Acting Director-General, PenCom, Aisha Dahir-Umar
Ratings firm projects pension assets in Nigeria to reach N20trn by 2023
Ratings firm, Agusto & Co, has projected that the Nigeria’s pension assets would hit N20 trillion by 2023.
As of December 31, 2020, pension assets under management (AuM) stood at N12.3 trillion (or $32.3 billion) which is 20.6 per cent higher than the N10.2 trillion reported in 2019, representing an 18.3 per cent compound annual growth rate over the last five years.
In its 2021 Pension Industry report, the agency said the growth in the industry’s managed assets has been largely driven by investment returns and additional contributions, to a lesser extent.
In particular, over the last five years, the sector’s annual contributions have averaged N699 billion while withdrawals have averaged about N341 billion, translating to a net annual contribution of N347 billion and accounting for 26.6 per cent of the industry’s AuM growth over the period. The remaining 73.4 per cent of average growth was attributable to investment returns earned on the portfolios, the ratings firm said.
Also in the report, it was stated that the pension transfer window opened on November 16, 2020, to allow pension retirement saving account (RSA) holders to switch Pension Fund Administrators (PFAs) once a year at most and at no cost.
As of the end of the second quarter of 2021 (less than nine months after the transfer window was opened), over 25,600 RSA holders with pension assets over N102.5 billion were reported to have changed pension fund administrators (PFAs).
Agusto & Co expects that in the subsequent quarters of 2021, the number of transfers will rise further as more enrollees become aware of the transfer process.
“In addition, we expect competition to intensify in the pension Industry as PFAs seek to attract new enrollees while retaining existing ones.
“Nonetheless, Agusto & Co expects the industry’s structure to remain relatively unchanged in the short-to-medium term with the top five players leading on the back of good market presence and strong brand recognition,” it added.
Agusto & Co, therefore, projected continuous growth in pension assets supported by increased participation on the back of the country’s favourable demography of young adults and rising yields in money market instruments.
“In addition, we expect an improvement in the performance of the industry as operators compete for a higher return on investments, improved customer service and use of technology for operational efficiency.
“Therefore, Agusto & Co. projects that the industry’s net assets will hit the N20 trillion mark by 2023, recording an average growth rate of 18 per cent (in line with the five-year average growth rate of 18 per cent) in the next three years leading to 2023.
“Over the year, the sector has evolved from one with predominantly public sector participants running a defined benefit scheme to a mandatory defined contribution system for all government and private sector employees.
“The 2004 pension reform redefined retirement planning in Nigeria and drove significant growth in the number of enrolees and the size of managed assets in the industry,” the report said.
