She holds an LL. B. in Law from the University of Nigeria, Enugu Campus and is a member of the Nigerian Bar Association. She also holds a Master’s degree in Telecommunication & Information Technology Law from the London School of Economics and a member of the Chartered Institute of Arbitrators, London. The Pencom boss has attended the Executive Education programme in the Wharton Business School, Pennsylvania where she obtained certification in “Negotiations: Bargaining for Advantage.” She was at the Kennedy School of Government, Harvard University, where she obtained a certificate in “Leaders in Development: Managing Economic and Political Change”; and the Graduate School of Business, Columbia University.
Since her assumption of duties as Acting Director General of the Commission in December, 2012, following the expiration of tenure of the pioneer Executive Management Committee, Chinelo Anohu-Amazu has successfully completed the process of a major review of the Pension Reform Act 2004 which culminated in an Executive Bill, the Pension Reform Bill 2013, which was signed into law recently by President Goodluck Jonathan.
In this interview with Daily Sun, Mrs. Anohu-Amazu noted that the PenCom rules would be tailor made to suit the peculiarities of Nigerian workers. Pension fund assets have also experienced a steady growth under her leadership from N2.9 trillion in December 2012 to N4.1 trillion as at December 2013.
PenCom prior to 2004
Prior to the enactment of the Pension Reform Act 2004, pension schemes in Nigeria were bedevilled by many problems. The public service operated an unfunded Defined Benefits Scheme and the payment of retirement benefits were budgeted annually. The annual budgetary allocation for pension was often one of the most vulnerable items in budget implementation in the light of resource constraints. In many cases, even where budgetary provisions were made, inadequate and irregular release of funds resulted in delays and accumulation of arrears of payment of pension rights. It was obvious therefore that the Defined Benefits Scheme could not be sustained.
It was in view of the foregoing that the Federal Government enacted the Reform Act in 2004, which among other things was intended to ensure that every person working in either the Public Service of the Federation, Federal Capital Territory or Private Sector receives his retirement benefits as and when due; to assist individuals by ensuring that they save to cater for their livelihood during old age and thereby reducing old age poverty; to ensure that pensioners are not subjected to untold suffering due to inefficient and cumbersome process of pension payment and to establish a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the public service of the federation, Federal Capital Territory and the private sector that would help to stem the growth of outstanding pension liabilities.
Why Pencom
The National Pension Commission (PenCom), is an agency of the Federal Government of Nigeria charged with the responsibility of supervision and regulation of all pension matters in the country. It was established following the enactment of the Pension Reform Act 2004. Prior to the reform, there were many problems associated with pension administration in Nigeria, which necessitated the reform and one of such issues was the absence of a Regulator to perform oversight functions and ensure that appropriate rules on pension delivery were made and enforced.
Reform Act of 2004
The PRA 2004 established a mandatory Contributory Pension Scheme (CPS) for the employees of the Federal Government and the private sector organizations with five or more employees. The CPS is contributory in nature; fully funded; managed and kept in custody by licensed private operators, the PFAs and PFCs; and is based on individual portable accounts, the Retirement Savings Accounts (RSAs).
The Act so established empowered the National Pension Commission (PenCom) to be the sole authority for the regulation and supervision of the Scheme under the Act, issue guidelines for the investment of pension funds.
The function to approve licenses, regulate and supervise pension fund administrators, custodians and other institutions relating to pension matters were also assigned the Commission to determine. This includes
establishing standards, rules and guidelines for the management of the pension funds under the Act and ensuring that the maintenance of a National Data Bank on all pension matters is updated from time to time.
Carrying out public awareness and education on the establishment and management of the Scheme. Promoting capacity building and institutional strengthening of pension fund administrators and custodians as well as receiving and investigating complaints of impropriety leveled against any pension fund administrator, custodian or employer or any of their staff or agents. Performing such other duties which, in the opinion of the Commission, are necessary or expedient for the discharge of its functions under the Act.
