Continued from last week
Introduction
In continuation of our provision of answers to frequently asked questions on the CPS, we will be providing answers to some frequently asked questions on transitional arrangements from defined benefits pension scheme (DBS) to contributory pension scheme (CPS). Prior to the commencement of the CPS, pension schemes existing in both the private and public sectors was the DBS.
What happens to my pension and gratuity under the DBS if I migrated to the CPS?
Employees of the Federal, State and Local Governments who worked before the commencement of the CPS, would have their pension and gratuity, which accrued under the DBS, computed and remitted to their respective RSAs at retirement.
What is Retirement Bond?
Retirement Bond represents the total amount equivalent to the pension and gratuity that accrued under the DBS.
How would the pension and gratuity that accrued under the DBS be paid to eligible Federal Government employees?
Accrued pension and gratuity of eligible employees of Federal Government Treasury Funded MDAs are paid from the Retirement Benefit Bond Redemption Fund (RBBRF), which was established and is maintained by the Central Bank of Nigeria (CBN). The Federal Government pays an amount not less than 5% of the monthly wage bill payable to employees in the public service of the Federation into the RBBRF for the payment of this liability.
Are employees of the FCT also going to be paid accrued pension and gratuity under the DBS from the Federal Government’s RBBRF?
No. The FCT has established a separate RBBRF Account with the CBN into which it pays 5% of the monthly wage bill payable to its employees and from which accrued pension and gratuity are paid to eligible FCT employees.
How will the accrued pension and gratuity of employees in the private sector be paid?
Private sector employers are required to determine the accrued pension and gratuity benefits, where applicable, and transfer the amount so determined into the individual RSAs of their eligible employees.
What happens to the pension of employees of FGN Treasury Funded MDAs who are exempted from the CPS?
The Pension Transitional Arrangements Directorate (PTAD) established by the PRA 2014 is responsible for the payment of pension and gratuity to employees of the FGN Treasury Funded MDAs who are exempted from the CPS (retired under the DB Scheme). The FGN would continue to provide the required finances to the PTAD for the payment of pension until the last pensioner under the DBS is no more.
What happens to the pension of private sector employees who retired prior to the commencement of the CPS?
Private sector employees who retired prior to the commencement of the CPS will continue to receive pension based on the terms and conditions of their employment.
What happens to the contributions deducted at source from salaries of public sector employees who are exempted from the CPS?
The employee’s portion of the pension contributions would be refunded to the affected employee while the employer portion would be transferred back to the employer.
What happens to the pension contributions made by private sector employees prior to the commencement of the CPS?
The amount contributed should be transferred to their RSAs within thirty (30) days of registration. The employer is required to notify PenCom of such transfers.
In the case of an organization that has an Approved Existing Scheme (AES) or a Closed Pension Fund Administrator (CPFA), are its employees eligible to join the CPS?
Employees of an organization that is operating an AES, which is being managed by a PFA or a Closed PFA, are entitled to choose to remain in the AES/CPFA or open RSAs with any PFA of their choice and request that their retirement benefits be transferred into such RSAs. However, new employees of such organizations, from July 2014, cannot join the AES/CPFA, but are mandated by the PRA 2014 to join the CPS.
What happens to the pension contributions made under the Nigerian Social Insurance Trust Fund (NSITF) before the introduction of the CPS?
The pension contributions made under the NSITF Scheme before the commencement of the CPS, including all investment incomes, shall be transferred to the RSA opened by the respective NSITF contributors.
What happens to existing pensioners under NSITF Scheme?
Existing pensioners under the NSITF Scheme will continue to receive their retirement benefits based on the terms and conditions upon which the contributions were made. PenCom supervises the process to ensure that it is in line with the laid down rules and regulations.
What happens to the contributions made under the NSITF Scheme by those not eligible for pension under the scheme and exempted from the CPS?
Contributions made by this category of NSITF contributors will be computed in line with the NSITF Act 1993 and paid into their individual bank accounts.
Can NSITF still manage pension under the CPS?
No. The PRA 2014 provides that only private entities licensed by PenCom are allowed to manage and administer pension funds and assets. Consequently, all contributions in the NSITF pension fund have been transferred to Trustfund Pensions Limited for management.
What is the role of NSITF after the introduction of the CP?
NSITF will continue to be responsible for social security services as provided under the Employees Compensation Act 2010.
Conclusion
In part 5, answers will be provided to some frequently asked questions on retirement benefits administration under the CPS.
To be continued…
Read part 1 here, part 2 here, and part 3 here.
