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PenCom Advises Government To Increase Its Pension Contribution Rate

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By Sola Alabadan

The National Pension Commission (PenCom) has faulted the proposed exemption of personnel of the Nigeria Police from the Contributory Pension Scheme (CPS), advising the federal government to rather review upwards its current contribution rate of 10%.
The Director General of PenCom, Aisha Dahir-Umar, who gave this advice in Abuja during a public hearing on two pension-related Bills by the House Committee on Pension, said that the CPS has provisions that can address the challenges being faced by personnel of the Nigeria Police and other Federal Government Agencies on the administration of their retirement benefits.
The two Bills are seeking for an Act to exempt the Nigeria Police Force from the CPS, as well as to further Amend the Pension Reform Act 2014 to, among other things, provide for a retiree to withdraw a lump sum of at least 75% from the Retirement Savings Account (RSA) and to criminalise undue delay in the payment of pension and for related matters.
“The solution to the pension challenges of the personnel of the Nigeria Police does not reside in their exemption from Contributory Pension Scheme and reversion to the Defined Benefits Scheme, which is clearly unsustainable,” Dahir-Umar told the Committee.
She said the absence of other social security benefits in Nigeria is partly responsible for the clamour by the retirees for exemption or to access substantial amounts as lump sum from their RSA balance.
The Director General said the exemption of the NPF from the CPS would result in the dismantling of the institutions, systems and processes that Government had put in place in the last few years towards the implementation of the pension reform programme.
“Exemption of the personnel of the NPF would imply additional financial burden on the Federal Government by way of unsustainable pension obligations. For instance, as at September 2021, there were 304,963 Police personnel based on IPPIS data. An actuarial valuation revealed that the retirement benefits (pension and gratuity) liability of these personnel under the defunct Defined Benefits Scheme would amount to about N1.84 trillion,” she said.
On the other hand, she said that the liability under the CPS for the same NPF personnel is made up of N213.4 billion as accrued pension rights and monthly employer pension contributions of about N2.2 billion.
To address the concerns of Police Personnel on pension, the PenCom boss advised that the government can review upwards its current contribution rate of 10%.
In addition, she said the PRA 2014 further provides that notwithstanding the pension contributions made by employer and employee into the employee’s RSA, the employer may agree on the payment of additional benefits to the employee upon retirement.
“Accordingly, the Federal Government may wish to provide additional benefits in the form of gratuity to personnel of the NPF upon their retirement,” she said.
Meanwhile, regarding the 75% lumpsum payment, she said the amendment, if approved, would be contrary to the provision of Section 173 of the 1999 Constitution of the Federal Republic of Nigeria (as amended), which guarantees the right to pensions for all public officers as the payment of “at least 75% of the balance of the RSA” as lumpsum at retirement. She added that this will significantly deplete the pension savings such that the contributions will not be sufficient to provide meaningful pensions during retirement.
“That converts the pensions into a provident fund and leaves such a retiree with no periodic pensions, which is contrary to the requirement of Section 173 of the 1999 Constitution,” she said.
The Director General said the proposal is based on a misunderstanding of the concept of pension payment under the CPS.

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Business

Workers Can Now Use Pension Contributions For Residential Mortgage

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By Sola Alabadan

Retirement Savings Account (RSA) holders can now use 25 percent of their RSA balance to pay for residential mortgage, now that the National Pension Commission (PenCom) has approved the issuance and immediate implementation of the Guidelines on Accessing RSA Balance towards Payment of Equity Contribution.
The approval is in line with Section 89 (2) of the Pension Reform Act 2014, which allows RSA holders to use a portion of their RSA balance towards
payment of equity for residential mortgage.
The Commission stated that interested RSA holders should contact their Pension Fund Administrators (PFAs) for more information and guidance.
On eligibility criteria, PenCom said the Guidelines cover pension contributors in active employment, either as a salaried for Residential Mortgage by RSA Holders, employee or as a self-employed person. Meanwhile, interested RSA holders must have an Offer Letter for the property, duly signed by the property owner
and verified by the Mortgage Lender.
The RSA of the applicant must also have both employer and employee’s mandatory contributions for a cumulative minimum period of five years.
While contributors under the Micro Pension Plan (MPP) are also eligible,
provided they have made contributions for at least five years, prior to the date of their application.
However, RSA Holders that have less than three years to retirement are not
eligible.
Married couples, who are RSA holders, are eligible to make a joint
application, subject to individually satisfying the eligibility requirements.
RSA Holders who are registered before July 1, 2019, must have their records
updated through the RSA data recapture exercise.
PenCom further said that application for equity contribution for residential mortgage must be in person and not by proxy.
According to the guidelines, the maximum amount to be withdrawn
shall be 25 percent of the total mandatory RSA balance as at the date of application, irrespective of the value of equity contribution required by the mortgage lender.
Where 25 percent of a contributor’s RSA balance is not sufficient for payment as equity contribution, RSA holders may utilise the contingency portion of their voluntary contributions, PenCom noted.
To qualify as a Mortgage Lender for this purpose, the company must be licensed by the Central Bank of Nigeria (CBN), comply with the Contributory Pension Scheme (CPS) and have valid Pension Clearance Certificate (PCC).
The Commission has promised to publish names of the eligible mortgage lenders on its website www.pencom.gov.ng.

