How Inflation Is Affecting Your Pension Returns– PENOP

Oguche Agudah, President of the Pension Fund Operators Association of Nigeria has said that for pensioners to get real returns on their investments, the proceeds must beat the country’s inflation rate.

Agudah gave the explainer during a monitored programme on Arise Tv.

Data from the National Pension Commission, the country’s pension asset rose by N123.47bn in July 2021 to close at N12.78trn compared to N12.66trn recorded in June.

According to Augusto & Co, Nigeria’s pension asset will grow to N20trn by 2023.

“It is not just about the funding it is about how we use the funds and it is also the consistency of the growth,” said Agudah.

Pension Fund Administrators are scouting for investments that would improve their returns.

The country has 9.3 million RRSA holders as of March this year.

Inflation in Africa’s largest economy is now 17.38 per cent in July as it is moderating from the 18.17 per cent high recorded in March.

Agudah said, “If inflation is north of 17 per cent, then if you want to get real returns then you have to get returns above 17 per cent. But then the issue is what risk are you using to get those returns above 17 per cent?

“ You can take a higher risk and then you jeopardise your funds so that you lose everything and that is the job of the Pension Fund Managers to see how they can beat inflation and to ensure their returns are above inflation so you get the real return.

“However, what I always say is that because it is a pension fund and by all stretch of imagination, you probably would be working for at least 20-25 years, perhaps even 30 or 35 years and so if you look at returns in one year, it will skew what you are looking at.

“You need to look at it over a number of years and so it is not just one year, it is over a number of years and the job of the pension fund manager is to see how they can beat inflation over a number of years, not just one year.

“This year and last year, inflation has been high, but we will see how that goes over a number of years based on investment returns.”