Pension operators target $100bn by 2020

Pension funds operators are targeting $100bn assets by 2020, which is an increase of 300 per cent over the $25bn currently under their management.

The Managing Director, ARM Pension Managers (PFA), Mr. Sadiq Mohammed, said this during an interview with our correspondent in Lagos.

“The expectation of PenOp is that the pension funds being managed will rise to about $100bn equivalent in 2020 from the present $25bn, while the National Pension Commission has a projection of $72bn by 2020,” Mohammed said.

According to him, the target is attainable because there are new contributors signing into the Contributory Pension Scheme, with high expectation of the economy getting more liberalised, and improved employment situation.

Mohammed also observed that the new pension law that raised the monthly contribution of workers from 15 per cent to 18 per cent would give the funds a boost.

He said that the industry would be investing in higher yielding assets because currently, operators had opportunities to invest in more assets than previously, based on the investment regulations.

With all the ongoing reforms in the economy, he said that there was more expectation for higher income as more businesses would be established.

Mohammed said that presently, the pension industry in Nigeria is the largest pool of long term investible funds.

The ARM Pension boss said that making additional voluntary contribution had a lot of benefits for the workers.

“We have identified additional contribution as part of the growth for the industry because apart from what the employer and employee contribute, there is an opportunity for people that are making additional income to also contribute further so that at retirement, the balance in the account will be substantial enough for the person to retire comfortably,” he said.

Should the new pension law allow contributors to use their pensions as collateral for mortgage, he said those with large amount in their Retirement Savings Accounts would have higher chances of using it for mortgage than those with less amount.

Again, he said there was the tax advantage because the additional contribution was not taxable.

“If you make additional contribution for five years, it is not taxable even if you want to take it after that period,” he said.

Mohammed said the investment return was also attractive because it would give better returns than when the funds were just left in a savings account.

He said, “If you look at our return over time compared to savings rate, it tends to be higher. At the point of retirement, that retirement money is able to ensure that you retire well because the purchasing power is still high because the return on your pensions is higher than the inflation rate.

“One could use it to plan for the children’s education by making voluntary contribution and five years on, you can collect it when it is tax-free and use it to pay for the education of the children.”