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Oshiomhole faults investment of pension fund in Capital Market

By on July 16, 2014

The Governor of Edo State, Mr. Adams Oshiomhole, has faulted the investment of pension asset in the capital market, saying the fund should rather be deployed to areas that would benefits contributors directly.

Toeing his line of argument, the umbrella body for workers in the country, Nigeria Labour Congress (NLC), said pension assets should be used to provide houses for the working people.

Oshiomhole made this assertion while sharing his thoughts on how best to deploy pension assets to grow infrastructure at the just concluded World Pension Summit (WPS) “Africa Special” in Abuja recently.

The summit with theme “Shaping the Future” was jointly organised by the National Pension Commission (PenCom) and WPS.

He noted that using the current guidelines on the investment of pension assets in the country, the fund would not benefit contributors directly.
He observed that the fund is largely being invested in government bonds and quoted stock in the capital market.

These instruments, according to Oshiomhole, benefit the rich who have the capacity and connections to access the fund to do business and make profit while the workers who are contributing the fund don’t have access to it.

The governor said investing pension assets in the capital market is tantamount to pooling the resources of the poor for the benefit of the rich.
This, in his thinking, negates the spirit and objectives of the contributory pension scheme.

Oshiomhole, therefore, charged the pension regulator, operators and other stakeholders to design ways of deploying pension assets largely in such a way that workers and contributors benefit directly from their retirement savings fund.

Also speaking during the summit, the Vice President of NLC, Mr. Issa Aremu charged pension stakeholders to deploy pension asset to financing home ownership schemes for workers.

He said this is one of the ways to deploy pension funds for the benefits of contributors directly.

He also demanded that the minimum guaranteed pension for retirees should not fall short of the national minimum wage at any point in time.

By the time the National Pension Commission (PenCom) start implementing it, all retirement savings account holders who have contributed for a number of years to a licensed Pension Fund Administrator (PFA) will be entitled to a guaranteed minimum pension.

PenCom had since engaged a consultant to look at the modalities for implementing this provision in the pension law and which submitted its recommendations. The commission is currently reviewing the work of the consultant.

The minimum guaranteed pension ensures that a retiree under the contributory pension scheme would not receive monthly retirement benefit below the guaranteed minimum pension.

This guarantee comes into play when a contributor is unable to accumulate enough money to enable him to draw down a pre-specified minimum benefits; as such the state provides the required assistance by topping up the contributor’s account with the required amount.

The minimum pension could be seen as a social security benefit which seeks to redistribute income nationally.

Also PenCom is expected to design appropriate techniques to determine the eligibility of retirees for the minimum guaranteed pension, in addition to the required number of years of contribution.

This is important in order to avoid retrogressive tendencies that could arise from a high income household benefitting from the minimum pension provision.

The Federal Government is expected to bear the additional cost of funding the minimum guaranteed pension in many countries.

Presently, more than 11 per cent of retirees receive a minimum pension guarantee benefits, which cost 0.1 percent of Gross Domestic Product (GDP) in Chile, which Nigeria’s contributory pension is patterned after.

 

 

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