Director General’s Report in PenCom 2021 Annual Report

The 2021 Annual Report of the Commission encapsulates details of significant milestones achieved by the Commission in pursuit of its mandate of regulating and supervising the Nigeria Pension Industry.

I am particularly pleased to note that the Commission has continued to consolidate on the gains of the past and focused on ensuring long-term value creation for all stakeholders.

The Commission has remained steadily committed to delivering regulatory and supervisory excellence in the industry, through the implementation of its corporate strategic objectives in spite of the many challenges encountered by the industry. I am however confident that the Commission will consistently pursue innovative and exciting opportunities to respond to the challenges of supervising and regulating the pension industry.

In evaluating our full-year performance, it is important to provide an overview of our operating environment with particular emphasis on the macro-economic indices.

Review of Operating Environment

Following the containment of the Covid-19 pandemic and eventual relaxation of the non-pharmaceutical interventions, the Nigeria Gross Domestic Product grew at 3.4% in 2021. This was largely driven by the non-oil sector, which contributed 92.76%, while the oil sector recorded 7.24%.

Furthermore, the Central Bank of Nigeria (CBN) sustained its various monetary and fiscal interventions aimed at reversing the negative impact of the Covid-19 induced contraction. Specifically, the CBN injected a total of N311 billion to finance interventions in the agricultural and manufacturing sectors of the economy, in addition to the N498 billion released to Households and Small and Medium Enterprises (SMEs). These monetary stimulus packages energized the real sector and bolstered demand for goods and services.

However, it also triggered inflation with an average rate at 17.0% in 2021. Although exchange rate remained relatively stable for most of the year, it gradually depreciated to N415.00/$ in the second half of 2021 and closed at N435.00/$ on the last business day of the year. Despite this depreciation, Nigeria’s External Reserves grew to $40.5billion in 2021. Although the Nigerian economy maintained its recovery stance through the extensive use of monetary and fiscal mechanisms, the growth rate was somewhat slow.

The Pension Industry

The industry remained focused on the resolution of the challenges of outstanding pension liabilities of the Federal Government under the CPS, expansion of coverage of the CPS to the informal sector and the sub-national governments and the diversification of Pension Fund Investment. Other focus areas included the drive to improve the quality of customer service delivery, enhancement of operational capacity of the regulator/operators’ workforce and the re-invigoration of the Commission’s public enlightenment and education initiatives.

The year under review was quite challenging, but indeed, pivotal in many regards. The Pension Industry was confronted with several intrigues to subvert the provisions of the PRA 2014, with the aggressive push for exemption of the officers and men of the Nigeria Police Force from the Contributory Pension Scheme. At the same time, a Bill was introduced in the lower house of the National Assembly seeking to peg lumpsum payable to RSA holders upon retirement at 75% of total RSA balance and to criminalize delay in payment of benefits. Although the Commission vehemently defended these unguided attempts by providing pragmatic and superior arguments, these attempts, nonetheless, revealed the need for the Commission to increasingly pursue opportunities that holistically address the huge knowledge gap about the underlining tenets of the CPS.

Despite the global economic challenges posed by the macro-economic trend, the Nigerian Pension Industry recorded significant achievements in the area of Schemes’ membership. As at 31 December 2021, the total membership of the various pension Schemes increased by 3.39%, from 9,271,665 to 9,586,291. This was dominated by the membership of the RSA Funds with a total of 9,529,127 representing 99.40%, while the AES and the CPFAs accounted for the balance of 0.60% made up of 40,951 and 16,213 members, respectively. The growth was attributed to a number of factors, which included the increase in the level of compliance by the public and private sector employers as a result of the various steps taken by the Commission to improve compliance and coverage as well as enhanced market penetration and strategies deployed by the PFAs.

In addition, there was the growing acceptance of the Micro Pension Plan by the informal sector, which recorded a total membership count of 73,691. This growth momentum is expected to continue in the light of the increasing adoption of the CPS by many States and Local Governments, as well as the steady uptake of the Micro Pension Plan by workers in the informal sector.

