THE new pension system, the Contributory Pension Scheme, CPS, envisaged a robust, just and guaranteed pension life for Nigerian workers.
Vanguard joins well-meaning Nigerians and Labour leaders, both serving and retired, in supporting the new system.
We believe that aside some of the out-layers, especially the disgruntled employers, including some state governments that have refused to honour their obligations in terms of remittances as and when due in the stipulated proportion, the intended benefits are in place and running smoothly.
However, we have seen some worrisome statistics in the figures released by the National Pension Commission, PENCOM. We see the disproportionate allocation of funds in favour of government securities and corporate bonds.
Latest update on the deployment of the pension assets by the PENCOM has indicated that infrastructure share of the allocation has stagnated far below one per cent as against 15 per cent envisaged by the Pension Policy/Act.
Also, the report indicated that PFAs’ pension assets allocation to corporate bonds is about 96.6 per cent of the total corporate debt securities, CDS, as at end May 2021.
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The other two CDS investment outlets, namely: corporate infrastructure bonds and green bonds, shared the paltry 3.4 per cent. While we understand the investment rationale behind these allocation formula, we believe things can be better done to maximise the benefits of the huge and still growing pension assets for individuals and the entire economy. The first obligation is to ensure that pension assets are safe from any form of value erosion.
Then the need to maximise returns comes into focus. However, the third benefit which has to do with economic development in the allocation of the assets appears to have been sidelined.
A situation where Pension Fund Administrators, PFAs, are moving most of their pension asset holdings to treasury bills and corporate bonds to the detriment of infrastructure bonds and green bonds is not economically efficient in the medium to long term, not even with the parlous state of the economy.
We believe that the huge pension asset can be used to jump-start a commercialised public infrastructure system that would guarantee even as much profit as we see in the corporate bonds and government securities.
This would be a win-win investment model for both the economy and the primary beneficiaries of the pension assets. The present situation where trillions of Naira in pension assets are deployed to corporate bonds ending up developing private businesses does not serve the overall interest of the wider economic space.
The PenCom should work more on getting the relevant authorities to smoothen the operating environment for infrastructure sector to enable it deploy adequate proportion of the pension asset to that critical sector of the nation’s economy.
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