existing private pension fund administrator for employess of Shell Petroleum Development Co., a unit of Royal Dutch Shell, and 16 new licence holders. The scheme is compulsory for civil servants, but also caters for the private sector. The 16 institutions are soon expecting to receive from the government 35 billion naira ($270 million) deducted from civil servants' salaries alone since the scheme began in 2004. Analysts expect a sizeable amount of the cash to be invested in the local stock market, thereby helping to deepen the bourse which now has a market capitalisation of about $20 billion. As part of the reform to establish the new scheme, the government created a new industry regulator, the National Pension Commission, a parastatal controlled by the presidency. Under the new scheme, every participating worker will open a retirement savings account with a pension fund administrator of their choice. The employee and employer each contributes 7.5 percent of the participant's monthly salary into the retirement savings account kept with a pension fund custodian. Analysts say the key to success of the new scheme lies with the ability of Pencom to monitor the sector. The old system fell apart because because it was not fully funded by employers, and control over the funds was weak. "The new system requires sophisticated oversight and regulation to mitigate the tendency to fraudulent practices which would undermine sustainability," wrote financial analyst Boniface Chizea in ThisDay newspaper last week.
