The Editorial of The Guardian Newspapers of June 2, 2021, reports a widely broadcast BBC investigation report of shocking corruption in pensions in Cross Rivers state. It revealed how some elderly people were left sick, “penniless” and helpless. Government workers were soliciting bribes before paying out pensions, arbitrarily declaring them dead until they proved again that they were alive. This matter transcends Cross Rivers state. Stories of woe abound in virtually all the states and federal levels.
“The Mainagate” is another case in reference. Abdulrashid Maina was the Chairman of the defunct Pension Reform Task Team. In a case of irony, he was arraigned before the Federal High Court on a 12 count charge bordering on money laundering of suspected pension funds to the tune of N2 billion. It is no wonder that confidence in the pension fund is wobbly.
Apart from the burden and challenges of consistent remittance of the backlog of defined benefits payments of workers who had a leg in there and in the new Contributory Pension Scheme, other challenges have bedeviled the confidence of the public in the sincerity and effectiveness of the pension program in the country. They are also confused about the clear differences and challenges facing the transition from the defined benefits scheme (DBS) to the contributory pension scheme (CPS). Comments and complaints are of general application, so to say.
Yet, there are some very efficient pension plans and packages in the country. These are from many blue-chip organizations, many private organizations following the provisions of the Pension Reform Acts of 2004 and 2014, as well as many self-funding government organizations with minimal bureaucratic bottle-necks. These, of course, will be silent. The public will not know how efficiently pensions are working out. More “noises” are coming from the largely inefficient “environments”.
The country’s population has truly grown. The government cannot continue to pretend to be a “superman” when it is being stretched tight by infrastructure inadequacy and catching up with the fast pace of changes in the dynamics of governance and the economies locally and globally. Defaults on those contributions were inevitable without a deliberate change in the approach to handling this very vital aspect of the economy.
What is the reality on the ground, and how can the confidence of the public be reinstated? How can the various state governments and government structures restore this greatly desired confidence? How safe is the already accumulated N13 trillion fund?
The good news is that our pension funds are safe! The dynamics of the financial world often create uniqueness in tightening transactions to near watertight settings. The Regulator of the Pension Industry has so far shown grit and backbone in the administration of the players and the fund. The scheme was novel at the start. It will not be without teething challenges and an active ‘learning curve’.
Thus, while objective criticism is necessary to continually improve, it would thus be unfair to make unfettered and deliberate negative evaluations of the CPS and pension without looking at where we were coming from. Attempts to pull down the CPS would lead to the question of what is the next viable alternative, if any, given the uniqueness of the country.
A lot has happened to continue to strengthen its operations and the players. Highly computerized systems are continually being evolved and driven by energy. The biggest challenge remains to transit the employees’ defined benefits into the contributory pension scheme. This, however, is making great progress. These agitations are “voices from the past,” not current happenings.
This is how secure the funds are: There is a major tripartite security check and balance in place. The Regulator, the Pension Fund Administrator (PFA), and the Pension Fund Custodian (PFC) No payment goes out without passing through the labyrinth of collective and internal scrutiny processes. All are expected to raise “red flags” as soon as a transaction looks suspicious. The PFA has no custody of the funds. They just manage the funds for growth for their fees and customer service. The PFC is the security man’. PenCom is the umpire. All players are active—no docility of any form. They are a story of working PPP—public, private, partnership. This is far different from when the government was carrying the burden alone. The transparency level is very high. Even the unusual transparency is drawing increased scrutiny from the public.It is good for everyone.
The Investments:
I had spent over twenty years in insurance marketing and administration as a professional, yet I was surprised to know little about the investment world. I further learned that the dynamics of each of the financial sectors cannot just be presumed unless you are deeply involved. Just as I see a lot of ignorance of the pension world by experts in other financial sectors, I have seen the same in the cases of insurance, investment, and banking for those not playing there, including a lot of the elite.
The investment basket is designed for high security while optimizing all potential benefits that an ordinary man on the street can never harness on his own because of group effects and benefits of inclusiveness. That is why the funds are even hedged in very difficult economic times like when money markets, T-bills, etc., drop unimaginably low as 0%. The dynamics here can never be understood easily or harnessed by the man on the street or the poorly informed. Despite the previous true obstacles, challenges, and corruption, pensions have moved forward with firm and long strides.
Some have been bothered by claims of “poor reporting” of the government borrowing the pension funds. The public should be told that the PFAs are doing great business with the government to grow the fund. Bonds are one of the safest investment instruments the world over. Failure in making good bond transactions is a reputation no responsible system organization wants to trifle with. It would hurt more than imaginable. The world is watching. Ratings are critical at any time, or the government cannot borrow easily, even internationally. Investment and endowment funds are never idle. Due processes and clearances of several layers of scrutiny are made before investments are made, guaranteeing clear entry and exit points for every transaction. The government is just like any other client. They must be appealing in terms of offers and security, without which no PFA will touch its public offerings.
State governments employ a huge population of Nigerians. When governments fail, fingers are pointed at the pension industry, not the governments. The state governments will need a political will and a desire to serve the people to initiate and follow through with the process of structuring their pension plans and execution. Execution is the most critical thing, not rhetoric. Many states are still caught up in the process of domiciling the law in their states. There are a lot of hiccups on the part of the author because of various interests as well. Help can come their way if they are truly sincere in
