Inflation keeps making things volatile, groceries cost more each month, and let’s not even get started on rent! It’s enough to make you wonder, “Can I really afford to retire someday?”

But this is not limited to Nigeria. An X user said, “The world is turning into an unlivable furnace, world leaders are supporting a genocide, inequality is skyrocketing, and many in the younger generations will never be able to afford stable housing, let alone retirement.”

Another user said even if you can afford to own a home, with inflation rising, you won’t be able to afford paying property tax! “Seniors who live on only social security and pension continue working after retirement just to pay that exuberant property tax. Property tax is the all life burden for owners.”

The Americans’ point about an uncertain future hits a bit close to home, doesn’t it? We see our parents, and grandparents, struggling to make ends meet, even with a pension. The question becomes, will the pension system even be there for us?

Nigeria’s Pension Industry Gains N3.36 trillion in 2023, Fastest Growth on Record

Lots of people like to blame the internet for negativity, but sometimes, reality can be harsh. Property taxes going up while salaries struggle to keep pace? That’s a recipe that will force you to keep working even during your retirement years, instead of enjoying a leisurely and carefree lifestyle.

Here’s the thing, saving for retirement in Nigeria isn’t impossible, but it takes some serious planning and a healthy dose of hustle.

Challenges and Strategies for Nigerians

While these broader issues are obvious, let’s narrow our focus to the specific economic factors affecting retirement planning in Nigeria.

Inflation is a silent enemy to savers. As prices rise, the value of your hard-earned savings diminishes. This is particularly worrisome for retirees who rely on fixed-income sources like pensions, annuities, or savings interest. 

Inflation erodes the real value of these payments over time, making it harder to afford basic necessities. To combat this, consider investments like stocks or real estate that have the potential to outpace inflation. 

Additionally, factor in inflation rates when planning your retirement budget to ensure your savings last throughout your golden years.

Another important aspect is the Nigerian pension system. While it has evolved, there are still challenges. Some retirees face frustrating delays in receiving their pension benefits, causing huge financial disruptions. 

To mitigate this risk, consider alternative savings options to supplement your pension income. The Contributory Pension Scheme (CPS) is a positive step, mandating contributions to Retirement Savings Accounts (RSAs) by both employers and employees. 

These contributions accumulate over time, providing a lump sum at retirement. Take an active role by managing your RSA and monitoring contributions to ensure everything is on track. 

The CPS also allows for voluntary contributions, offering an excellent opportunity to boost your retirement savings. Consult with a financial advisor to determine the optimal contribution amount that fits your financial situation.

Now, let’s get practical. Here are some essential strategies to ensure a comfortable retirement in Nigeria:

Start Early

The advantage of compound interest is undeniable. The sooner you start saving, even small contributions, the more your money grows over time.

Diversify Investments

Don’t put all your eggs in one basket. Invest in a variety of assets like stocks, bonds, real estate, and mutual funds. Diversification helps spread risk and maximize potential returns.

Take advantage of your employer’s pension plan if they offer one — it’s essentially free money for your future self. 

Budget and Live Below Your Means

Creating a realistic budget and tracking your expenses is important. Cut back on unnecessary spending and debt, prioritize saving for a comfortable retirement rather than immediate gratification. 

Seek Professional Advice

Consult a financial advisor or planner. They can help create a personalized retirement plan that considers your risk tolerance, financial goals, and tax-efficient strategies. 

Side Hustle

Consider a side hustle, like freelancing or a small business, to generate extra income and enhance your savings. A little effort now can make a big difference in your golden years.

Retirement planning isn’t a one-size-fits-all situation. In Nigeria, it demands proactive planning, informed decisions, and adaptability. 

Saving for retirement might feel like climbing a mountain, but the view from the top, a life of comfort and security, is definitely worth the climb. Don’t let the negativity win, let’s be the generation that breaks the cycle and enjoys a well-deserved retirement.

However, a member of FCMB Group Plc, FCMB Asset Management Limited appears to have insights into ways to simplify the journey towards a comfortable retirement.