In terms of net Pension Assets under Management (AuM), the industry recorded a growth rate of 8.85% from N12.31 trillion as at fourth quarter 2020 to N13.42 trillion in the corresponding period of 2021. The Pension fund assets were predominantly invested in FGN securities (Bonds and Treasury Bills), while the remaining assets were invested in other asset classes such as States Government Bonds, Ordinary Shares, Corporate Debt Securities, Local Money Market Instruments, Supranational Bonds, Mutual Funds, Infrastructure Funds and Private Equity Funds. The Pension funds were invested in structured infrastructure projects that met the stringent requirements as enshrined in the Regulation for the Investment of Pension Fund Assets.

As at 31 December 2021, N8.77 trillion, representing 65.35% of the AuM, was invested in Federal Government Securities. Out of that amount, pension funds directly invested N118.31 billion in the Sukuk Bond issued by the Federal Government to finance road projects nationwide. Furthermore, pension funds were invested in FGN Green Bond to the tune of N59.32 billion, while N14.30 billion was invested in Agency Bonds issued by the Nigeria Mortgage Refinance Company.

It is pertinent to note that all investments of pension funds by the Pension Fund Administrators (PFAs) are made in accordance with guidelines and regulations issued by the Commission and guided by the primary objectives of safety and maintenance of fair returns.

Perhaps the most significant development in the Pension Industry in 2021 was the successful reduction of outstanding pension liabilities of the Federal Government under the CPS. The Commission obtained Presidential approval for the sum of N159.46 billion to defray some aspects of outstanding pension liabilities of the Federal Government under the CPS. Consequently, the sum of N40.55 billion, being the outstanding accrued rights of 6,282 retirees and 2,329 deceased employees, was paid during the year. In the same vein, the sum of N66.83 billion was remitted into the RSAs of 85,743 retirees and 693,229 active employees, being the 2.5% shortfall in the rate of employer pension contributions as at 31st December 2021. The balance of N52.08 billion was processed in the 2022 financial year. In addition, the Federal Government continued to fund the Retirement Benefits Bond Redemption Fund (RBBRF) Account. With the release of N100.29 billion for the payment of accrued rights to retirees of Treasury Funded MDAs, this brought the total amount released by the Federal Government into the RBBRF Account, from inception to 31 December 2021, to N980.18 billion.

In keeping with the Commission’s focus on improved service delivery in the industry and the need to eliminate the challenges hitherto encountered by our teeming stakeholders during the annual verification exercise, the Commission deployed the Online Enrolment Application on 1 September 2021. It is worthy of note that from the commencement of the 2021 online enrolment exercise, a total of 357 MDAs had uploaded the data of 10,584 retirees on the Application. Out of the 10,584 uploaded data, 6,937 retirees had successfully registered on the Application, while the PFAs had verified and enrolled 6,266 retirees as at 31 December 2021.

Regulatory and Supervisory Framework

The Commission continued to regulate and supervise the Nigerian pension industry in a transparent and consultative manner through the instrumentality of on-site/special examinations, as well as off-site surveillance and analysis of all Pension Fund Operators (PFOs). Specifically, the Commission monitored the activities of the Pension Fund Operators and conducted routine inspection of States’ Pension Bureaux to ascertain the level of implementation of the CPS, as well as the administration of the Defined Benefits Schemes (DBS) in the States and the FCT.

I am glad to report that the off-site reviews of the thirty-two (32) PFOs indicated that they substantially met all the thresholds set out in extant regulations and guidelines issued by the Commission. Nonetheless, a number of areas of concern were noted and are currently being addressed.

The industry, during the review period, witnessed a number of mergers and acquisitions. The Commission granted approvals to some PFAs to proceed with merger or acquisition of other PFAs. Highlights of the mergers and acquisitions consummated during the year included the acquisition of 100% shareholding of AXA Mansard Pensions Limited by Eustacia Limited and others. Further approval was granted for the change of name of the PFA from AXA Mansard Pensions Limited to Tangerine Pensions Limited.

