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Need to empower PenCom to deal with pension defaulters

By ROSEMARY ONUOHA

Last year, only 74 companies out of the lot operating in Nigeria got the National Pension Commission, PenCom, certificate of compliance to the Contributory Pension Scheme, CPS.

Statistics from PenCom shows that about 15,760 employers are defaulters of the CPS. Accordingly, over N2.5 billion of employees’ monies are being withheld by these employers. Unfortunately, the figure is on the rise on daily basis even when these monies have been deducted at source from the workers’ salaries.

Need to empower PenCom

It is high time the Attorney General of the Federation grants,  the National Pension Commission, PenCom, the fiat to institute criminal proceedings against employers who default in remitting pension contributions of their employees to their Retirement Savings Account, RSA.

Should the Attorney General subscribe to this, PenCom will have the power to institute criminal proceedings against employers for their persistent refusal to remit pension contributions as at when due.

The National Assembly should likewise hasten the process of amending Section 11(7) of the Pension Reform Act, PRA 2004, as the present provision is clogged with limitations.

The section states thus, “Any employer who fails to remit the contributions within the time prescribed in subsection (5) (b) of this section shall in addition to making the remittance already due be liable to a penalty to be stipulated by the Commission provided that the penalty shall not be less than 2 per cent of the total contribution that remains unpaid for each.”

Further review of the penalties and sanctions shows that the sanctions currently provided under Section 85 are no longer sufficient deterrents against infractions of the PRA 2004. Consequently, Section 85 should be amended to provide for stiffer penalties that will serve as deterrents.

Section 85 states thus “Any person who contravenes any provisions of this Act where no other penalty is prescribed under this Act, commits an offence and is liable on conviction to a fine not more than N250,OOO or to imprisonment for a term not exceeding one year or to both fine and imprisonment.”

Certificate of compliance

It will be recalled that the PRA 2004 made it compulsory for companies seeking government businesses to present certificate of compliance which indicates that they are meeting the regulation on staff pension contributions.

The PRA 2004 also mandates all employers with minimum of five staff to subscribe to the pension scheme. To ensure enforcement of the law, the Commission issued an order that employers who fail to remit their pension contributions would pay two per cent charge two weeks after deductions have been made by them.

According to PenCom’s guideline, employers are to remit employees contributions not later than seven working days from the day salary is paid. If default persists after three months, one per cent of the outstanding would be paid to the Commission.

The Commission said it would take legal actions on defaulters if violation persists while employers who refused to give access to information about their staff would pay a fine not more that N200,000 and that every false or misleading information would attract N100,000 fine, each day the offence continues.

Also any employer who coerce employees to open RSA with Pension Fund Administrator (PFA) that is not their choice, would pay N1,000 after three months per employee for every month of violation.

Objectives of the CPS

The CPS is to assist individuals by ensuring that they save to cater for their livelihood during old age; establish a uniform set of rules and regulations for the administration and payment of retirement benefits in both the public and private sectors; and stem the growth of outstanding pension liabilities.

Under the CPS, the employees contribute a minimum of 7.5 per cent of their basic salary, housing and transport allowances. Employers contribute 7.5 per cent in the case of the public sector. Employers and employees in the private sector  contribute a minimum of 7.5 per cent each. An employer may elect to contribute on behalf of the employees such that the total contribution shall not be less than 15 per cent of the basic salary, housing and transport allowances of the employees.

Contribution and retirement benefits are tax exempt and fully funded. The contributions are deducted immediately from the salary of the employee and transferred to the relevant retirement savings account. By so doing, the pension funds exist from the onset and payments will be made when due.


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