Pension Funds Hit N19.53 Trillion
…Investments Mostly in Government Securities
By Patience Ikpeme
Nigeria’s pension fund assets have grown to N19.53 trillion as of January 31, 2024, reflecting a N1.17 trillion increase from December 2023. This information is according to the National Pension Commission’s (PenCom) unaudited report.
Government securities remain the dominant investment choice, with N12.14 trillion or roughly 62% of the total funds allocated to them. Bonds account for the majority within this category, at N11.59 trillion, followed by treasury bills at N221.81 billion.
PenCom’s report also details investments in other asset classes, including agency bonds (N14.86 billion), Sukuk and green bonds (N306.46 billion combined), and state government securities (N270 billion). Money market instruments hold N1.71 trillion of the total assets.
The report further reveals that as of January 31st, there were 10.22 million registered Retirement Savings Account (RSA) subscribers. This indicates a possible increase in the number of people contributing to the pension scheme.
The dominance of government securities in pension fund investments highlights a cautious investment strategy. This approach prioritizes security and stability over potentially higher returns offered by riskier assets.
Over N3 Trillion Paid Out Under Contributory Pension Scheme
Significantly, the National Pension Commission (PenCom) has also revealed that over N3 trillion has been paid out to 500,000 workers, retirees, and Next of Kin (NOK) since the inception of the Contributory Pension Scheme (CPS) in 2004.
These payments were made through various channels, including Programmed Withdrawal, Retiree Life Annuity, En-bloc Payment, Death Benefits, Temporary Job Loss, Voluntary Contributions, and Equity Contribution for Residential Mortgage.
Modes of Payment for Retirement Benefits
PenCom Director-General, Mrs. Aisha Dahir-Umar, explained the different options available for retirees to access their benefits under the CPS framework established by PenCom and regulated by the Pension Reform Act (PRA) 2014.
Programmed Withdrawal (PW): This option allows retirees to receive their retirement benefits in regular installments (monthly or quarterly) spread throughout their estimated lifespan. Since the scheme’s inception, 346,296 retirees have chosen this mode, receiving a total lump sum of N1.04 trillion and N15.89 billion in monthly pensions.
Retiree Life Annuity (RLA): This option involves purchasing a steady stream of income for life from a life insurance company using a lump sum from the retiree’s RSA balance. As of January 31, 2024, 121,125 retirees opted for this mode, receiving a combined N264.26 billion lump sum, while N739.04 billion was paid to RLA providers for monthly annuities of N7.72 billion.
En-bloc Payment: This mode is available for retirees whose RSA balance is insufficient to provide a Programmed Withdrawal or Retiree Life Annuity equal to one-third of the minimum wage. Since the scheme’s start, PenCom has approved en-bloc payments totaling N49.07 billion to 161,817 retirees.
Death Benefits: These benefits are paid to the designated beneficiary (spouse, children, next-of-kin) in case of the RSA holder’s death while employed. From the scheme’s inception, N396.75 billion in death benefits have been paid to the beneficiaries of 97,834 deceased employees and retirees.
Temporary Job Loss: The PRA 2014 allows employees who lose their jobs to withdraw up to 25% of their RSA balance after four months of unemployment. A total of N228.10 billion has been paid out under this provision to 496,833 RSA holders under 50 years who couldn’t secure new employment within four months.
Voluntary Contributions (VC): RSAs allow additional voluntary contributions besides mandatory contributions to boost retirement savings. Since the scheme’s beginning, N42.46 billion in voluntary contributions have been withdrawn by 50,772 contributors.
Equity Contribution for Residential Mortgage: Eligible RSA holders can use a portion of their RSA balance for residential mortgage down payments. This initiative has helped many achieve homeownership. As of January 31, 2024.