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Business

PenCom Denies Paying N3m As Minimum Monthly Salary

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By Sola Alabadan

The management of National Pension Commission (PenCom) has denied allegation that the least paid employee of the commission earns a salary of ₦3 million per month.
PenCom stated that the claim is absolutely false, pointing out that the highest paid official of the Commission earns less than ₦1 million a month.
As the false and misleading information on the compensation package of PenCom was being circulated in the traditional and social media, the commission said it has become necessary to set the record straight in the interest of the Nigerian public.
PenCom also explained that “right from the inception of the Commission in 2004, the Federal Government mandated the Board to adopt an employee compensation policy that favourably compares to comparator government bodies in the financial services sector, such as the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC) and the Securities and Exchange Commission (SEC).”
“Section 25(2)(b) of the Pension Reform Act 2014 also empowers the Board of the Commission to fix the remuneration, allowances and benefits of the employees,” the commission added.
Besides, the pension regulator said “the Presidential Committee on the Consolidation of Emoluments in the Public Sector headed by the late Chief Ernest Shonekan, former Head of the Interim National Government, made a number of recommendations which guide the PenCom Board in its compensation review exercises.
According to the commission, one of the recommendations of the Shonekan-led committee “is that the pay structure of self-funded agencies should be benchmarked with their private sector comparators so as to ensure relativity in such agencies and attract and retain high-caliber professionals.”
“The Shonekan Committee, which was set up by former President Olusegun Obasanjo in 2005, also recommended that the pay structure of regulatory agencies should be benchmarked against sectors they monitor to avoid regulatory capture, and that an annual increase in pay should be undertaken to account for inflation/cost of living adjustment and establishments may strive to attain 50th percentile and above their comparators in the private sector,” PenCom stressed.
PenCom further affirmed that “We made all these facts known in a recently submission to the House of Representatives Committee on Finance over the compensation package of the Commission. We also stated that the last compensation package review was done in 2017 with the approval of the Office of the Secretary to the Government of the Federation (OSGF). No review has been done in the last five years and this has affected the ability of the Commission to attract, hire and retain staff with competitive skills”.
The commission therefore implored members of the public to ignore the false and mischievous information on the staff compensation package, saying it has nothing to hide and will continue to run a transparent and accountable system.

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Business

Journalists Strive To Bring SMEs Into Insurance, Pension Safety Net

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By Sola Alabadan

As part of efforts to deepen financial inclusion in Nigeria, the 2022 Conference of the National Association of Insurance and Pension Correspondents (NAIPCO) holding on November 3, 2022 in Lagos, aims to ensure that the Small and Medium Scale Enterprises embrace insurance and pension as a way of life.

The theme of the Conference, which is the seventh in the series, is: “On-boarding Small and Medium Scale Enterprises into Micro Insurance and Pension Space in Nigeria.”

The Chairman of the occasion is Engr. Cyril Ajagu, a major investor in the financial services industry, as well as oil and gas sector, while the Director General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Mrs. Chinyere Almona, will be the keynote speaker, while the Commissioner for Insurance/CEO, National Insurance Commission (NAICOM), Mr. Sunday Thomas, and Director General, National Pension Commission (PenCom), Mrs. Aisha Dahir-Umar, will be Special Guests.

The Chairman, Nigerian Insurers Association (NIA), Mr. Segun Omosehin; Chairman, Pension Fund Operators Association of Nigeria (PenOp), Olumide Oyetan; among others, have confirmed their presence at the event.

The event will also be graced by experts and stakeholders from the insurance and pension sectors, as well as the financial services sector, such as Lagos State Pension Commission (LASPEC); Chartered Insurance Institute of Nigeria (CIIN); Nigerian Insurers Association (NIA); Nigerian Council for Registered Insurance Brokes (NCRIB); Professional Insurance Ladies Association (PILA); Institute of Loss Adjusters of Nigeria (ILAN); Pension Funds Operators Association of Nigeria (PenOp); Association for Registered Insurance Agents of Nigeria (ARIAN); College of Insurance and Financial Management (CIFM) and Small and Medium Enterprise Development Association of Nigeria (SMEDAN) etc are also expected at the event.

Others expected are: Nigeria Union of Pensioners; Trade Union Congress; People Living with Disabilities; Barbers, Hairdressers, Market Men and Women, Vulcanizers, etc.

The event will also feature the unveiling of NAIPCO New Name and Logo to stakeholders in both sectors of the economy.

Speaking on the conference, Chairperson of NAIPCO, Mrs Nkechi Naeche-Esezobor, noted that the theme of the conference is apt as the SMEs sector has been the main driver and engine of growth of the Nigerian economy, and being the sector with the highest employers of labour, needs all the support to enable it continue to contribute significantly to the economy.

“Incidentally, the larger population of operators and employees in this space are left unattended to, with a lot of them not benefiting at all from the nation’s financial inclusion project, and this therefore underscores why the microinsurance and micropensions players should see this group as a growth asset,” Nkechi added.

According to her, experts, stakeholders and the general public will converge on the conference to proffer solutions on the way forward.

Also speaking, Chairperson, 2022 NAIPCO Conference Planning Committee, Mrs. Iyabo Ogunjuyigbe disclosed that the conference promises to meet and surpass expectations as consumer groups will also be present to voice their concerns about insurance and pension services.

She noted that the conference would be a convergence point for insurance and pension operators and the public that needs information on how the two concepts can better their lives and enhance financial inclusion.

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