The safety of the pension contributions- Odunze Reginald C

 

In all the presentations , I have done in pension related matters , numbering about 3500, spanning over a period of 7 years in the following sates  Zamfara,  Nasarawa, Abuja , Enugu, Imo , Abia, Kwara, Osun, Lagos etc  in both private and public sectors, the most re occurring question is how safe is my contribution.

The safety of any fund is the basic criteria in setting up the fund, when a fund has no safety; it is of no use in setting it up.

The objectives of the scheme in PRA 2004 were as follows:

Ensure that every worker receives his retirement benefit as at when due

Assist workers to save in order to cater for their livelihood during age

Establish a uniform set of rules, regulations, and standards for administration of pension matters

Establish strong regulatory and supervisory framework.

But in 2014 the PRA 2014 extended to the following

Establish  a uniform set of rules , regulations, and standards for the administration  and payments of retirement benefits for the public service of the federation, the public service of the FCT, the public service of the state governments, the public service of the local governments and the private sector  Section 1 subsection A of the PRA 2014

Assist the improvident individuals by ensuring that they save in order to cater for their livelihood during old age Section 1 subsection D  of the PRA 2014

Make provision for the smooth operations of the scheme

Ensure that every person who worked in either the public service of the Federation, FCT, States and Local Governments or the private sector receives his retirement benefits as and when due Section 1 subsection C of the PRA 2014

In an article by Odunze which appeared in 2011, titled “The Task of managing and safeguarding the pension fund” Odunze opined that  “With the call in Europe and America for an extension of the retirement age due to the failure of the pension schemes as a result of the last global financial crises, it becomes pertinent for the pension fund administrators, the pension fund custodian and the National pension commission . PenCom to embark on stringent financial and investment strategies to put the schemes on sound footings. This becomes necessary to safeguard the pension fund”

The failures of the National Provident Fund Act of 1973, The Pension Act of 1990 and the NSITF Act of 1993 are all fresh in our memories. The business environment is becoming more and more complicated, so also is the human nature and behavior. They all fail because of several reasons, which included corruption, not maintaining a good data base, not proper oversight function, non challant attitude of the officials involved.

The Pension Reform Act 2004 clearly pointed the provisions of Pension fund custodian, pension fund Administrator and the National pension commission and careful delineated their duties that serves as checks and balances to the establishment, administration and running of the schemes to make it safe and profitable to both the contributors, retirees, and return on assets to the administrators and other stakeholders in the scheme.

The recent amendment of the 2004 Pension Reform Act, which resulted in its repeal and the subsequent provisions of the Pension Reform Act 2014 will positively consolidate more on the pension assets as the relevant portions of the law has increased the coverage to states, local governments, and employers with minimum of three employees.

There is also the consolidation of the pension reform act as aptly captioned by the highlights of the pension reform act 2014, it should be noted that   “The Pension Reform Act 2014 has consolidated earlier amendments to the 2004 Act, which were passed by the National Assembly. These include the Pension Reform (Amendment) Act 2011 which exempts the personnel of the Military and the Security Agencies from the CPS as well as the Universities (Miscellaneous) Provisions Act 2012, which reviewed the retirement age and benefits of University Professors. Furthermore, the 2014 Act has incorporated the Third Alteration Act, which amended the 1999 Constitution by vesting jurisdiction on pension matters in the National Industrial Court. 

Punishment for defaulting employers : the pension reform act  in Section 11 (6) of the Act provides that an employer who fails to deduct or remit the contributions of its employees within 7 working days from the date salary is paid, in addition to making the remittance already due, will be liable to a penalty to be stipulated by the Commission.

Furthermore, Section 105 (1& 2) on offences under the Act empowers the National Pension Commission (PenCom), subject to the fiat of the Attorney General of the Federation (AGF), to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees.

With all these provisions, the scheme has the necessary provision to ensure compliance and safety of the fund as pension fund custodians are expected to have an indemnity of three times the value of their fund, in the case of custodian going bankrupt.