Security of contributory pension scheme
The fact that there is a separation between the function of management from that of custody of pension assets is an indication that provisions have been made to safeguard the scheme and contributors’ funds. It is also of note to know that government contribution is a charge on the consolidated revenue fund while guarantee of the assets in custody by owners of the Pension Fund Custodians (PFCs) and mandatory statutory reserve requirement are for the Pension Fund Administrators (PFAs). The PFAs are required to be meticulous in their investment of contributors’ money to avoid high risk rating. The fact that there is daily monitoring of investment of pension funds, makes the Contribution Pension Scheme (CPS) safe and guarded. Management of pension funds also require tasted hands who will adhere to strict corporate governance principles and meet disclosure requirements. This is to ensure that that pension funds are not used for meeting the claims of any creditors or be sold or granted as loan. Statutory Reserve Fund of the scheme demands that PFAs should set aside 12.5 per cent of its profit after tax to absorb any losses. There is strict compliance to rules and regulation by operators and this is the cardinal reason for the appointment of compliance officers.
Enforcement mechanisms
The Contributory PensionScheme has three major enforcement mechanisms for instance, there is the Administrative Mechanisms, the Judicial Mechanisms and the Relevant Courts Mechanisms. The administrative mechanisms take care of public enlightenment, collaboration with other regulatory authorities, imposition of sanctions and penalties and engagement of recovery agents. The judicial mechanisms take charge of institution of criminal and civil actions as seen appropriate for infractions. Enforcement could also be through Federal High Courts, National Industrial Court and via Investment and Securities Tribunal (IST) as the case may be.
Safety of Nigerian Pensions
Our conservative and modest philosophy may not permit me to say how important PenCom is. However, by the time we look at the numbers in terms of where we were before the reform and our position today, you should arrive at the answer. First of all, the CPS has engendered a regime of a fully funded pension scheme with assets in excess of N4 trillion today. This has been a remarkable growth when compared to estimated pension liabilities of over N2 trillion before the reform. Over 98,000 workers have retired so far and are receiving their retirement benefits as and when due without any hassles. In the past, they joined long queues and some even died in the process. In terms of safety, the pension fund assets are ring fenced. That is, there is a separation between management and custody. While the PFA manages the assets, the PFC maintains actual custody of the funds and these functions and the investment of the funds are all guided by the Investment Regulations issued by PenCom. The pension assets are only invested in safe and secure instruments. The Commission monitors this daily by requiring PFAs to submit daily valuation reports which are reviewed to ensure compliance. These are the things that speak to the importance of PenCom.
Challenges as Ag. DG PenCom
The journey has been very challenging but rewarding when one looks at the successes recorded. Concerned by the magnitude of issues and lack of transparency in pensions in Nigeria then, President Olusegun Obasanjo constituted a Pension Reform Committee chaired by Mr. Fola Adeola, I served on that committee. It was the committee’s work that culminated into the PRA 2004. At the time, there was a lot of apprehension on the part of stakeholders, labour for example. Their concerns were understandable considering some not so pleasant outcomes of other reforms by government in the past. Ten years now, I am glad that having seen PenCom’s steadfastness in protecting the interest of retirees, labour is one of our greatest supporters. We have tried to continue sustaining the reform by being proactive. That is why we embarked on a major review of the PRA 2004 in order to strengthen the reform by expanding its coverage and enhancing benefits to retirees. We are pleased that both chambers of the National Assembly have passed the bill. One of our strategic focus areas is to bring on board the informal sector of the economy where most of our active employees earn their living.
Confusion over Police Force Pensions Limited
With respect to Police Force Pensions Limited, the Federal Government never granted any approval to the Nigeria Police to pull out from the Contributory Pension Scheme. On the contrary, the personnel of the Nigeria Police Force are still under the Contributory Pension Scheme by virtue of Section 1 of the Pension Reform Act 2004. Indeed, the Whitepaper recently issued by the Federal Government on the Report of the Orasanye Committee on the Rationalisation of Federal Government Institutions clearly indicated that the Federal Government has accepted the recommendation that, with the exception of the military which has already been granted exemption, no Federal Government Institution or Force should be exempted from the Contributory Pension Scheme.
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