Similarly, Tangerine Pensions Limited merged with APT Pension Funds Managers Limited to birth a new entity. Also, Guaranty Trust Holding Company Plc acquired 100% shareholding of Investment One Pension Managers Limited, while FCMB Pensions Limited completed the next phase of the acquisition of 60% shareholding of AIICO Pension Managers Limited.

Regarding compliance and enforcement activities, the Commission continued to deploy various administrative and legal means to ensure that public and private sector institutions complied substantially with the provisions of the PRA 2014. During the year under review, the Commission processed and issued Pension Clearance Certificates (PCCs) to 25,841 private companies. Available records confirmed that the sum of N106 billion was remitted into the RSAs of 364,021 employees by the 25,841 companies that were issued the PCCs.

On the other hand, the ongoing recovery of outstanding pension contributions and penalty from defaulting employers recorded positive results as the Commission’s appointed Recovery Agents successfully recovered the sum of N2.55 billion from 120 defaulting employers. The amounts recovered had since been credited to the respective RSAs of the employees of the affected employers. In the same vein, the Commission continued to take legal steps to recover pension contributions. The Recovery Agents recovered outstanding pension contributions from sixty-seven (67) defaulting employers that failed to remit.

The status of implementation of the CPS in States and the FCT, as at 31 December 2021, remained largely un-changed as a total of twenty-five (25) States of the Federation had enacted pension laws on the CPS, seven (7) States were still at the bill stage while five (5) States were operating other pension Schemes. Out of the five operating other Schemes, four (4) States adopted the Contributory Defined Benefits Scheme (CDBS), while one (1) operated the Defined Benefits Scheme (DBS).

In furtherance of the Commission’s supervisory mandate, off-site supervision of States Pension Bureaux were conducted in seven (7) States to determine the level of compliance with the remittance of pension contributions under the CPS, payment of accrued rights, the receipt and utilization of administration fees, as well as payment of pensions under the Defined Benefit Scheme. The Commission continued to engage the States with a view to address some notable gaps in the implementation of the pension reforms.

Future Outlook

In the coming year, we expect the Federal Government to sustain the efficiency of Nigeria’s fiscal policy by ensuring that the budget cycle remains within the stipulated time frame. The expansionary nature of the N17.09 trillion 2022 budget premised on expected improvements in revenues, particularly crude oil prices and stronger economic growth is expected to positively impact the growth of Pension Fund Assets.

It is our earnest expectation that the Pension Industry will continue to thrive, sustain the growth trajectory across memberships of pension schemes, pension contributions and AuM. This is particularly anticipated in the wake of the deployment of automation to enhance operational efficiency and increased drive to expand coverage of the CPS across the public and private sector organizations.

Aisha Dahir-Umar
Director-General National Pension Commission (PenCom)

Checkout PensionNigeria breakdown of important aspects of the PenCom 2021 Annual Report

PenCom 2021 Annual Report Breakdown

Chairman’s Statement in PenCom 2021 Annual Report
Director General’s Report in PenCom 2021 Annual Report
Analysis of Pension Operating Environment for the Year 2021
Micro Pension Registrations per PFA as at Dec 2021 and Fastest Growing PFAs by Micro Pension Registrations
Update on the Micro Pension Plan for Year 2021
N93.49 Billion Pension Contributions not in Contributors Retirement Savings Account
Defaulting Employers pay Penalties of N10.03 billion into Employees RSA as PenCom takes 67 Employers to Court
Redacted Reports – Unfunded RSAs and RSAs with Incomplete Documentation
PTAD paid N99.94 billion to Federal Government Retirees in 2021
PenCom Stakeholder Engagement and Public Enlightenment Activities in 2021
Biggest PFAs by RSA Pension Fund Assets under Management & Fastest Growing PFAs in 2021
Update on Implementation of Minimum Pension Guarantee
PenCom provides Scanty Update on using RSA for Payment of Residential Mortgage
PenCom approved over N1.46 Trillion for PFAs to pay RSA Holders
PFAs made over N340.57 Billion Total Income in 3 years

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