Sanctity of Truth
Friday, May 9, 2014
Pension
BUSINESS |PENSION 37
Police PFA: Panic spreads despite PenCom’s safety assurance PENSION The creation of a separate pension fund administrator for the Nigeria Police Force stirs more reactions from stakeholders Sunday Ojeme
T
he serene atmosphere that had pervaded the almost nine-year operation of the Contributory Pension Scheme is beginning to experience some air of uncertainty due to recent clearance of the Nigeria Police Force by the National Pension Commission to operate under an independent pension fund administrator. Although the commission has reassured contributors and stakeholders that there is nothing to worry about, feelers from the industry, especially among the PFAs, present an ominous picture of the situation. In a response to the report regarding the threat to the pension assets, PenCom said that the issue of threat did not arise under the CPS because the management and custody of pension assets were respectively undertaken by separate licensed operators, namely the Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), under the strict supervision of the Commission. The Commission, through the Head, Communications, Mr. Emeka Onuora, said that the NPF Pensions Limited, which was recently granted an approval-in-principle, would operate like any other licensed PFA where the pension assets under it would be held in custody by licensed PFCs under the supervision of the Commission. The Commission pointed out that the Federal Government had never granted any approval to the Nigeria Police to pull out from the Contributory Pension Scheme, stressing that the personnel of the Nigeria Police Force were still under the Contributory Pension Scheme by virtue of Section 1 of the Pension Reform Act 2004. According to PenCom, 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. The statement emphasised that “following the enactment of the Pension Reform (Amendment) Act 2011, which exempted the personnel of the military and State Security Services from the CPS, the Nigeria Police and other agencies agitated for exemption from the scheme. However, the Federal Government decided after careful consideration of the submission made by the Nigeria Police that the Police personnel should remain under the Contributory Pension Scheme and that the Nigeria Police Force should seek administrative solutions to the grievances of its personnel within the framework of the scheme. “Accordingly, after extensive consultations with the Commission, the authorities of the Nigeria Police Force decided
A gathering of policemen, Inset: Inspector-General of Police. Mohammed Abubakar
to incorporate a limited liability company (NPF Pensions Limited) and apply to the Commission for licence to operate as a Pension Fund Administrator exclusively for the Nigeria Police personnel in order to address their peculiar concerns. Following a rigorous and thorough review of that application, the NPF Pensions Limited was found to have satisfied all the normal stringent approval-in-principle conditions without any concessions. Consequently, the Commission granted the NPF Pensions Limited an A-I-P for a licence to operate as a PFA. “It is pertinent to note that the NPF Pensions Limited, which is incorporated as a Private Limited Liability Company, will be managed independently by professionals who must satisfy the fit and proper persons due diligence requirements and approved by the Commission in line with the guidelines for appointment to board and top management positions of PFAs and PFCs. “Furthermore, although the NPF Pensions Limited will be exclusively for police personnel, every police officer will, in line with section 11(2) of the PRA 2004, be at liberty to transfer to another PFA of his/her choice as soon as the transfer window is opened by the Commission.” The Commission further hinted that in order to achieve a smooth take-off of the NPF Pensions Limited, the Commission had developed an Operational Framework that would guide the reassignment of Personal Identification Numbers (PINs) and transfer of records of all Nigeria Police contributors to the NPF Pensions Limited, which would be spread over an 18 month period. “Accordingly, in its usual consultative approach, the Commission has engaged and would continue to engage other licensed operators and stakeholders regarding the modalities of reassignment
of PINs and transfer of records of officers and men of the Nigeria Police, with a view to ensuring a smooth exercise for the benefit of the pension industry,” the statement added. However, despite what appears to be a water tight assurance on the part of the Commission, concerned stakeholders appear to believe that the situation is far more than what the regulator is trying to make the public believe. They are of the opinion that even though the likely pull out of the police from the scheme would not directly affect the N4 trillion assets being held in custody for the contributors, the movement or transfer of cash already under the control of the existing PFAs would definitely impact on the business plans of the fund administrators. They are of the opinion that the regulator should consider the risks taken, effort, hard work of shareholders and managements of PFAs in the registration, asset creation and value addition made over the last seven years. The statement said: “Significant accumulated losses running into several hundred millions of naira were incurred by most PFAs in the course of the years. Indeed, some are only just coming out of these losses. Following the military exit,
Following the military exit, the further loss of Police assets totaling N302 billion will have significant impact and draw-back on the PFAs
DG, PenCom, Chinelo Ahonu Amazu
the further loss of Police assets totaling N302 billion will have significant impact and draw back on the PFAs. Potential loss of income is about N5 billion per annum collectively. “This will invariably have attendant knock-on effect on overall operations of existing PFAs to varying degrees. In order to have a fair outcome and ensure any future such licensing requests are mitigated, we believe the conditions should, while being fair, be stringent.” The stakeholders, in the interest of equity and fair play in the industry, craved the indulgence of the Commission to consider restricting the Police PFA to managing only pension contributions from the Nigeria Police Force, both now and in the future. It also suggested that for an orderly transfer within the Pension Reform Acts and Guidelines issued by the Commission, the police should be restricted to enrolling new employees for now, until the transfer window is opened, at which point officers and men could choose to move or compensation be given by the Police PFA to existing PFAs in the form of asset purchase as in the case of operator buy-outs. On the issue of asset transfers, the stakeholders also suggested that the process should be arranged in an equitable manner to neither favour the Police PFA nor the existing Retirement Saving Account funds. According to them, “the large percentage of FGN bonds in the RSA portfolios' disposal will lead to significant losses at this time. We must also ensure that the transfer of N302 billion asset cash and near cash to a single player within a short period of time do not cause systemic risk for the market. To prevent future liability, some form of indemnity should be considered.”