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Pension industry net assets to hit N20trn in two years -report

Joseph Oyekanmi

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PenCPension industry net assets to hit N20trn in two years -reportom transfers 10,165 RSAs to new PFAs

The Nigerian pension industry’s net asset is projected to hit the N20 trillion mark by 2023, a study has shown.

According to Agusto & Co.’s newly released 2021 Pension Industry report and survey, the growth in the industry’s managed assets has been largely driven by investment returns and additional contributions, to a lesser extent.

The National Pension Commission (PenCom) franchised 22 PFAs to privately manage the Contributory Pension Scheme.

The PFAs have mandates to open RSA for employees; invest and manage pension fund assets; payment of retirement benefits and accounting for all transactions relating to the pension funds under their management.

Agusto & Co said the pension industry would record an average growth rate of 18 per cent (in line with the five-year average growth rate of 18 per cent) in the next three years leading to 2023.

The study also found that change of Pension Fund Administrators (PFAs) by some 25,600 Retirement Savings Account (RSA) holders have triggered the transfer of N102.5 billion from one PFA to another.

The holders moved all their savings in the last eight months to their new managers.

The number of transfers will rise as more account holders become aware of the transfer process in the subsequent quarters of this year, the study found.

“In addition, we expect competition to intensify in the pension Industry as PFAs seek to attract new enrollees while retaining existing ones,” the company said.

Unchanged
The rating agency said the industry’s structure may remain unchanged in the short-to-medium term with the top five players leading on the back of good market presence and strong brand recognition.

It said the industry has evolved from one with predominantly public sector participants running a defined benefit scheme to a mandatory defined contribution system for all government and private sector employees.

The 2004 pension reform redefined retirement planning in Nigeria and drove significant growth in the number of enrolees and the size of managed assets in the Industry.

“As at 31 December 2020, the Nigerian Pension Industry’s assets under management (AuM) stood at N12.3 trillion (or $32.3 billion). This represented a 20.6 per cent growth over the N10.2 trillion reported at the end of 2019 and an 18.3 per cent compound annual growth rate over the last five years,” it said.

”In particular, over the last five years, the industry’s annual contributions have averaged N699 billion while withdrawals have averaged about N341 billion, translating to a net annual contribution of N347 billion and accounting for 26.6% of the Industry’s AuM growth over the period. The remaining 73.4 per cent of average growth was attributable to investment returns earned on the portfolios.

“The pension transfer window opened on 16 November 2020 to allow pension retirement saving account (RSA) holders switch Pension Fund Administrators (PFAs) once a year at most and at no cost. As at the end of the second quarter of 2021 (less than nine months after the transfer window was opened), over 25,600 RSA holders with pension assets over N102.5 billion were reported to have changed PFAs,” it added.

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