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Insurance companies comply fully with pension act

By Rosemary Onuoha
The National Pension Commission (PenCom) has hailed the insurance sector for fully complying with the Pension Reform Act (PRA) 2004 in 2010 by opening Retirement Savings Accounts (RSAs) for their employees.

PenCom noted that only two companies did not comply with the Act in the year under review.

According to PenCom’s annual report released recently, the regulatory body for pension practice in the country stated that all but two of the forty insurance companies inspected in 2009 had fully complied with the PRA as all their employees had opened RSAs which were being funded regularly while the remaining pension assets worth N1 billion were transferred to licensed operators during the year.

One of the defaulting insurance companies, according to PenCom, had commenced the process of transferring the legacy assets in its possession to a Custodian. PenCom had commenced the process of legal action against the other insurance company that was yet to comply and had notified the National Insurance Commission (NAICOM), accordingly.

Meanwhile there was a remarkable increase in the value of pension fund assets from N1,529 billion as at 31 December, 2009 to N2,029 billion as at 31 December, 2010, indicating a 32.70 percent growth. The growth of pension fund assets was mainly accounted for by new capital injections either by contributors or scheme sponsors as well as investment income, the commission revealed.

Mr. Mohammed Ahmad, Director General of PenCom stated that there was an appreciable increase of 13.20 percent in the number of registered RSA holders over the 4.01 million recorded in 2009. The public sector maintained the lead in the RSA registrations with 56.45 percent, while the private sector had 43.55 percent.

However, due to improved compliance by the private sector employers, RSA registrations in this sector increased by 19.44 percent against the public sector increase of 8.49 percent, Ahmad noted.

The total pension contributions into the Retirement Savings Account in the private and public sectors amounted to N289.81 billion in 2010. This was accounted for by N162.46 billion public sector contributions and N127.35 billion private sector contributions, which represented 56.06 percent and 43.94 percent respectively.

This represented average monthly contributions of N13.54 billion and N10.61 billion for the public and private sectors respectively. The gross investment income was a modest sum of N205.30 billion or 10.12 percent of the total pension assets during the year under review.

PenCom also noted that the RSA Active Fund recorded a tremendous growth of N231.41 billion (30.9 percent) during the year under review while the Retiree Fund witnessed a very significant growth of 42.66 percent from N89.24 billion unaudited value as at end of 2009. Similarly, by the end of year 2010, the CPFA and AES assets had grown phenomenally from N342.36 billion and N266.1 billion in 2009 to N404.37 billion and N423.12 billion respectively.

According to the PenCom DG, the bond market continued to serve as safety alternative for the investment of pension funds, which were mostly put in FGN bonds with term to maturity of below seven (7) years.

In his words “One of the remarkable pictures of the bond market in 2010 was the surge in pension funds investment going to State Governments bonds that increased by 134 percent in 2010 over the placements in this investment class during the previous reporting period.”


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