FCMB Asset Management Limited’s recent webinar, “Smart Retirement – Investing Ahead”, educated and provided attendees with actionable strategies for taking charge of their financial future by leveraging the power of compounding and the accessibility of investing, debunking the myth that significant capital is required to begin the investment journey.

Tinuola Odufuye, head of Business Development at FCMB Asset Management, moderated the insightful webinar.

She set the stage for a very educative discussion with a panel of financial subject-matter experts drawn from the FCMB Group’s supportive ecosystem that connects people, capital and markets.

Also, Nduka Offiah, Head of Alternative Assets at FCMB Asset Management, shared insights on the potential investment portfolio benefits of the Alternative Assets class and offered strategies to diversify portfolios and navigate challenging market conditions.

Abiola Ajayi, Head of UHNI & HNI Unit at FCMB Asset Management, spoke on investment solutions tailored to both Ultra-High Net-worth Individuals and High Networth Individuals, emphasising personalised wealth management and legacy planning.

Leveraging her in-depth knowledge of trusts and estate planning, Oluwayemisi Arowolo, who heads Trust Services at another subsidiary of FCMB Group Plc, FCMB Trustees Limited, clarified the legal structures essential for protecting and transferring assets effectively.

At the same time, Richard Ade-Martins, Head of Business Development South at FCMB Pensions Limited, which is another member of FCMB Group Plc, spoke on pensions, highlighting FCMB Pensions’ commitment to best practices.

This impressive lineup of professionals ensured a multifaceted and informative exploration of the strategies and options available for building a secure financial future.

Here is a recap of the key takeaways from the thoroughly enjoyable session:

Start Early: 

It is important to start investment early. Starting early provides a longer runway for your money to grow and compound, potentially leading to a larger nest egg.

Investing is for Everyone: 

The panel debunked the myth that significant capital is required to invest. The panelists encouraged attendees to begin their investment journey with as little as N1,000 in Mutual Funds offered by FCMB Asset Management Limited, making financial security accessible to all Nigerians.

Estate Planning: 

Apart from wealth preservation, Wills and Trusts provide a clear plan that ensures a smooth transition for beneficiaries. It fosters communication and reduces the risk of conflict.

Unlocking Your RSA: 

The webinar explored the benefits of the RSA Mortgage option offered by FCMB Pensions Limited. This option allows individuals to access a portion of their Retirement Savings Account (RSA) to secure a home purchase, facilitating wealth creation beyond retirement savings.

Financial Inclusion for Business Owners: 

FCMB Pensions’ micro-pension plans cater to business owners with up to three employees, promoting financial inclusion within the informal sector. The flexibility of withdrawing up to 40% of contributions acknowledges the unique needs of business owners who may require access to funds for operational purposes.

Combating Inflation: 

Alternative Assets investments and currency hedging options were discussed as tools to preserve wealth and purchasing power.

Investing for Young Minds: 

Valuable advice was offered to students interested in starting their investment journey early to maximise the benefits of compound interest.

Retirement savings remittance from overseas: 

The webinar clarified the possibility for Nigerians working abroad to set up Naira-denominated pension plans with FCMB Pensions Limited, subject to their employer’s remittance policies.

Staying Ahead of the Curve: 

The expert panel highlighted the importance of staying informed on current investment strategies to ensure that your financial roadmap adapts to changing circumstances and economic realities, to build a sustainable financial future.

You can reach out to the organisers of the webinar at  FCMB Asset Management.

This represents a year-on-year increase of 22.43%, which is the fastest growth on record.

This is according to the unaudited report on pension fund portfolio as released by the National Pension Commission (PenCom).

Also, the total number of RSA registrations hit 10.19 million as of the end of December 2023, reflecting a 3.3% increase from 9.86 million recorded as of the end of 2022.

A breakdown of the portfolio, showed that investments in federal government securities (N11.92 trillion) accounted for 64.9% of the total assets, which is in line with PenCom regulation to invest most of the contributions in fixed less risky assets like the FGN bonds, treasury bills etc.

