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PenCom Records N14.9tn Contributory Pension Fund in 2022

The total assets of the Contributory Pension Scheme grew by N1.56 trillion in 2022 as it recorded N13.42 trillion in 2021

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The National Pension Commission has revealed that N14.99 trillion was recorded as a Contributory Pension fund at the end of year 2022.

This was contained in its latest report titled– Report on pension industry portfolio for the period ended 31 December 2022.

According to PenCom, the total assets of the Contributory Pension Scheme grew by N1.56 trillion in 2022 as it recorded N13.42 trillion in 2021.

Investors King reports that the members of the contributory scheme increased by 333,002 in 2022 as the number of contributors was formerly 9,529,127 as at 2021 ending. 9,862,129 members were recorded at the end of 2022. 

The Commission gave the breakdown for 2022 as follows: N9.64 trillion or 64.33 percent of the assets was invested in the Federal Government securities, N1.66 trillion for incorporate debt securities, N1.98tn for money market securities and N82.8bn for mutual funds aside other investment figures.

The Director-General of PenCom, Aisha Dahir-Umar marveled at the increase in pension fund assets in the third quarter of 2022 despite the economic situation globally.

She averred that the Pension Scheme will diligently deliver good and quality services for the benefit of its contributors.

Dahir-Umar noted that the Commission has broadened its means of acquiring funds for the scheme and embarked on infrastructure projects amongst other forms of investments.

She said the efforts put forth are yielding much increase which makes the Commission ahead of the economic situation and inflation. 

The Director-General hinted that steps have been taken to enable the commission’s annual average rates of return of pension funds in Retirement Savings Account and legacy funds to rise above inflation rates.

Her words, “This laudable performance, in the growth of the AuM, points to the fact that the pension industry will continue to deliver value and benefit to its stakeholders and the nation’s economy. Perhaps, the most significant achievement recorded in the third quarter of 2022 was the successful issuance of guidelines on accessing RSA.

“Balance towards payment of equity contribution for residential mortgage. The guidelines give effect to Section 89(2) of the Pension Reform Act 2014, which allows eligible RSA holders to apply a percentage of the balances in their Retirement Savings Accounts for payment of equity contribution towards residential mortgage for employees of the public, private and the informal sectors.”

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Pension

Zamfara Governor Dauda Lawal Unveils N13 Billion Pension Crisis

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Dauda Lawal, the governor of Zamfara State, has claimed that he resumed to an empty state treasury.

In an interview with TVC on Wednesday in Abuja, the governor revealed that he inherited N13 billion in unpaid pensions and gratuities from previous administrations in the state.

However, he noted that his administration has settled around N9 billion of the debt owed to Zamfara workers, adding that the remaining balance will be cleared in the coming months.

The issue of unpaid pensions and salaries is not new to the system.

Lawal made it known that the pensions and gratuities date back to 2011, which is 13 years before his administration.

He expressed concern over the heavy burden placed on his administration.

Accumulated debt backlogs from the previous administration, including sectors such as education, electricity, and water resources, seem to be weighing down Lawal’s government.

However, the state governor is confident and determined. According to him, his government is diligently working to resolve the issue of debt.

In his words: “We inherited a very empty treasury with a backlog of four months’ salaries for Zamfara State workers. We were able to settle that. We are set to settle N1.3 billion for NECO. We were able to settle N1.4 billion for WAEC. We also settled N1.4 billion for Kedco because, when we took over, almost all the ministries, including the government house, were disconnected from electricity.

Since 2011, Zamfara has not paid pensions and gratuities to the tune of N13.4 billion. Guess what? We have already cleared about N9 billion as of today. The remaining balance will be paid within the next couple of months,” Lawal said.

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Pension Funds Boost Real Estate Investments to N1 Trillion in 2023

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Pension funds have invested a record N1 trillion in the real estate sector in 2023.

According to Oguche Agudah, CEO of the Pension Fund Operators Association of Nigeria (PenOp), this surge in investment shows the real estate sector’s viability as a strategic investment option for pension funds.

“Pension funds have consistently been investing in real estate and REITs over the past few years, and these investments provide a stable return and help diversify the pension fund portfolios,” Agudah said.

Real Estate Investment Trusts (REITs), which pool capital from investors to earn dividends from real estate assets, have been a significant beneficiary of this trend.

In 2023, N1 trillion out of a total Assets Under Management (AUM) of N18.36 trillion was channeled into real estate and REITs.

