-Obasanjo Cautions On Pension Innovation
Government commends the enforcement drive of National Pension Commission towards capturing the informal sector
President Muhammadu Buhari has commended the National Pension Commission (PenCom) for enforcing compliance to the Contributory Pension Scheme (CPS) among the public and private sector institutions.
The President also noted with delight that 12 years after the introduction of the CPS, the PenCom has recorded over seven million contributors and N5.8 trillion assets as at end of June 2016.
The President made these remarks at the World Pension Summit ‘Africa Special’ which opened in Abuja Tuesday, organised by PenCom, Nigeria’s apex pension regulatory body.
The theme of the two-day event is: ‘Pension Innovations: The African Perspective’.
Speaking through the Head of Service of the Federation, Mrs Winifred Oyo-Etta, Buhari commended PenCom for extending the scheme to the informal sector as government moves to resolve pending pension matters under the old scheme.
“PenCom has been asked to step up its enforcement drive to ensure full compliance by public and private sector institutions in line with the enabling law.
“Furthermore part of the commitment of this Administration is to ensure that within the scarce resources available to it, outstanding pension liabilities inherited by the Federal Government, are addressed,” Buhari said.
The President recalled that the former pension system created administrative challenges due to its vulnerability to budgetary allocations and other pitfalls.
This, he said, resulted in countries adopting various models to tackle their pension and social benefit challenges.
“These challenges have resulted in governments adopting measures that result in appropriate changes in pension system to suit their peculiar socio-economic circumstances,” Buhari said.
He said that governments in many countries are compelled by their peculiar socio-economic circumstances, to either make parametric changes in their pension schemes, or a complete paradigm shift from the defined benefit scheme to the defined contribution scheme.
“While the former model was mainly adopted by advanced countries, developing countries, mainly African countries, opted for the latter model.
“Interestingly, we are beginning to see some developed countries, also gravitating to the Contributory Pension Scheme,” Buhari said.
He urged the conference participants to use the opportunity of the event to address the myriad of challenges facing pensions and social welfare benefits in Africa.
In his keynote address, former president Olusegun Obasango, whose administration introduced the CPS in 2004, commended the management of PenCom for sustaining the integrity of the scheme.
He expressed delight that pension assets had remained sacrosanct amid reports of mismanagement of public funds in recent times.
He stressed the need for PenCom to ensure the safe-keeping of contributors’ funds warning that regulatory and technological innovations introduced by regulators and operators must not be allowed to erase public confidence in the CPS.
He cautioned against “adventurous” innovations, noting that any innovation must be pursued with caution as the contributor must have his money whenever he asks for it.
“I am not against innovation, but your innovation must be with caution.
“When people have to work all the days of their lives and they make contribution for their future, we cannot be too adventurous with so-called innovation, because when they need the money, the money must be there,” Obasanjo said.
He also noted that while sustainability is required in pensions and social welfare schemes, it must not be allowed to erode the trust on which the CPS is built as the contributors’ assets are worth preserving.
“I believe that is something we must preserve, no matter what we do. Agreed, we need innovation and sustainability, but our innovation and sustainability must guarantee security of the fund.
“We must never reduce trust or eliminate trust from the system. People must have trust that when they require that money in their old age and retirement – the money they have contributed will be there,” the former President said.
In her welcome address, PenCom Director-General, Chinelo Anohu-Amazu, drew attention to the global and continental demographic challenges that make effective and sustainable pensions system compelling.
African countries, she said, must fashion out effective pensions and social security systems to meet future demographic challenges.
She thanked the founders of WorldPensionSummit, The Netherlands, for partnering with PenCom in organizing the World Pension Summit ‘Africa Special’ since 2014.
She said that the rapid population growth in Africa would put pressure in existing weak infrastructure among the countries in the continent.
She urged participants to deliberate on how to build deep financial markets and financial models that would serve the desired purpose.
She said that bridging Africa infrastructure deficit will require sustained spending of about USD93 billion per annum which translates to about 15 per cent of Africa’s GDP.
“This huge challenge, I believe, can be surmounted, by a co-ordinated multi-faceted approach to development and integration of domestic funding sources, such as pension funds, and foreign institutional investors,” she said.
Anohu-Amazu said that Africa has recorded a five per cent growth in GDP in the last decade, while innovations in technology, agribusiness and small and medium enterprises provide Africans with entrepreneurial and innovative spirit.
She said that a recent World Bank demographic report on Africa published in 2014 stated that countries in sub-Saharan Africa had experienced rapid economic growth and development over the past 15 years.
“Africa’s rapid population is projected at two billion people by 2060. This will place a demand on leaders to provide for healthy population and reduce poverty.
“It must provide for the aged population that will emerge as the demographic cycle comes to an end by – developing robust pension and social security systems to cater for the aged income,” the PenCom boss said.
Kaduna State governor, Malam Nasir el-Rufai and former governor of Cross River State, Donald Duke, were among the dignitaries that graced the occasion.
The Co-Founders, WorldPensionSummit, The Netherlands, Eric Egginik and Harris Smorenberg called on African pension practitioners to embrace technological revolution that would bring the desired innovation in the management of pensions and social welfare benefits.