Additionally, corporate debt securities (N1.91 trillion) accounted for 10.2% of the assets, while investments in the Nigerian equities market (N1.57 trillion) contributed 8.6% to the total.

A total of N1.67 trillion was invested in money market instruments as of the end of the year, accounting for 9.1% of the total pension assets.

In terms of breakdown by fund category, Fund II continues to dominate with a total asset value of N7.8 trillion, accounting for 42.5% of the funds.

This is the default fund for contributors below the age of 49 years as it allows PFAs 55% of the portfolio in variable instruments.

Fund III followed with a total portfolio of N4.94 trillion, while Fund V recorded the least amount of N731.4 million.

The Nigerian pension industry has recorded significant strides in recent years, as represented in its growing penetration rate. In the last five years, the industry asset value has more than doubled, following several reforms that shaped and is still shaping the industry.

One of such policies include the increment of the minimum regulatory capital requirement for PFAs from N1 billion to N5 billion, triggering a series of mergers and acquisitions in the industry.

A move which was aimed at fortifying the financial capacity of the pension administrators. Recall that before the recapitalization in 2021, there were 22 PFAs, however following the implementation, the number of players reduced to about 19, with more anticipated mergers in 2024.

Also, the restructuring of some major commercial banks into Holding companies, with diversified interest in the pensions industry spurred improved competition in the industry.

New players such as Access Pensions, Norrenberger Pensions, GT Pensions, Tangerine amongst others have helped to drive increased growth in the industry through market efficiency and profitability.

Access Holdings recently announced that its subsidiary, Access Golf Nigeria has received the necessary regulatory approval to acquire a majority stake in ARM Pension Managers, a move that could further reduce the number of PFAs.

According to the records,  a total of 101,820 Retirement Savings Account (RSA) holders switched their Pension Fund Administrators (PFA) in 2023, representing an increase of 10.2% compared to the 92,413 transfers recorded in the previous year, and the highest on record.

A total of N462 billion was moved by the RSA holders in the review year, 28% higher than the N361.5 billion that was transferred in the previous year, bringing the total since the inception of the transfer window to N1.14 trillion.

This transfer is in line with section 13 of the Pension Reform Act (PRA) 2024, which specifies that an RSA holder may transfer his/her account from one PFA to another.

Meanwhile, Pension Fund Administrators (PFAs) invested N130.18 billion funds under the Contributory Pension Scheme (CPS) in infrastructure as of the period under review.

Figures obtained from the National Pension Commission on ‘Unaudited report on pension funds industry portfolio for the period ended 30 September 2023- Approved Existing Schemes, Closed Pension Fund Administrators and RSA Funds (Including unremitted contributions @CBN & legacy funds’, revealed.

According to the figures, total assets under the CPS stood at N17.35tn as of the period under review.

Part of the funds was also invested in domestic and foreign ordinary shares, federal and state governments’ securities, and money market instruments among others.

The commission had in its amended investment regulation highlighted the requirements for investing the funds in line with the provisions of the Pension Reform Act, 2014.

It said the purpose of the regulation was to provide uniform rules and standards for the investment of pension fund assets.

According to the regulation, pension fund custodians must only take written instructions from licensed PFAs concerning the PFAs’ investment and management of pension fund assets held in the custody of the PFCs on behalf of the contributors.

It said the PFCs, in discharging their contractual functions to PFAs, must not contract out the custody of pension fund assets to third parties except for allowable investments made outside Nigeria.

“The PFC shall obtain prior approval from the commission before engaging a global custodian for such allowable foreign investments,” it said.

According to the regulation, the PFAs, in discharging their contractual functions to contributors, must not contract out the investment/management of pension fund assets to third parties except for open/close-end/hybrid funds and specialist investment funds allowed by the regulation.

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The Pension Managers descried the reports as unfounded, incorrect, and defamatory.

“The alleged falsehoods stated that Stanbic IBTC Pension Managers continued to offer incentives to Retirement Savings Account holders contrary to the directives issued by the National Pension Commission (PenCom) in a bid to retain their accounts and win over accounts from competition.

