Chairman of Pension Fund Operators Association of Nigeria, PenOp, Mr. Misbahu Yola has said that creation of the Pension Protection Fund, PPF and Minimum Pension Guarantee, MPG, is a welcome development for all stakeholders. Yola who spoke at a stakeholder conference on the Pension Reform Act 2014 in Abuja said that the creation of the PPF and MPG would give more security to low level contributors.

Speaking on the topic “Establishment & funding of the pension protection fund & minimum pension guarantee under the PRA 2014” Yola stated that funding the scheme would require will and commitment as it will foster greater confidence in pension administration and attract more participation.

He explained that a PPF is a (usually statutory) fund established by governments to offer additional support for pension payment to eligible pensioners ( UK – Pension Protection Fund / US – Pension Benefit Guarantee Corporation) while MPG refers to the minimum pension which an occupational pension system has to provide for employees/contributors irrespective of contributions.

Recall that the Pension Reform Act, 2004, Section 71-(1) provides that all RSA holders who have contributed for a number of years to a licensed Pension Fund Administrator, PFA, shall be entitled to a guaranteed minimum pension. However, the modality for funding of the MPG was not provided for in the Act, Yola added.

Also, the Pension Reform Act, 2014, Sections 82 and 84 provided for the establishment of a statutory PPF as a means of actualisation of the MPG. It mandates the National Pension Commission, PenCom, to set up a Pension Protection Fund to be utilised for payment of compensation to eligible pensioners who have insufficient funds to enjoy the payment of pension upon retirement. According to Yola, the MPG provide a backup in case of financial losses arising from investment activities as well as any other purpose deserving protection with the PPF as the Commission may determine from time to time.

He said that the fund shall consist of the following; an annual subvention of one per cent of the total monthly wage bill payable to employees in the public service of the Federation, annual pension protection levy paid by the Commission and all licensed pension operators at a rate to be determined by the Commission from time to time as well as income from investment of the Pension Protection Fund.

Yola said that the Commission shall utilise the PPF for funding of the MPG pursuant to section 84 of the Act; augment pensions in case of financial losses arising from investment activities as well as any other purpose deserving protection with the PPF as the Commission may from time to time determine.

On the benefits of the PPF and MPG, Yola said that it would bring about social harmony and security which means that the MPG would ensure support for eligible retirees by augmenting their balance through such support for a reasonable monthly pension payment to be determined by the Commission.

He said that it will bring about greater confidence in pension administration and the Contributory Pension Scheme, CPS; encourage participation by other groups; would encourage informal sector participation as well as accumulated funds can further deepen the financial market.