A critical look into the Nigerian Pension industry, following the opening of the Transfer Window by the National Pension Commission (PENCOM) on the 16th of November 2020, has revealed some interesting insights.
Nigeria has 22 Pension Fund Administrators (PFAs) currently operating in the country and now, contributors can freely move from one PFA to another at least once a year. The curiosity about what would motivate contributors to switch and where they would prefer to move to has led us to assess the industry vis-a-vis the performance of the top PFAs.
According to information from the 2020 third quarter (Q3 2020) industry report released by the industry regulator, PENCOM, on 04 December 2020, the top five PFAs in Nigeria by their total retirement savings account (RSA) membership as of September 2020 are Stanbic IBTC (1.84 million), ARM Pension (821,958), Trustfund Pensions (751,242), Sigma Pensions (727,636), Premium Pension (725,028), and Leadway Pensure (632,908) – in that order.
Stanbic IBTC Pension Managers recorded a total RSA registration of 25,969 in Q3 2020 which accounted for 24.2% of the total 107,158 registered within the quarter. Premium Pensions followed with 7,957 registrations and ARM Pensions had 7,216; both Stanbic IBTC Pension Managers figures amounting to 14.2% of the total number of registrations in the quarter.
Nairametrics also reviewed the 2019 annual report released by PENCOM on 16 October 2020 and noted that as of December 2019, Stanbic IBTC Pension Managers manages pension fund assets worth over N2.9 trillion, accounting for 37.14% of the total pension fund assets of N7.82 trillion for the period under review. ARM Pension Managers and Premium Pension Limited which were part of the top three ranked PFAs in Funds under Management (FUM) accounted for 8.75 and 7.99% respectively.
The remarkable performance from Stanbic IBTC Pension Managers, both in contributor numbers and assets under management, has been attributed to the fact that they started early. While this may be argued considering the consistent funds’ performance witnessed over the years, we noted that IBTC Pension Managers (former name of Stanbic IBTC Pension Managers) got their operating license in 2005, around the same period as other top players like NLPC Pension Fund Administrators (2005), ARM Pension (2005), AIICO Pension Managers Limited (2006) and Leadway PFA Limited (2005). It appears, therefore, that the claim of an early-start advantage as many seem to think, may not be valid.
Nairametrics further gathered that contributors’ major reasons for moving from one PFA to another include funds performance, expertise, reliability, and capacity to manage pension plans/retirement benefit funds for a variety of public and private organisations. Contributors are also demanding excellent service delivery, the safety of their funds, and prompt payment of benefits.
Perhaps then, the school of thought which holds that their heritage as part of then IBTC Chartered Bank Group, now Stanbic IBTC Group, offers Stanbic IBTC Pension Managers an advantage may have some merit. Notably, in a recent Twitter thread, Stanbic IBTC claims to have paid over N800 billion to more than 62,000 retirees since the inception of the Contributory Pension Scheme. The company also appears to have a reputation of transparency and integrity, as well as a perception of being technologically savvy, evidenced by their all-inclusive mobile app – Appyness. These may be some of the contributing factors to the seeming preference for Stanbic IBTC Pension Managers.
Upshot
It will be interesting to see if Stanbic IBTC Pension Managers will maintain its leading position in light of the opening of the transfer window and intensified competition amongst the industry players. We will wait and see what the 2021 numbers say.
Whatever the case, contributors hold the Joker. Now that they have the power to choose, all PFAs must step up their service delivery or risk being relegated to the background.
Pension Account holders would have appreciated a rating of most performing PFA on the basis on return on investment of pensioners funds and not just in terms of the size of contributors and asset base alone