This is a notable increase from 2022, where N943.61 billion was invested from an AUM of N14.99 trillion.

The trend over the past few years shows a consistent commitment to real estate investments.

In 2021, N957.27 billion was invested from an AUM of N13.42 trillion, while 2020 saw N958.35 billion invested from an AUM of N12.31 trillion.

Going back to 2019, pension funds invested N972.83 billion out of an AUM of N9.58 trillion, marking one of the highest allocations to real estate and REITs.

Dave Uduanu, managing director and CEO of Access Pensions Limited, highlighted the attractiveness of real estate investments for pension funds.

“Pension managers are interested in investing in real estate, but it has to be well structured,” Uduanu said.

He said these investments provide competitive returns and help reduce Nigeria’s infrastructure deficit.

The regulatory landscape has also evolved to support greater investments in real estate. The regulation of equity contributions for residential mortgages, which began in December 2023, has facilitated more substantial investments in this sector.

Data from the first quarter of 2024 shows that 2,971 pension contributors via RSA have signed up for equity contributions for residential mortgages, with N29.2 billion already allocated.

Despite the significant allocation to real estate, a chief investment officer from one of Nigeria’s leading PFAs noted that there is still room for greater investment in infrastructure, including real estate.

“One thing we can do better is on visible impact. One way people can truly feel the tangible impact of their pensions is in the area of infrastructure investments, and real estate is key here,” the officer stated.

The growing investments in real estate by pension funds are a testament to the sector’s potential and the strategic vision of pension fund managers.

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PFAs Posted Decent Growth – Coronation Economic Note

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According to the latest monthly report released by Nigeria’s Pension Commission (PENCOM), the assets under management (AUM) of the regulated pension industry increased by +26.2% y/y to N19.7trn.

Meanwhile on an m/m basis, the AUM decline marginally by -0.5%.

This marks the first decline since September ’22. Notably, FGN debt securities accounted for 62% of the total AUM in March ’24. Meanwhile, other asset classes such as private equities, real estate, and infrastructure funds, accounted for 0.4%, 1.4%, and 0.8% of total AUM, respectively.

Total FGN debt securities held by the Pension Fund Administrators (PFAs) increased by +19.7%
y/y but declined marginally by -1.4% m/m.

Specifically, we note that the FGN bond instruments held by the PFAs increased by +17.2% y/y to N11.5trn, but declined by -2.4% m/m, on the back of a 10-year tenure FGN bond maturity (N719.9bn). The FGN bonds account for 58% of the total AUM.

FGN bonds remain attractive due to its lower risk profile and elevated yields. It is worth noting that the average FGN bond yield increased by +219bps m/m as at end-March ‘24.

The PENCOM report shows that NTBs held by PFAs grew by +120% y/y and increased by +42.5% m/m to N407.6bn in March ’24. We note that the average NTB yield increased by +250bps m/m as at end-March’24.

This asset class accounted for just 2.1% of the total AUM in the same month.

Meanwhile, State government securities held by the PFAs increased by 64.1% y/y to N266.2bn in March ‘24.

It is worth highlighting that domestic equity holdings surged by 99.6% y/y and 8.7% m/m to N2.1trn in the same period, accounting for 10.6% of the total AUM in March ‘24 compared with 9.7% in February ’24. The NGX-all-share index (NGX-ASI) rose by +90.6% y/y and +4.6% during the same period.

Furthermore, YTD (28-March ’24) return on index rose by +18.1% to close at 39.8% from 33.7% in February ’24.

Recently, the market has shown a bearish trajectory as the NGX-ASI declined by -6.1% m/m as at end-April ‘24, partly, on the back of relatively weak corporate earnings amid inflationary conditions. Given expectations of higher yields in the fixed income market on the back of continuous tightening or a hold stance of the CBN at the next MPC meeting, PFAs are likely to reallocate a greater portion of pension assets to fixed income securities.

According to PENCOM, the total pension contributions since inception remitted to the Individual Retirement Savings Account (RSA) increased by +17.3% y/y to N9.9trn as at end-December ‘23 compared with N8.5trn recorded as at end-December ‘22. Remittance from the public sector accounts for 52%, while private sector accounts for 48% of the total pension contributions.

This can be partly attributed to improvement in the efforts to expand pension coverage.

Notably, PENCOM added a total number of 8,927 micro pension contributors in Q4 ’23 bringing the total number of registered MPCs in the Micro pension plan from inception to 114,382 as at end-December ’23 from 89,327 as at end-December ’22.

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