said, would
focus on the identification of potential risks faced by pension funds
and strengthen mechanisms that were in place to attenuate those risks.
“This ultimately allows the regulatory
agencies to channel their resources towards issues that pose the
greatest threats to the stability of the industry,” she said.
Anohu-Amazu also said infrastructure
development remained a key driver and a critical enabler of sustainable
growth in Africa and the current favourable economic landscape on the
continent provided a unique opportunity for the public and private
sectors to collectively address the infrastructure gaps.
Focusing on Africa’s infrastructure
challenges, she added it would help in creating the economic
pre-conditions needed for longer-term growth as well as foster poverty
alleviation.
The PenCom DG said disruptive market,
demographic, fiscal and environmental dynamics were fundamentally
reshaping Africa’s economic landscape.
“National governments must think of
infrastructure, not in the general but in the specific, understanding
the ways in which different infrastructure sectors such as
transportation, energy and water are governed, financed and sustainably
delivered,” she said.
Anohu-Amazu also said governments needed
to outline their priorities given their peculiar economies, competitive
advantages and infrastructure needs.
The Vice-President, Nigeria Labour
Congress, Mr. Issa Aremu, said it was important that stakeholders should
deploy pension assets in financing home ownership schemes for workers.
He also said this was one of the ways to deploy pension funds for the benefit of the contributors.
The NLC leader advocated that the pension assets should be used to provide houses for the contributors.
Aremu, therefore, urged the PFAs to deploy the pension assets in financing home ownership schemes for workers.
He said this was one of the ways to properly utilised the pension funds that would directly benefit the contributors.
The Chief Executive Officer, Retirement
Benefits Authority, Kenya, Edward Odundo, noted that houses were usually
expensive when mortgage institutions and other intermediaries built for
sale to workers.
According him, in Kenya, workers are allowed to borrow from their retirement savings to build houses.
He said the Kenyan example showed that
pension operators were not attracted to private equity and venture
capital, rather they tilted towards lending to workers for housing
purposes.
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