ONE of the objectives of the pension reforms carried out in the country in 2004 is to ensure that every person who worked in either the public service of the federation, the public service of the Federal Capital Territory (FCT), states and local governments or the private sector receives his retirement benefits timeously.
The Contributory Pension Scheme (CPS) introduced under the Pension Reform Act 2004, which commenced in June 2004 started on a promising note for employees of the federal public service, FCT and the organised private sector. Sixteen years after coming into force of the CPS, landmark achievements have been recorded.
After implementing the scheme for ten years, the Pension Reform Act 2004, which introduced the scheme, was reviewed to take on board desirable changes aimed at taking the scheme to the next level. The outcome of the review was the enactment of the Pension Reform Act (PRA) 2014. The Act brought on board some changes into the supervision and administration of the scheme, including increases in the rates of contributions of the employer and employee, from 7.5% each to 10 and 8% for employer and employee, respectively. Another introduction was the permission of the use of a percentage of the balance in an employee’s Retirement Savings Account (RSA) for residential mortgage.
According to the Director General, a large number of federal government employees who retired in March 2020 to March 2021 under the CPS were yet to receive their pensions due to non-payment of their accrued rights. According to her, the challenge, which started in 2014, was essentially triggered by the appropriation of insufficient amounts for payment of accrued pension rights of federal government retirees and further aggravated by late or non-release of full appropriated amounts.
The CPS, which is mandatory for employees in the public service and employees of private sector organisations with more than three (3) employees, left vast majority of employees in the unorganised private sector and the self-employed with no financial protection in their old age. In order to expand the coverage of the CPS, to these segments of the citizenry, the National Pension Commission (PenCom), introduced the Micro Pension Plan within the framework of the CPS. The Plan allows citizens who fall within the bracket earlier mentioned, to make financial contributions towards the provision of pension at retirement or incapacitation on health grounds.
In line with section 13 of PRA 2014, PenCom, on Monday, 16th November, 2020 lunched the Transfer Window, which allowed RSA holders to transfer their accounts from one Pension Fund Administrator (PFA) to another once in a year. The activation of the RSA transfer process is expected to engender healthy competition and improve service delivery in the pension industry, while asserting the right of RSA holders to determine which PFA manages their pension contributions and retirement benefits.
As at March, 2021, 12,681 RSA holders transferred their funds from their former PFAs to other PFAs.
Pension liabilities, which were in a deficit of N2 trillion in the public sector as at 2004, before the commencement of the CPS is now N12.34 trillion assets as at March 2021. The growing size of pension assets is impacting positively on the financial landscape of the nation, with a growing role as institutional investors, being played by PFAs and life insurance companies, indicative of the positive impact the CPS is having on the economic growth of the nation.
The PenCom, PFAs and Pension Fund Custodians (PFCs) as well as life insurance companies combined; employ thousands of graduates and experts in diverse fields, thereby contributing to solving the hydra-headed monster of unemployment that the nation is facing. From a non-existing industry in 2004, the CPS has evolved the pension industry, which is fast becoming a power base in the financial sector of the economy.
Unfortunately, while the CPS is impacting positively on the nation, the hens that are laying the golden egg, retirees of federal public service, are leaving in abject poverty and penury as a result of the non-payment of their retirement benefits.
On Wednesday, 14th April, 2021 while welcoming the members of the Senate Committee on Establishment and Public Service, to the Commission’s headquarters, in Abuja, the Director General of the National Pension Commission, Aisha Dahir-Umar, highlighted some major challenges of PenCom.
According to the Director General, a large number of federal government employees who retired in March 2020 to March 2021 under the CPS were yet to receive their pensions due to non-payment of their accrued rights. According to her, the challenge, which started in 2014, was essentially triggered by the appropriation of insufficient amounts for payment of accrued pension rights of federal government retirees and further aggravated by late or non-release of full appropriated amounts.
Other challenges she highlighted included federal government’s non-compliance with the new minimum statutory rate of pension contribution of 18% since 2014; non-payment of approved 15% and 33% pension increases to pensioners under the CPS; non-payment of shortfall for payment of full retirement benefits of retired Heads of Service and Permanent Secretaries; and non-payment of federal government pension protection levy. She further stated that these challenges have created sad and negative impression on the full realisation of objectives of the CPS in Nigeria.
It is therefore heart-warming, and worthy of mentioning, that the federal government has revealed that it is now ready to fully implement the provisions of PRA 2014. The good news came through a press release issued by PenCom, to the effect that President Muhammadu Buhari had approved PenCom’s submission on the payment of some critical aspects of outstanding pension liabilities of the federal government under the CPS.
Specifically, the President was reported to have approved the payment of outstanding pension rights for verified and enrolled retires of treasury-funded ministries, departments and agencies (MDAs) that retired but are yet to be paid their retirement benefits, as well as the backlog of death benefits claims due to beneficiaries of deceased employees of treasury-funded MDAs.
We commend the approvals of the President and call on him and his officials to sustain this policy direction. We however, wish to draw the attention of the President, that nothing was said in the press release of PenCom about the 15% and 33% increases to pensions under the CPS. We are drawing the attention of the President and his officials to Section 173(3) of the constitution, which states that: “Pensions shall be reviewed every five years or together with any federal civil service salary reviews, whichever is earlier”. We point this out knowing that the review is a constitutional matter and this government respects and upholds the provisions of the constitution.
Also approved is the payment of 2.5% differential in the rate of employer pension contribution for federal government retirees and employees, which resulted from increase in the minimum pension contribution for employers from 7.5% to 10% in line with Section 4(1) of PRA 2014. Payments for retirees and existing employees should take effect from July, 2014.
PenCom also informed the public through its press release that subsequently, the federal government is expected to continue with the payment of the 10% rate of employer pension contribution for its employees, thus ensuring a remittance of at least 18% monthly (employer 10% and employee 8%) as provided by the PRA 2014.
PenCom further informed that funds have already been made available for the settlement of the above stated pension liabilities. Accordingly, remittance into various RSAs of affected retirees and employees is currently being processed. The affected retirees and employees would be notified in due course by their respective PFAs.
The press release further revealed that the settlement of outstanding accrued pension rights of verified and enrolled federal government retirees and in compliance with the reviewed rate of pension contributions are significant developments that have resolved the challenges in these aspects that have lingered since 2014.
We at the Centre for Pension Rights Advocacy (CPRA) join workers and pensioners to appreciate the Board and Management of PenCom for leaving up to its responsibility of effective supervision and regulation of the pension industry. We are aware of the progress being made by PenCom to ensure compliance in the private sector. We are not unaware of the huge challenge PenCom has to go through to effect compliance in the public sector, being an agency of the federal government.
We commend the approvals of the President and call on him and his officials to sustain this policy direction. We however, wish to draw the attention of the President, that nothing was said in the press release of PenCom about the 15% and 33% increases to pensions under the CPS. We are drawing the attention of the President and his officials to Section 173(3) of the constitution, which states that: “Pensions shall be reviewed every five years or together with any federal civil service salary reviews, whichever is earlier”. We point this out knowing that the review is a constitutional matter and this government respects and upholds the provisions of the constitution.
