Human Capital Development and Professional Discipline in Nigeria’s Pension Industry

Introduction

The Nigerian pension industry has recorded remarkable improvement and growth since the legislative intervention of 2004, which resulted in the enactment of the Pension Reform Act and its subsequent amendment in 2014. The gains of the new pension scheme and the importance of the pension industry in the economy of the country are well documented and bear no repeating.

However, like every other system, the industry is not without challenges. Two of those challenges that now require legislative intervention are (1) human capital development and (2) professional discipline.

Relevance of Human Capital Development to the Pension Industry

The Nigerian pension industry has experienced a paradigm shift within the last decade, and is growing very rapidly and intensively. Issues about the qualification, skill, knowledge and attitude of the people working in the industry are bound to arise and rightly so. A strong human resource base plays a critical role in complementing other investments and policies to boost productivity and economic progress.

The experience over the years is that significant numbers of those now working in the pension industry have formal qualifications in areas that are not directly related to pension and pension fund management. Many of these employees find it difficult to adjust to and tackle the peculiar challenges in the industry resulting in a misallocation and waste of human resources that we can ill-afford. The industry is therefore in urgent need of an industry owned training institute to meet its specific human capital needs.

Presently, there is no statutorily recognised institution specifically established to provide technical training for the pension industry on a continuous basis. There are however, private individuals and organisation who pose as ‘pension gurus’ and organize trainings and seminars for the industry’s workplace at a cost. Some trainings are also routinely organized by PenCom and PenOp (sometimes in conjunction with each other). PenOp is the association of all registered Pension Fund Administrators (PFAs), Closed Pension Fund Administrators (CPFAs), and Pension Fund Custodians (PFCs), while PenCom is the statutory body charged with the regulations of all pension matters in Nigeria. Surely, human capital development for one of Nigeria’s fastest growing sector is deserving of more coordinated and importance.

Thankfully, there is presently pending before the National Assembly a Bill for an Act to establish a Chartered Institute of Pension Practitioners, which will, among other things, will be responsible for the following:

  • Conducting, encouraging and sponsoring research in the field of pensions administration, pension fund management, investment, custody and asset management, and the publishing and dissemination of same;
  • Organising and regulating the continuing education of members of the Institute;
  • Administering professional examinations in pension fund management practice;
  • Collaborating with other reputable examination bodies and/or educational institutions to provide continuous education in pension fund management practice from time-to-time;
  • Monitoring developments in the pension industry.

The confluence of rapid technical change, globalisation and economic advancement creates a gap between the foundation provided by an academic education and the technical and management competencies required in today’s technical and business environment. The Institute should, among other things, bridge this education gap.

Professional training and certification has immense benefits. The proposed Institute would ensure the development of the skills required for competitiveness and growth in the industry.

Relevance of Professional Ethics for the Pension Industry

The pension industry has a lot to learn from sister sectors in financial services on the importance of professionalism, and even more so when we consider the “not so glorious” history of pension fund management and administration in this country. Confidence in the new pension administration is paramount and this can only be earned through high standards of professionalism. Recognising and understanding this need, and the realities of today’s commercial environment, is a key factor in the economic development of Nigeria.

The National Pension Commission (PenCom) has already taken the initiative in ensuring adherence to professional ethics by issuing a Code of Ethics and Business Practices for Licensed Pension Operators. This is in additional to its ever stringent regulatory oversight.  The Pension Fund Operators Association of Nigeria (PenOp) has also developed and encouraged adherence to ethics through its Legal, Regulatory and Ethics Committee which promotes ethical practices within the industry and dictates disciplinary actions against erring members.

It is re-assuring that since the inception of the new pension system, the industry has recorded near zero scandals or cases of pension fund misappropriation. This is not to say that ethics within the industry are self-enforcing or that the industry is immune to scandals. It only means that the industry cherishes professional discipline and enforces it strictly.

The proposed Institute should be charged with the responsibility of ensuring professional discipline in the industry, in the following ways:

  • Determining the standard of knowledge, skill and qualification of persons seeking to become professional Pension Fund Operators and reviewing those standards from time-to-time as may be determined by circumstances;
  • Securing in accordance with the provisions of this Bill, the establishment and maintenance of a register of members of the Institute and publication from time-to-time of lists of those persons;
  • Maintaining and upholding the ethics of pension fund management practice on an on-going basis.

In order to protect the public and maintain public confidence in the industry, a system for dealing with complaints and discipline is necessary. In this regard, there should also be provisions in the law for establishment of a Disciplinary Tribunal and an Investigative Panel for the Institute, which together should be designed to ensure that issues of misconduct of persons to be its members are properly handled. There should also be provision in the law for adequate penalties for erring members of the Institute.

Other considerations as provided under the pending Chartered Institute of Pension Practitioners Bill 2016  

Structure of the Institute – The Institute will perform a role similar to those of the Chartered Institute of Bankers (CIBN) in the Banking Industry, the Chartered Institute of Stockbrokers (CIS) in the Capital Market, the Chartered Insurance Institute of Nigeria (CIIN) in the Insurance industry, etc. The Institute will be structured in a similar manner as these institutes. It will be a body corporate with perpetual succession and a common seal. It will have a Governing Council, Executive Management and various categories of membership. The Executive Management will be headed by a Registrar appointed by the Governing Council.

Membership of the Institute – The Institute will have the powers of not only training and certification, but also of admitting duly qualified persons to its membership and recognising or disciplining such members. Membership of the Institute will comprise both individuals who are employees and managers in the industry and companies that operate in the industry.

Funding of the Institute – The Institute shall be self-funding and sustaining. Its primary sources of funding will be the following:

  • Take off grant from PenCom and PenOp
  • Annual grants to the Institute by PenOP
  • Donations and grants from individuals and corporate organisations
  • Levies, penalties, subscriptions fees, examination fees and other charges on members of the Institute
  • Consultancy, conference and training fees
  • Sale of publications and memorabilia
  • Income from investment of its funds
  • Borrowing – where need be, for capital projects.

The Governing Council of the Institute will have sole responsibility of the funds and keep proper accounts on behalf of the Institute. The accounts will be audited by a firm of Chartered Accountants annually, and submitted to the members of the Institute for approval at the Institute annual general meetings. No member of the Council, or any party related to any Council member will be appointed as an auditor to the Institute, thus assuring the proper management and safety of the funds.

Conclusion

The pension industry is of extreme importance to this Country. The impartation of the right technical and managerial competencies, skills and ethical values to the professionals who run the industry must be of the highest quality. These pension industry employees and the industry as a whole and by extension the hard working Nigerians whose pensions they manage, must not be left to persons who are more interested in establishing a pension institute for purely economic gain.

It is against the foregoing that care must be taken to ensure that the Chartered Institute of Pension Practitioners Bill 2016 has the support and input of both the regulator (PenCom) and the Operators (PenOP).

The development of a strong human resource base and promotion of professional discipline for an industry as sensitive and important as pensions should rightly be championed by well-known and nationally recognised entities such as PenCom and PenOp rather than private individuals or organisations. A legislative intervention in the establishment of a Chartered Pension Institute which has the buy-in of these two bodies is safer and better guaranteed to ensure the desired standards in the industry.

Michael Dugeri

Corporate Commercial Lawyer at Austen-Peters & Co.

Qualified Lawyer in Nigeria with broad experience in handling corporate and commercial transactions for both domestic and foreign clients within the financial services, oil and gas, aviation, employment and telecommunications sectors. Dugeri also participates in due diligence audits of the litigation portfolios of companies and banks targeted for acquisition and investments.
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