National Chairman of the All Progressives Congress (APC), Comrade Adams Oshiomhole, has advised the Federal Government to stop borrowing from pension funds to finance budget deficits.
Oshiomhole who stated this at the opening of the presidential policy retreat at the Presidential Villa, Abuja this week, said all pension assets must be deployed to investments in critical sectors that impact directly on the lives of ordinary Nigerians. He said it was unfair to use pension funds that are the contribution of poor Nigerian workers to finance projects that often do not benefit them directly.
Oshiomhole explained that PenCom was originally initiated to provide long term loans for housing development. He said the logic behind introducing the pension scheme under PenCom, was that the workers’ social capital that they deducted every month, which they would not need to draw on until they retire about 30 years or 35 years later, will provide a basis for long term fund.
“Unfortunately, the money is borrowed by government, both federal and state and it is not available to address the social purpose of the working people whose contributions the pension fund evolved.
Oshiomhole further said, “I ask our expert to recognize that the primary purpose of the workers’ social capital is that it would be creatively managed and deployed to workers’ social needs including housing, education and all the other factors. It wasn’t meant to fund government’s deficit, it wasn’t meant to support Federal Government deficit; it was meant to address the primary social purpose of those who work so that they are sure that by the time they are retired, they have a modest home to retire to. “I think we must visit these issues and address them.
Status of using your Retirement Savings Account balance for Mortgage.
The National Pension Commission around August 2015 released the Draft Guidelines on withdrawals from Retirement Savings Account (RSA) for Equity Contribution for Payment of Residential Mortgage. Since then operators and RSA holders have been waiting for PenCom to release the final guidelines.
In February 2019, the acting Director General of PenCom disclosed that the final guidelines to allow RSA holders to access part of the balance in their Retirement Savings Accounts for payment of equity contribution for residential mortgage will be released before the end of 2019.
Facts to Note about Pension Funds Invested in Federal Government Securities.
Based on the last report released by the National Pension Commission (PenCom) as at March 2019, total pension fund assets under the Contributory Pension Scheme is approximately N9.03 Trillion, out of which N6.51 Trillion 72.08% was invested in Federal Government Securities and N144b 1.60% was invested in State Government Securities.
Its necessary to note that Federal Government does not force or mandate Pension Fund Administrators (PFAs) to invest a high percentage of their pension funds in Federal Government securities, infact the investment regulation set global limits for the pension funds that can be invested in FG securities, but it so happens that when you are dealing with huge funds in Nigeria, Federal Government securities is arguably the most profitable, secured and stable investment in Nigeria.
Consequently, if you want a stable and reliable growth in your pension funds you would be glad that your PFA has invested your funds in FG securities. For people that are young and more aggressive and have a longer time before retirement the National Pension Commission (PenCom) last year launched the Multifund structure which allows such people to move to Fund I which has a high exposure to equity and its short term fluctuations.
In conclusion, operators, RSA holders and all other stakeholders are all waiting for the National Pension Commission to release the final Guidelines on withdrawals from Retirement Savings Account (RSA) for Equity Contribution for Payment of Residential Mortgage.
Check out the full report on Status of Contributory Pension Assets as at end of March 2019 here
Check out our MultiFund Structure Executive Summary here