“The publications specifically stated that gift vouchers worth hundreds of millions of naira were given out to certain public and private sector clients in December 2022, disregarding PenCom’s directive to all Pension Fund Managers with the goal to end “unhealthy competition” within the industry.

“Stanbic IBTC Pension Managers would like to clarify that this news is false and does not represent our ethos and values as an institution.

“The publication is a fabrication of reckless journalism, and it is our responsibility to clarify any misconception or doubts in the minds of the general public.

“Further to PenCom’s directive in October 2022, our clients were notified of the directive and its subsequent implications leading to the discontinuation of our Loyalty Programme on 05 November 2022 as approved by PenCom.

“To further reinforce our commitment and alignment with PenCom’s directives, we partnered with PenCom’s representatives to sensitise clients on this development at our annual clients’ engagement fora held in Lagos, Abuja and Port Harcourt, late 2022.

“As a major stakeholder and the largest pension fund administrator in Nigeria managing over 1.9 million retirement savings accounts and over N4.5 trillion in assets under management, our organisation has a responsibility to uphold the highest operational and ethical standards for operators in the industry.

“Stanbic IBTC remains resolute in its position and would like to reiterate that it conducts its business with integrity in compliance with extant laws of the operating environment and international best practices. We will continue to do business the right way”, a statement by the Stanbic IBTC Pension Managers, reads.

In a statement released in Lagos, Oyetan stated that the policy would benefit the building materials and mortgage finance industries in addition to the construction value chain.

As pension managers, he claimed that they are confident that it will significantly increase the number of jobs for skilled tradespeople and blue-collar laborers involved in the construction value chain, as well as further expand the wealth management and financial planning sectors.

Additionally, he claimed that RSA holders will want to reach the RSA balance because they want to acquire a house.

He stressed that they were aware that the process of actualizing the portion of the Pension Reform Act on a mortgage has gone through many iterations and stakeholder engagement and that they were happy that it had been released.

He pointed out that while they realize that there might be some initial teething problems, they are excited and are primed to partner with the commission, RSA holders, and other stakeholders to ensure that the policy actualizes the reason it was set up.

Oyetan, who is also the Chief Executive Officer, Stanbic IBTC PFA, added that the homeownership ratio and first-time home buyer statistics are low and they believe that the policy will help to improve this and also provide increased benefits to RSA holders in the immediate future.

He said: “Pension operators commend PenCom for the recent release of the guidelines that brings into effect the use of a portion of one’s Retirement Savings Account (RSA) as equity contribution for obtaining residential mortgages.

“The provision for this had been part of the amendments that occurred when the Pension Reform act was amended in 2014.”

PenCom exists for the effective regulation and supervision of the Nigerian Pension Industry to ensure that retirement benefits are paid as and when due.

The DG was been quizzed by members of the House Committee on Finance when revealed the information.

According to Umar, “the total assets under management is now N14.5 trillion, made up of three funds: the retirement savings account fund, the Closed Pension Fund Asset (CPFA), and the Assets in Existing Scheme.

“Out of the N14.5 trillion, the RSA Fund is about N11 trillion, the CPFA has N1.5 trillion and the AES has about N1.4 trillion. These funds are in the accounts of the contributors.

It is not being kept by PenCom; it is not being kept by the pension fund administrators (PFAs). It is not anywhere but in the account of the contributors, just like the commercial banks.”

The head of PenCom noted that the organization was created to regulate the pension business and that its primary responsibility is to oversee and regulate all pension-related activities nationwide. As a result, it is not a revenue-generating organization.

Reacting to claims by the FRC that PenCom had been listed as a government revenue agency, Umar said: “If they have put us on the schedule, we have not been advised. In 2017, PenCom, as a responsible citizen, decided to be paying surplus, even though it was not on the list. And each time we pay, we get a commendation from the Ministry of Finance. So, even when we were not asked to pay, we paid.

“I want the committee to know that long before the Ministry of Finance included PenCom on its list, it was not a revenue-generating agency.

By the provisions of the establishment Act, all incomes earned from investments earned from the Retirement Savings Account are credited back to the RSA of the contributors. Nobody takes a single kobo from it…”