Aisha Dahir-Umar is acting director general, National Pension Commission (Pencom), who is on the driving seat of the commission’s strategic objective of rescuing the nation’s pension scheme from years of accumulated pension liabilities. She has done a lot to put the many problems associated with pension schemes in the country behind.
Pencom, under her management, took innovative steps to prioritise payment of pension liabilities. This has provided a solution to the extent that retirees no longer need to nurse apprehension about life in retirement.
Outstanding pension arrears were incorporated in annual budgets and with government’s commitment, Pencom has resolved much of the crisis of huge outstanding pension liabilities. This is the result of new zeal and energy on the part of the DG and her team. She took steps to restructure the management team of the commission and the results affirm it was a step in the right direction.
She also gets the credit for capacity building initiatives by extending coverage of pension scheme to under-served sectors. The Contributory Pension Scheme (CPS) has been extended to the informal sector of the economy through the creation of a Micro Pension Plan launched in March 2019.
This is an arrangement that has brought in self-employed persons and persons working in organisations with less than three employees under pension services.
Her tenure has witnessed a continuous increase in the number of persons joining the scheme. There is a tremendous growth as well in pension funds under her management.
According to the commission, pension fund assets had risen to N12.7 trillion as at the end of June 2021 with contributors under the CPS hitting the N9.38 trillion mark.
Dahir-Umar attributed the steady growth of the fund to the federal government’s consistency in the remittance of monthly contributions of its employees.
One of her major beneficial initiatives to retirees under the scheme is pension enhancement under a programmed withdrawal arrangement. This has enhanced monthly pension benefits of retirees by making them share the high returns being generated with the balances on their Retirement Savings Accounts by Pension Fund Administrators (PFAs).
The result is that monthly pensions for over 60 percent of retirees under the programmed withdrawal arrangement has increased, according to Dahir-Umar. Enhancement of pensions of eligible retirees began as far back as December 2017, she said.
“I must say that the implementation of the pension enhancement was one of the significant milestones attained since the commencement of the CPS. It confirms that the CPS has workable internal mechanisms to respond to legitimate demands of retirees as they seek a reasonable retirement income”, she assured.
The commission has also created a multi-fund structure for retirement savings accounts. The new structure has been designed to align a contributor’s risk tolerance or appetite with his or her investment return expectations, based on work life cycle.
This has led to subdivision of the RSA fund into four categories to cater for the different age groups of contributors. Different categories of funds with respective asset allocation are tailored to fit the age and risk profiles of contributors.
Dahir-Umar explains that the fund categorization is to ensure that young contributors, who have longer working years and relatively higher risk appetites, would desire more investments in variable income instruments.
On the other hand, middle-aged contributors or retirees, who are risk averse, would prefer fixed income investments with stable streams of income. She said the implementation of the multi-fund structure is targeted at increased returns due to aggressive investments and ultimately growth of the pension funds.
The objective of increasing return has been supported with policies that have expanded the scope of allowable investment instruments and fund classes available to contributors. Limits have been set for variable income instruments to achieve high returns over a given time.
Apart from improving returns on pension funds, the initiative is also aimed at resolving the challenge of asset-liability risk management by pension funds. They are now better positioned to align the risk return expectations of contributors, match pension assets and liabilities and achieve pension asset portfolio diversification.
Dahir-Umar has moved Pencom to a modern day technology-driven institution. The commission has deployed online application automation programme for the annual pre-retirement verification and enrolment for all its retirees. Verification and enrolment for its 2021 retirees and prospective retirees of federal government treasury-funded ministries, departments and agencies can now be done online.
She said resort to innovative use of technology became imperative for the commission in the changed environment of Covid-19 to navigate the challenges posed by the pandemic.
With the deployment of the new application, mass gathering of retirees is no longer necessary while the convenience for prospective retirees has been assured through a seamless enrolment process.
Another of Pencom’s notable technological innovation is the design and deployment of RSA transfer system, which it rolled out last year. This is s a robust electronic platform that enables seamless RSA transfers.
The objective is to stimulate competition and improve service delivery in the pension industry as RSA holders will now determine which PFA manages their pension contributions and retirement benefits.