July 14, (THEWILL) – Nigeria’s pension asset continues to increase notwithstanding the high rate of contributors’ withdrawal, In May 2024, the Nigerian pension industry maintained its uptrend, reaching an all-time high of N20.23 trillion. This marks an impressive N4.12 trillion increase over the past year.
Data from the National Pension Commission (PenCom) indicates that the total pension assets in the industry surged to N20.23 trillion in May 2024, up from N16.11 trillion in May 2023, representing a 25.6 per cent year-on-year increase.
Compared to the previous month, the asset value increased by 2.23 per cent from the N19.79 trillion recorded as of the previous month.
The increase in the industry’s assets under management can be attributed to the growing adoption and acceptance of pension schemes by Nigerians and the high yields on investments.
Additionally, the number of total pension registrations saw a year-over-year increase of 3.2%, rising from 9.99 million in May 2023 to 10.32 million in May 2024.
The RSA II, which is a balanced and default fund for RSA holders of 49 years and below, accounted for most of the asset value. Notably, RSA Fund II accounted for 41.7 per cent of the assets, followed by Fund III with a contribution of 26.4 per cent.
Investments in equities increased by N771.7 billion between May 2023 to date, currently at N1.89 trillion and accounting for 9.4 per cent of the total pension assets.
Corporate debt securities also increased by N466.26 billion during the period, having attracted about N2.19 trillion as of the end of May 202
A notable aspect of the growth is the significant portion of the funds channelled into FGN securities. In the one-year period under review, 57.1 per cent of the total gains, amounting to N2.07 trillion, were invested in federal government securities, particularly Treasury Bills. This allocation is driven mainly by regulatory guidelines and high-yielding fixed-income instruments.
PenCom’s investment guidelines play a crucial role in directing pension fund investments. These guidelines emphasize the need for safety and reasonable returns on investments, encouraging a significant allocation towards low-risk government securities.
The attractiveness of FGN securities has been further bolstered by the high yields on fixed-income assets. This high yield is a result of the Central Bank of Nigeria’s (CBN) monetary policy decisions.
In 2024, the CBN implemented a substantial hike in the Monetary Policy Rate (MPR), increasing it by approximately 750 basis points. This aggressive tightening policy aims to control inflation and stabilize the economy.
Consequently, this hike has led to higher yields in the fixed-income market, making government securities more attractive to pension fund administrators.
The increased yield on FGN securities offers pension funds a reliable and lucrative investment avenue, aligning with PenCom’s guidelines to ensure the safety and profitability of pension assets. This has resulted in a significant portion of pension assets being invested in these securities, providing a stable and high-yielding option for pension fund growth.
Also, the value of funds withdrawn from the voluntary contributions increased by 160 per cent to N3.9 billion from N1.5 billion withdrawn in the previous quarter.
A breakdown of the first quarter report released by the National Pension Commission, PenCom, shows that 1,259 workers who made the withdrawals were from the private sector, while 43 were from the public sector.
Voluntary Contributions are extra funds that a worker can opt to add to his/her mandatory pension contributions, or simply set aside as retirement savings.
The Pension Reform Act (PRA) 2014 allows employees to make voluntary contributions into their Retirement Savings Accounts, RSAs, in addition to their mandatory pension contributions, with the sole aim of enhancing their retirement benefits.
The report stated: “Approvals were granted to 1,302, RSA holders to access N3.9 billion of their voluntary contributions during the quarter under review while 24 were rejected due to incorrect computations. 1,259 RSA holders whose benefits were approved were from the private sector, while 43 were from the public sector.”
Meanwhile, on RSA holders’ request to access their pension savings for mortgage, the report stated: “A total of 1,390 RSA holders requested to access up to 25% of their RSA balances towards payment of equity contributions for residential mortgages during the quarter under review.
Approvals were granted to 1,234 requests amounting to N10.5 billion, while 156 were rejected due to incorrect documentations. Out of the 1,234 applicants whose benefits were approved, 379 were from the private sector, while the remaining 855 were from the public sector.”
Further analysis of the report shows that a total of 89,061 new RSAs were registered in different sectors in the quarter ended 31 March 2024.
