‘Technology Is Game Changer For Pension Industry’
Mr Oguche Agudah, the CEO, Pension Fund Operators Association of Nigeria (PenOp), in this interview on Arise Television monitored by CHRIS EBONG, speaks on contemporary pension issues including the growth of the sector. Excerpts:
Report has it that the pension assets under management will hit N20trillion by 2023, what is your take on this?
What has brought us to this stage are strong professionalism in the management of pension funds and strong regulations.
So, the two coming together is to ensure that we have a consistent growth in pension assets in the country and I think that is the story, not necessarily number.
Looking at the assets under management of about N12.78trillion as at July, do you think we can hit N13trillion by the end of the year, is that possible?
Yeah! We should, but then to my earlier point, it’s not just about the number, it’s about what we do with the funds and also the consistency of the growth and it should be consistent growth over the years.
It’s not that we are happy about it, is something that we need to progress just in terms of the way the industry has been structured.
The PFAs manage the funds in PFCs’ custody and the regulators ensuring that there’s sound regulations, so all of these need to continue to work together to ensure that growth is consistent. N13trillion should, like I said, is not really about the numbers, is really about the effectiveness of the fund’s managers because as we know, number one; the fund is a contribution and two; investment returns.
As long as investment returns are strong, contributions are strong which we need to continue to do, then we can get to that number and higher than that.
Can operators who are competing for higher returns on investment improve performance of the industry?
Definitely, I think you will see that going forward now with the transfer window and operators competing for higher returns that should lead to an improved industry because the industry will grow as returns are getting higher.
Inflation rate is getting higher at double digits as at July, isn’t that a major issue when you are looking at pension returns, how do you factor that in?
If inflation is at 17per cent and a pension manager wants to get higher returns above 17per cent; the issue is with what risk is he using to get those returns above 17per cent? Does he want to take a higher risk and jeopardise his funds and lose everything? That is the job of pension managers.
They need to see how they can beat inflation and ensure their returns are above inflation.
However, what I always say is that because it’s a pension funds and by all stretch of imagination you probably have been working for at least 20-25years perhaps even 30 years and so if you look at returns in one year it will still be what you are looking at. So, you need to look at over a number of years, is not just one year, is over a number of years.
So, the job of a pension manager is to see how he can beat inflation over a number of years not just one year. So, this year and last year inflation has been high but we will see how that goes over the number of years and how it affects returns on investments.
How can technology improve operational efficiency in the pension space?
We’ve gotten about 9.4million retirements saving account (RSA) holders and to be able to service RSA holders we need technology.
So, technology will help us to reduce cost to acquire new customers and also serve current and new customers. Technology will bring down the cost for the pension fund. Technology will ensure that we are able to reach more people and serve them effectively, quicker, improve customer services.
Technology will also ensure that operators reduce their cost and that is going to go well for the industry and for everyone…. and it will go well for shareholders as well. So, technology is really a game changer. it’s something we are pushing in the industry to ensure that we reduce both our cost to acquire customers and the cost of serving new customers.
It is just the way we structure our transactions and business. So, technology is really a game changer and it is something we are really pushing for in the pension industry.
How would you assess the performance of micro pension for the self-employed?
Micropension hasn’t cut off that well for a number of reasons and that is the growth frontier for the pension industry because a large number of labour force are self-employed, micro and small businesses.
Currently we have about 11per cent penetration with the pension. So, there’s a considerable amount of growth in that industry.
But it hasn’t done well because it is a new frontier for the sector, it is something that the industry is working on. Like you mentioned, technology is something that we are looking at for micro-pension just in terms of serving the people in that space. Technology will also be a game changer in micropension subsector.
This post was written by Chris Ebong and was first published at independent.ng