Pension assets hit N14.2 trillion on better compliance

Nigeria’s total pension assets under management (AUM) reached N14.2 trillion at the end of May 2022, with contributory pension scheme enrollment rising to 9.7 million.

Assets grew in May by 14% year-on-year and 1% month-on-month, according to the monthly report released by the National Pensions Commission (PenCom).

Analysts say growth in assets under management is being driven by two important factors: compliance at the micro-pension plan (MPP) level by small businesses and qualified individuals, as well as compliance by large businesses that want to participate. federal government contracts.

Seun Babalola, Executive Director of NLPC Pension Fund Administrators Limited, attributed the AUM’s growth to increased awareness of the MPP, increased adoption of the plan by small businesses that have no more than three employees, as well as by legal persons who have seen the need to protect their old age.

“Awareness of the micro-retirement plan is growing because a good number of affected people are participating in it,” he said.

According to the PenCom report, in the first quarter of 2022, 18 pension fund administrators (PFAs) registered 2,897 contributors, bringing the total number of MPP contributors to 76,588 as of March 31, 2022.

He said N34.53 million had been credited to the Retirement Savings Accounts (RSAs) of 8,668 MPP contributors in the first quarter of 2022, bringing the total value of micro pension funds to N263.57 million. naira as of March 31, 2022.

“Having PenCom certification is a prerequisite to qualify to bid for all Federal Government contracts in Nigeria today; this is one of the reasons for compliance,” Babalola said.

Ethelbert Ogu, who works with one of the country’s top three PFAs, said the growth was the result of increased compliance.

“PenCom’s business through debt collectors helps grow funds through increased remittances,” he said.

PenCom declared following the issuance of formal notices to defaulting employers whose pension commitments were drawn up by the collection agents appointed by the commission, the sum of N422.34 million, representing the principal contribution (124.89 million Naira) and penalty (295.45 million Naira), was collected from 23 defaulting employers during the quarter under review.

“In the meantime, six defaulting employers have been recommended for appropriate legal action, for refusing to pay their employees’ pension contributions after all administrative actions to compel them to comply failed,” it said. -he declares.

Meanwhile, analysts at FBNQuest said federal government bonds were the main driver of the month-on-month gain, as their value rose nearly 250 billion naira (+3% m/m) to reach N8.5 trillion, while their share of total AUM rose 120 basis points month-on-month to 59.7%.

“If we include treasury bills, Sukuk bonds and other agency bonds, the share of FGN securities increased to approximately 62.1% of total assets under management, compared to 60.9% in April”, they said.

According to FBNQuest, by comparison, Kenya’s Retirement Benefits Authority puts the share of government securities at 45.7% at the end of last year, underscoring the need to diversify the portfolio of pension funds.

The value of pension assets under management held in domestic equities rose 23% year-on-year (1% m//m) to nearly 1.1 trillion naira, taking its share to nearly 7.1% from 6 .6% in May 2021.

“Linked to this is the outstanding performance of the Nigerian Exchange Limited’s All Share Index this year, which is one of the best in the world. Its year-to-date return of 22% contrasts with negative returns in many equity markets around the world,” they added.

According to analysts, the total number of retirement accounts has increased to almost 9.7 million from around 9.4 million in May 2021. This implies an average value of 1.47 million naira per RSA holder, slightly higher than the 1.33 million naira for the year. – earlier period.

They said: “Although the pensions industry in Nigeria has seen remarkable growth since 2004 when the Pension Reform Act was passed, there is still a long way to go. Similar to access to credit, Nigeria’s retirement savings penetration rate (asset to GDP ratio) is still quite low, at around 8.2%. That compares with a global average estimate of 60% and, closer to home, 54% for South Africa, the agency noted.

“Going forward, we expect fixed income yields to rise nearly 50 basis points across the curve over the next two weeks, due to tight market liquidity.”

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