The Director General and Chief Executive Officer of the National Pension Commission (NPC), Muhammad K. Ahmad, may not, indeed, be the first Nigerian to beat this drum. .

History has other people who had reasoned in this direction, but his may actually be the first to make tangible impact as both the workers and their employers appear to have woken up from slumber to begin to save for the rainy day.

But Ahmad should thank his stars for the coming of the Pension Reform Act, which has given his work a boost. In just one year, he has recorded some degree of success, particularly in the public sector where the Federal Government has contributed over N23 billion to the pension fund. He also said that the private sector is doing some contributions, but cannot categorically say what it is.

The PenCom boss looks at the Pension Reform Act and other schemes in the past aimed at encouraging Nigerians to keep something aside for old age, saying that the old reforms were inadequately funded and covered only a few people. He believes that the new initiative would change the status quo. When reminded that the present economic situation of the country may prevent many Nigerians from developing saving habit, which is necessary to make the reform work, as many are feeding from hand to mouth; he dismisses this, saying that the economy will not continue to be harsh.

Background
My name is Muhammad K. Ahmad. I currently supervise the National Pension Commission (NPC). I worked with the Nigeria Deposit Insurance Corporation (NDIC) as a pioneer staff, we started it in 1989. Then, seconded by the Federal Inland Revenue Service before I was moved to the National Pension Commission last year.

PenCom
This is a new organisation. We are trying to establish it as part of the pension reforms of the government. It is supposed to be a supervisory and regulatory agency for the pension industry. We are to approve, licence and supervise PFA, PFC and other institutions relating to pension matters. In other words, we are going to supervise and regulate all pension matters in Nigeria. We are also to maintain a national data bank on pension matters as well as receive and investigate complaints against PFC, PFA and the employers. The membership of NPC include the NLC, NECA and the National Union of Pensioners (NUP), SEC, CBN, MOF and HOSF

Challenges
The challenges are obvious, starting from getting the enabling law formulated and passed by the National Assembly. Another challenge was in talking to the public, educating the Nigerian public, both the employers and the employees on the need for the pension reform and what it is all about. And, of course, trying to set up a new institution and establish a new industry entirely can be most challenging. My colleagues and I have been working round the clock to meet these challenges and we have been making progress.

Pension Reform Act
The Pension Reform Act is an Act meant to ensure that employees whenever they retire from service have something to fall back on. It ensures that every employee receives his or her retirement benefits as at when due. So, the whole thing is to ensure that when you and I retire, we don’t need to rely on the extended family system, we don’t need to rely on our employers, we must have saved to cater for ourselves after retirement. So, that we don’t go home to begin to beg in order to sustain ourselves after many years of active service. So, the Act aims at establishing a sustainable, simple and transparent pension system, to empower the workers, establish strong regulatory and supervisory framework as well as secure compliance and promote wide coverage.

Impact of reform
It will improve living standards of the elderly, secure financial autonomy and independence of retirees. The pensioner will no longer be at the mercy of the employer as he or she is assured of regular payment of retirement benefits. It will also improve the labour market by reducing incentives for early retirement and also increase the supply of labour. It will reduce unemployment due to GDP growth as well as promote labour mobility as retirement savings account will be made portable.

Other pension schemes
There is a review of existing schemes. In the past, the various schemes were largely unfunded. Pension obligations were unsustainable and majority of Nigerians were not covered by any form of pension scheme. An example of this was in a survey carried out between 1990 and 1991, where it was observed that only 1.3 per cent of Nigerian workers were covered under any pension scheme compared with Mauritius, which had about 60 per cent during the same period or even Cameroun, which had about 17 per cent. So, it is a big problem that we needed to make sure anybody who had worked has something to fall back on. We discovered that there were unsustained outstanding pension liabilities estimated at N2 trillion. We also noticed that there were weak and insufficient administration as well as demographic shifts and aging benefit scheme that was unsustained.

Support of the new scheme
I am happy to say that we first started with the Federal Government. The government has been quite supportive and committed. In fact, since the scheme started in July last year, the government as an employer has never defaulted in its contributions. We have collected contributions both from the employer and the employees regularly and it has been kept in the Central Bank of Nigeria and invested in Treasury Bills, pending when the pension fund administrators are licensed. In the private sector also, we have had series of stakeholders’ discussions, particularly with the secretariats of NECA (Nigerian Employers Consultative Association and NLC (Nigeria Labour Congress), trying to explain to the employers and employees what the scheme is all about. I am happy to say that the scheme has started and indeed, observed challenges are being addressed.

