Pensions Analyst, Andrews Agblobi, has bemoaned the worsening nature of pension arrears owed beneficiaries of the scheme.

According to him, although it isn’t a new phenomenon, the decline in prompt payment of pension funds is a cause for worry. He revealed that there is the need for swift redress of the situation.

“From my experience, pension arrears have actually worsened… In 2017, 2018 and 2019, we used to have about three months in arrears from especially the public sector scheme, which are the ones related to government. That moved on to around 10 months, so it got worsened at the end of 2022…”
Andrews Agblobi

Reacting to NPRA’s rollout of new supervisory model to safeguard contributions of workers, Mr Agblobi indicated that the last time most of the public sector scheme beneficiaries received contributions from government was in November 2022. Owing to this, he noted that from December 2022 to present, the contribution hasn’t been regular.

“Out of that, most pension boards have to devise a way of paying their members. For example, paying them some portions of the money then when the last payment comes, they are paid the rest. So, the arrears have been quite pervasive and has been consistent.”
Andrews Agblobi

Furthermore, Mr Agblobi explained that the arrears in a way is expected because the private pensions tier two beneficiaries who make up the defined contribution schemes, however, when there are arrears from such schemes, it hurts the beneficiary.

Usually, he stated that when the public sector schemes are being paid the arrears, they don’t come out with the penalties.

“For example, the 3% and all that. Here, they are charged but usually, the employer doesn’t pay those amounts of money.”
Andrews Agblobi

Mr Agblobi insisted that arrears generally, especially for the tier twos, are not the best to have for such schemes because they are investment driven. To this end, he revealed that there is the need to improve upon it.

“The story around it was that once the debt exchange is finished there can be some fiscal space such that those arrears can be cleared. But let’s hope and see because the debt exchange has not completely ended yet, though we know the domestic ones have gone some way, but the external ones we know there’re still teething problems. So, most public pension funds, the arrears are a particular challenge.”
Andrews Agblobi

Sustainability of pensions scheme

Commenting on what can be done to sustain pension scheme, the pensions analyst emphasized that most of the private pension schemes are doing well irrespective of the arrears that are built. However, he expressed that the challenge of high interest rate in the country must be resolved.

“So, when you’re having an investment such as pensions scheme that will pay you a bulk money at once, and you have inflation that is higher, it means that most of the private pension scheme are having the challenge called negative real returns…
“So, real returns are a challenge for people now, so if we can be able to control the inflations, which is a major challenge for people who have fixed income like that, I think that the most returns that are done by the private sector above 20% is quite meaningful returns.”
Andrews Agblobi

Moreover, Mr Agblobi underscored the relevance of bringing the economic fundamentals under control. He emphasized that once this is done and contributions trickle in, coupled with the pensions regulator doing its supervisory work, he expects that sustainability will be good.

“Because so far, the private pensions have done remarkably well… So, in the future, if macroeconomic fundamentals are controlled, I believe that the private pension scheme one day in the future will be like most of these advanced countries as compared to our GDP…”
Andrews Agblobi