The Retirement Savings Accounts maintained by millions of workers under the Contributory Pension Scheme has the capacity to generate massive long-term funds for investment in the country.
The Lagos State Commissioner for Establishment, Training and Pensions, Dr. Akintola Oke, said this during a seminar by the Peninscope Professional Warranty Limited in Lagos.
He spoke on the theme ‘Government policies as it affects various investment options of pension and insurance funds. He said owning to the economies of scale, the cost of investing such funds would be relatively lower than if an individual worker were to undertake the investment on their own.
“The health of the economy is always a major concern of the government. Thus, aside from the law’s potential to promote national savings and by implication, economic growth, funded pension schemes have the capacity to promote capital market development. Moreover, it is often argued that funded schemes have the capacity to promote economic reforms generally.”
Oke said another area in which the government stand to benefit from the law establishing the CPS was through the scheme’s ability to support the overall macroeconomic policies of reform. Having a pension scheme that could pay out benefits in the form of a life annuity, he explained, would offer workers protection against longevity risk.
Oke also said the CPS would encourage labour market flexibility because the workers would be free to move with their accounts, while moving to another employment or residence. “It is an important tool for enabling workers and employers to adapt to changing circumstances, especially in global environment in which change is a constant aspect of social and economic life,” he said.
The Commissioner said the scheme would stem further growth of pension obligations and provide a platform for addressing the liability. He added that it would impose fiscal discipline on budgetary process because pension obligations would be accurately determined.
He said the last two decades had witnessed a growing support for the idea that enterprises were better run by private individuals and the role of government should be limited to providing the right regulatory and institutional framework for the private sector to thrive.
Oke said that many countries around the world had adopted privatization as an avenue for reform and often employed similar laws to support the process.