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Key Highlights from The 2nd APSA Virtual Conference

The first session of the conference focused on roundtable experiences from various jurisdictions on dealing with impact of COVID-19 on the pension Industry. The session highlights include;

The outbreak of Covid-19 destabilised economies of the world. In Africa, countries have revised their economic growth figures downwards for the year 2020.

The widespread restriction of movement of people led to slowdown in economic activities as most companies closed down. Workers lost their livelihoods as some of them were sent on unpaid leave, some lost jobs, while others had their salaries reduced. As a result, a decline in pension contributions was witnessed not only from members but also sponsors. Investment returns were equally subdued.

 The loss in livelihood for workers resulted in clamour by members to be allowed to withdraw retirement savings. This urge has however been resisted by most regulators

Interventions to the impact of COVID-19 by pension regulators is not only a policy puzzle to African regulators alone but also a concern to Developed countries, under OECD (Organisation for Economic Co-operation and Development).

In developed countries, regulators had to develop draft regulations on pension savings reduction, savings deferral and early withdrawals. Most African regulators allowed employers to suspend pension contributions by members and sponsors.

In response to the urge by members for early withdrawal of benefits, most regulators have shown reluctance to allow this except as a last resort or under exceptional circumstances and on individual basis. In Botswana, there is legal provision allowing members to withdraw benefits under hardship circumstance. However, not everybody must be allowed to withdraw benefits instead regulators must continue telling members to continue saving for their retirement.

The second session of the conference looked at hindrances to expansion of pension sector development in Africa and ways to address them. The session highlights include;

Most pension systems in Africa are designed for workers in the formal sector. The average pension coverage in Africa is 10.6% of the working population. This leaves almost 90% of the population without retirement savings. The bulk of these are in self-employment.

Most pension products are designed to capture employed or formal sector. Design of an informal scheme must be simple and have low contribution cost. Information and communications technology (ICT) can help bring down cost of registration and contribution.

ICT makes it easy to join a scheme by eliminating paperwork. Mobile phone money services can be used to make contributions and receive benefits.

To increase coverage, we must bring on board those in self-employment. And to sufficiently serve those in self-employment we must use technology.

The third session of the conference discussed pension plans of the future and leveraging on ICT. The session highlights include;

The advent of Covid-19 has shown how vulnerable informal sector is. Because of lockdown most ran out of their savings. Everybody now knows they need emergency savings.

High usage of smart phones in Africa (600 million) and mobile money services the continent provides a platform to leverage on digital advantages to offer micro-pensions. However, growth of micro-pension has been hindered by lack of coordination. For example, mobile telephone firms don’t see how pension inclusion concerns them.

Increased use of technology during and after Covid-19 bring along concerns cyberattacks on regulators, pension providers and members. As such, there is need for procedures on how these scams work and what can be done to eliminate or remove these attacks. 

Regulators and pension administrators are at a risk of cybersecurity breach or cyberattacks. These attacks may attempt to destroy, expose, or obtain unauthorised access to computer networks. We may not prevent cyberattacks but with cyber resilience can will be able to defend our organisations against these attacks and limit effect of an attack.

Cyber resilience is the ability of an organisation to prepare, respond and recover when cyberattacks happen. An organisation is considered to have cyber resilience if it can defend itself against these attacks, limit the effects and guarantee the continuity of its operation during and after the attacks.

In addition, as we watch out for what is trying to come in, we much watch out for what might be going out. Regulators and pension administrators hold a lot of data. That data can be taken out by employees. Regulators and pension providers must ensure the data they have is safe.

The fourth session of the conference covered consumer protection, financial education and communication during covid-19. The session highlights include;

Effects of Covid 19 on RBS Consumer Protection include trustee Unavailability, More Fraud, Increased Enquiries, increased Complaints, Trustee Development trainings postponed, Election of trustees and Compliance Issues

Responses have included regulatory relief, Prudential Measures e.g Waivers; Tax Measures i.e Top Rate Reduced and Conduct related Measures i.e ensure Good governance

The fifth session of the conference encompassed investment of pension assets in the COVID-19 Era. The session highlights include;

The Assets Under Management (AUM) in Africa currently stands at US$ 410 billion. The bulk of it is in South Africa with only US$ 116 billion in the rest of Africa. A huge portion of these assets are invested in fixed income assets (especially government securities) with alternative investment being minimal.

Investment environment has generally been unstable during the covid-19 pandemic. Short-term yields have come down; rental yields have equally come down.  Trends across African markets have shown great awareness of risks from markets, climate, biodiversity and other risks.

In order to respond to the trends observed, African markets can adopt three strategies; co-investment, alternative investment and impact investing.  

Covid-19 has served to hasten some of the issues that pension funds across African have grappling with like alternative investment, low returns.