Money collected
From the public sector, what has been collected at the federal level is about N23 billion as at the end of March. For the private sector, the official take off was January this year and they have started collecting. What we want them to do is to make sure that contribution has started and by the time the administrators are constituted, the employees can choose the pension fund administrator that will manage their scheme and their fund transferred to the respective pension funds administrators.

Informal sector
The informal sector is another challenge. You see, we are starting a new industry where we have plenty of operators. So, you have to work with the employers to look at their existing schemes and how it can be managed and incorporated into the new scheme. Remember that we are coming from a background where schemes were never funded. Even the big multi-nationals, most of them, their schemes were not fully funded. So, we need to sit down with them to make sure that their schemes were fully funded. This means that we have to move gradually from the formal sector to the informal sector. But I believe we will eventually reach there after we have stabilised and established a very strong framework.

Collection from informal sector
We don’t have records of that yet because they are collecting on individual bases. That of the government, we got to know of it because it is centralised and we are supervising it. But I believe that very soon we will have an idea of what they have contributed. But some of the private sector players have been making contributions and it is not new to them. Perhaps it is just the rate of the contribution that will go up.

What they have paid for before will just be credited to their retirement savings account. So, when they are leaving they will now take them. For instance, if under all rules, they are entitled to 100 per cent, when they are leaving they will take 100 per cent. That is, when they are leaving they will take all the contributions 100 per cent and if you have paid 60 per cent, you will take only the 60 per cent.

But there is no need for them, that is, those running old schemes to take their money back because assuming this scheme is not put in place, would they have taken their money out? They wouldn’t have taken their money out. So, what is the new thing that would make them to take their money out? Nothing! This new scheme is a kind of retirement that will make sure that old institutions will take adequate care of the money they have been collecting.

Public Sector
In transitional arrangements for the public sector, accrued pension rights, gratuity and pension are guaranteed and will be actually determined for each employee transiting to the new scheme at cut-off date. Also the Federal Government is to establish a Retirement Benefit Bond Redemption Fund (RBBRF) at the CBN and pay five per cent of monthly wage into the fund until last retirement bond issued is redeemed. And the bond redeemed from the RBBRF upon an employee’s retirement will be added to the RSA.

Pension Fund Administrators
The administrator is an employee who opens a retirement savings account, managing it to an expanding benefit. And the custodian, when he is retiring sits down with him to see how he is going to utilise it. On the other hand, a custodian’s responsibility is to collect the contribution on behalf of the beneficiary and keep it in custody. On no account should the pension fund administrator have direct access to the fund. The custodian keeps the money and then tells the administrator that I have collected an amount of money from some people, what do I do with it? The administrator will say, buy shares from the capital market for me and take any other action that has been allowed under the National Pension Commission Act.

Our time frame
Of course, we have a time frame and we believe we are working within that time frame. We believe that the operators would be licensed within the next few weeks or so and after which other things will follow.

Our powers
The law has given us sufficient powers. The government has supported us in taking off, and the prospective operators have been supporting us too. The various stakeholders, NLC, NECA have given us the necessary support. So, we believe we are on the right track.

Management philosophy
As an organisation, we believe in consultation. And, in fact, since we started all the guidelines and regulations issued; we have exposed them at the stakeholders’ forum to get feedback from them, get their suggestions because we believe that the essence of this scheme is for the worker to benefit at retirement. And whatever we are going to do is to see how the worker saves for his retirement life. Therefore, we are making sure that those who have good schemes see how they can improve on the existing schemes. So, ours is to basically see how we can carry people along and to make sure that whatever we introduced is acceptable to the people.

The Economy
The economy will not continue to be harsh. Measures are being taken to address such issues that are making the economy to be harsh. And I believe eventually the results of the current reforms will start to be seen.

Advice
The employee is to set aside money for life after retirement, you are keeping it for yourself. You don’t need to retire to start begging, you don’t need to retire and start pleading with your employer, we want you to be independent, to have a pleasant retirement life.

Dream
I don’t want to say my dream, but our dream. Our dream, that is, the staff and management of NPC, is to have the best organisation that can address the needs of the Nigerian workers when they retire.