Like Jonny Walker we are not deterred by where we failed, but we set our minds on our destination and that is why we are bent on the safety of the fund that has clearly manifested with the recent remarks by the DG , stressing that the pension assets is well in excess of 4.6 Trillion Naira.

Odunze Reginald is the Lead Consultant, Chareg Consulting, a management and marketing  consultant  a social media and social marketing consultant , you can visit our twitter anchor @regydunze, find us on Facebook @ Reginald

Positioning the RSA Holder for Mortgage Access, a case for Housing Development as the Pension Fund Assets Hits 4.6 Trillion Naira- Odunze Reginald C

The Pension Reform Act 2014 on Access to Mortgage observed in Section 89 subsection 2 of the Act noted that a Pension Fund Administrator (PFA) may subject to guidelines issued by the National Pension Commission, apply a percentage of the pension assets in a Retirement Savings Account (RSA) towards the payment of equity contribution for a residential mortgage by a RSA holder.

In an article on Sunday punch, of 30^th August 2015, captioned  “Workers to access 25% pension savings for mortgage …to forfeit lump sum payment at retirement”  Nike Popoola  noted that “The guidelines  allow only contributors, who have a minimum of N6m in their RSA, to use part of it for a mortgage loan. Specifically, Section 5.5 of the guidelines states that the mortgage loan shall be a minimum of N1.5m and a maximum of N50m”

Continuing she noted Section 5.6 says that the mortgage loan shall be for a minimum of five years and a maximum of 20 years;  section 5.7 states that the interest rate on the mortgage loan shall be at a fixed rate for the whole duration.” that Section 3.4 also states that a RSA holder that has utilised a portion of the RSA balance as equity contribution for residential mortgage may not be entitled to a lump sum payment at retirement.”

The importance of housing can be seen in its place in the 1999 constitution of the Federal Republic of Nigeria. S.16 (I) (d) provides as one of the fundamental objectives and directive principles of the Nigeria state policy, the provisions of suitable and adequate shelter for all citizens, the same was made in the 1979 constitution (Nigeria constitution 1979, 1999 and FMBN 2006)

Continuing the FMBN bulletin 2006 stated that FMBN Act 1993 and the Mortgage Institutions Act 1989 all fell short of desired impact on housing and Mortgage industry. The National Housing Policy 2002 according to FMBN is to ensure that all Nigerians own or have access to decent, safe and sanitary housing accommodation at affordable cost and secure tenures. But this is not been achieved, as NHF has been involved in the refund of contributions which cannot afford enough blocks talk less of building houses.

Therefore there is that urgent need for infrastructural development, a case of housing as most retirees are faced with the great task of building their own houses. In an article on 15 costly mistakes pensioners make, Odunze (2014) in the verynewsinfo.com highlighted that one of the pension mistakes is using retirement money to build a house after retirement. It should be noted that building houses after retirement aggravates the retiree health as the retirement money is not enough to erect a house coupled with the ignorance of the retirees who thought that they will be paid everything in the retirement savings account balance only to hear the bitter truth of the provisions of the Pension Reform Act 2004 for 25 percent, according section 4 subsection (!) paragraphs (a) (b) (c)and Section 4 subsection 2 of the PRA 2004  and section 7 subsection (1) paragraphs,(a)(b) and (C) of the PRA 2014.

 And so the need for such housing development cannot be over-emphasized as in all investments instruments, it is investment in housing that appreciates astronomically. In an article in the Telegraph Newspaper of London, Richard Dyson noted in article captioned “ £1,250bn and rising , how buyer to let is overtaking Pension”  that  “The value of property owned by Britain’s growing army of buy-to-let investors is fast approaching the value of the entire workforce’s pension savings built up over decades of employment. At £1.25 trillion – £1,250bn – the value of the flats and houses owned by almost two million small-time landlords is catching up on the £1.6 trillion total amassed in workers’ pension schemes.“

In a recent announcement in 2015 in Lagos, the nation’s commercial nerve centre; while announcing attending a pension forum organized in conjunction with stakeholders in Nigeria Labour Congress , NLC and the National Pension Commission ,PenCom, the Acting Director General of National Pension Commission, Chinelo Aholu stated that the pension assets has hit 4.6 Trillion and still counting. That provides enough investment outlay for infrastructural development in housing.

