Nigerian Pension Fund Trustees Pay N49.5 Billion in Taxes in 3 Years

Pension fund administrators (PFAs) in Nigeria incurred a sum of N18.85 billion in income tax in 2021, an increase of 15.6% from N16.31 billion. naira spent in the previous year and a 31.4% increase from the 14.35 billion naira incurred in 2019. This brings total tax expenditure over the past three years to 49.5 billion naira, according to a report of the National Pensions Commission (PenCom).

The report seen by Nairalytics – the research arm of Nairametrics, shows that Stanbic IBTC, ARM Pension and Premium Pensions reported the highest income taxes in the year under review, jointly accounting for 70.4% of tax expenditures industry totals.

The list under consideration includes 21 PFAs, which were operating at the end of 2021, although this list has been shrinking lately, due to some mergers and acquisitions, with the aim of consolidating their minimum capital requirement to 5 billion. naira, as reported by Pencom.

The PFAs are: Apt (now merged with Tangerine), ARM, Crusader Sterling, FCMB and Fidelity as tax contributors. Others include First Guarantee, Investment One (now GT Pensions), IEI-Anchor (now Norrenberger), Leadway, NLPC and NPF. The list also includes Oak, PAL, Premium, Radix, Sigma, Stanbic IBTC, AXA Mansard (now Tangerine Apt), Trustfund and Verita Glanvills.

Corporate Income Tax (CIT) is a tax levied on the profits of registered companies operating in Nigeria, including foreign companies carrying on any form of business in the country. CITs are charged at 30% of company profits, for companies with turnover of N100 million or more.

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Below is a breakdown of the top 10 pension fund administrators in the country with the highest tax burden in the reporting year. It should be noted that the list excludes pension fund depositories.

Stanbic IBTC pension – N10.58 billion

Stanbic IBTC pension managers posted a total of N10.58 billion as tax burden in 2021, 21% higher than the N8.78 billion incurred the previous year. The corporate tax burden represented 56.2% of the total tax burden of the pension sector.

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A closer look at the data shows that Stanbic IBTC’s pension manager tax burden is 32.5% of pre-tax profit at N32.59 billion. Meanwhile, the company’s pre-tax profit rose 16% from the N28.1 billion posted the previous year.

ARM pension – N1.65 billion

ARM Pension is far behind on the list with a total of N1.65 billion incurred as income tax expense, an increase of 16% from the N1.42 billion deduction in 2020 ARM Pension accounted for 8.7% of the 21 companies’ total tax expenditures.

Similarly, its tax burden accounted for 31.3% of the N5.27 billion recorded as profit before tax.

Premium Pension – N1.04 billion

Premium Pension Limited recorded a total tax deduction of 1.04 billion naira in 2021, 11% more than the 937.9 million naira incurred the previous year, while accounting for 5.5% of total pension payments. taxes on industry during the year in question.

The company recorded a pre-tax profit of 2.99 billion naira in the year under review, a marginal increase from the 2.97 billion naira recorded the previous year. Meanwhile, Premium Pension incurred 34.7% of its pre-tax profit as a tax expense for the period.

PAL pensions – N839.2 million

A total of N839.2 million was incurred by PAL pensions as tax expenditure for 2021, an increase of 29% from the N649.9 million recorded in 2020. PAL pensions accounted for 4.5 % of total tax deductions recorded by the ATP under study.

With pre-tax profit growth of 20% (year-on-year) to N2.56 billion in 2021, PAL Pensions recorded 32.7% of its pre-tax profit as income tax for the year.

Sigma Pensions – N812.4 million

Sigma Pensions incurred N812.4 million as a tax deduction for FY 2021, an increase of 10% from the N735.4 million recorded in 2020, and a 40% increase from the N580 .3 million naira recorded in 2019.

Along the same lines, Sigma Pensions’ tax expense for the period was 33.6% of pre-tax profit, which was up 5% year-on-year to N2.42 billion.

Others include

  • Trust Fund Pensions – N810 million
  • Pensure Leadway – N770.4 million
  • MFN pensions – N626.7 million
  • Crusader Sterling Pension – N575.3 million
  • FCMD Pensions – N463.1 million

Why increasing tax payments is important

Tax collection is a very important slice of revenue for the Federal Government of Nigeria, accounting for 33.5% of Nigeria’s non-oil revenue in 2021. In order to make up for the shortfall recorded in Nigeria’s oil revenue, the non-oil component Federal government oil needs improvement.

The pension industry has been able to improve its tax payments to the federal government over the past three years, despite the covid-19 pandemic in 2020. This is due to the impressive results recorded by pension fund administrators.

This is a crucial contribution from PFAs in the face of the government’s inflating spending profile due to grant payments and interest on loan obligations.

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