The Former Governor of the Central Bank, Mr. Sanusi had canvassed for the use of the fund for infrastructure development. In an article in Punch 2011 captioned ”Safeguarding Pension Funds”  it reported that the Central Bank Governor has canvassed for the use of the pension fund in rescuing the decayed infrastructure , however the paper was quick to add “but this should be discouraged because of the underlying factors of mismanagement” continuing it stated that as “plausible as this idea may seem to have, are problems of corruption, inflated contracts and abandoned projects which may threaten investments in such areas. The paper concluded that it is necessary to “avoid a situation where money may not be available when pensioners are ready to collect their life savings” All these stems from fear of the unknown which I don’t blame them because corruption had at one time or the other affected, the smooth running of some laudable government policies.

Be as it may , it is a good proposition but do we because of fear of corruption allow the retire to suffer in  using the pension to start building a house and the risk of inflation on the said fund, bearing in mind that the majority of the retirees still use the retiree fund to build houses. The result is more abandoned project as most retirees are in the last phases of their circle of existence and may not be able to complete such projects.

In most developed countries in Europe and America, pension fund are being used for infrastructural development especially in the area of housing. But what they do here is that they build houses for lease and rent, and some are used for outright sale. They discovered that of all investment in life, it is real estate that has the highest rate of return. As a house that was bought in 2012 for 5 million cannot be sold for the same amount even within a period of 3 months. As both land and building appreciates over a period of time.  Jerry Lewis, the owner Macdonald, once stated that he is getting his wealth through real estate and not through the restaurant.

Since the masses are afraid of corruption ravaging the fund, if it used for infrastructural development, they can work out the following:

The retirement saving balance can be used to access mortgage under strict compliance

The commission in conjunction with PFA and PFC can embark on massive housing project with part of the fund as a way of ensuring housing for all.

Let us remember and bear in mind the words of Richard Dyson that “ while traditional pension saving is complex and unpopular with many, the phenomenon of buying-to-let is now growing at its fastest rate ever, spurred by rising rents and house prices and cheap mortgages.” Will the pensioners be able to afford the rising prices of houses and rents knowing quite alright that if they know they can’t afford it at their point of retirement they make resort corruption during their working life.  And that is why we give kudos to the legislators who amended the amended PRA 2004 that gave rise to PRA 2014.

There is need for increase in the contribution for individual RSA holders in the form of additional voluntary contribution. The need for such outlay becomes imperative as majority of RSA holders, have account balances that is far below the minimum balance of 6million , the minimum benchmark for mortgage  access.

Odunze Reginald is the Lead Consultant, Chareg Consulting, a management and marketing  consultant  a social media and social marketing consultant , you can visit our twitter anchor @regydunze, find us on Facebook @ Reginald odunze and reginaldodunze.com, at google+ @ Reginald Odunze and at Linkedin@reginald odunze.

Wholesale prices plunge 4.95 percent year/year in August

A worker holds a fuel nozzle at a petrol pump in Hyderabad June 17, 2010. REUTERS/Krishnendu Halder/ …

NEW DELHI (Reuters) - India's wholesale prices fell for a tenth straight month in August, tumbling an annual 4.95 percent primarily on the back of a sharp cooling in fuel costs, government data showed on Monday.
The fall compared with a 4.40 percent year-on-year decline forecast by economists in a Reuters poll and a provisional 4.05 percent plunge in July.

The wholesale fuel prices tumbled 16.50 percent from a year ago, while food prices dropped 1.13 percent year-on-year.

Prices of manufactured goods declined 1.92 percent on year last month.

(Reporting by Rajesh Kumar Singh; Editing by Malini Menon)

Culled from Reuters