By Akintola Benson-Oke

WHILE committed to a knowledge-based transformation of the civil service, the Ministry of Establishments, training and Pensions, under the overall guidance of the His Excellency, Mr. Akinwunmi Ambode, is also overly committed to staff welfare in terms of in-service and post-service welfare. Thus, matters relating to pension administration and management have always been at the top of the list for the administration.

This is why yet another training has now been devoted to equipping the minds of the senior staff of the civil service of Lagos State with the current trends in effective pension management strategies.

Ambode

I wish to offer a synoptic insight into the benefits of having and maintaining a pension strategy. While this approach is merely tangential to the main thrust of this training, it is my hope that it will serve to prepare the minds of participants to appreciate the importance of this training.

Thus, I have articulated 30 unique benefits of having and maintaining pension plans.  I am confident that the participants will become even more resolved to take this training seriously and to apply the lessons learnt to the benefit of civil servants, the Lagos State Civil Service, the Lagos State Government, and the economy of Lagos State:

i.Pension plans are important because they offer financial security after retirement. Those who do not want to become destitute and dependent after retirement should take the subject with seriousness.

ii.Pension plans are forms of deferred payment for the employees. Employees can look forward to receiving payment for services rendered to their employer in the past.

iii.Attractive pension plans make it easier for the employer to attract and keep competent employees because people are always eager to work for an employer who has good pension strategies in place.

Employees can enjoy tax deductions in respect of contributions made to a pension plan. Thus, the making of the contribution effectively reduces the overall taxable income of the employees.

v.Similarly, the contributions made by employers to the pension plan does not result in payroll taxes  because they are not included in the calculation to determine contributions to determine payable payroll taxes. The employee can have his/her pension savings invested in attractive profit-yielding investments that are also tax exempt. Thus, the employee can save on taxes from both ends.

The employer’s contributions are immediately vested to the plan immediately upon the commencement of the employee’s employment because they are backed by the force of law. In the event of an employee’s death, his or her spouse may be structured to receive a payment structured as either a pension or some other benefits. In any event, the next-of-kin stands to benefit from the dead employee’s contributions in the manner provided under the scheme.

The benefits accumulated in a plan cannot be seized, except in a few cases, such as a seizure to alimony or child support or for the purpose of partition of family patrimony.

The pension fund does not belong to the employer; it cannot be seized if the business goes bankrupt. Pension plans represent an opportunity for an employee to accumulate wealth without engaging in the rigours of running a business or operating assets.

Also, pension plans present the opportunity for those who have already acquired wealth to supplement their acquisitions. Pension plans help employees to cope with the reduction in income that will arise after the retirement. When people retire, they will naturally experience a reduction in income, a pension plan makes up for some of this loss of income in retirement;

Pension schemes can provide protection in the form of lump sums and pensions to dependants in the event of a member’s death;

Pension plans make it possible for employees to enjoy lower management fees from top-tier fund managers to which they would not otherwise have access.

Employees can achieve increased savings through payroll deductions. This is because contributions paid into a group pension plan are directly withheld from the employee’s pay, thus making it much easier to save. It is proven that individuals will put more money aside when they do not have to transfer manually an amount from their account to a retirement savings plan.

The funds offered through group pension plans are run by managers whose expertise is recognised in the industry and who are continuously reviewed and monitored by the insurers and the regulators.

When an employer decides to make, or is required to make, contributions to the pension plan, the plan becomes even more profitable for employees as the accumulated contributions exponentially increases the value of the fund.

Competitive and attractive pension plans help maintain productivity during the active pre-retirement years of the employee.

In the same related vein, great pension plans help in finding quality employees. Business owners consistently report that their toughest challenge is finding high-quality candidates. When a potential employee considers working for an organisation, a retirement plan is a key deciding factor, along with salary and health insurance. Thus, organisations risk losing quality candidates if they do not offer a strong retirement package.

Furthermore, and aside from attracting high quality candidates, competitive and attractive pension plans foster the retention of human capital. Of course, attracting but losing valuable human resources is not beneficial for an organisation.

xxii.        The retirement payout from a pension fund is usually guaranteed. It is not based on the stock market. When you start your pension, you create a plan formula to determine an employee’s pension benefit. This is usually based on the person’s average salary and the number of years he worked in your company. When the employee retires, he receives his promised pension payout. A reliable pension plan helps to meet the challenges of the increase in life expectancy. Our generation will live longer than previous ones due to improved medical and healthcare, implying the need to gather enough funds that can sustain longer life. This also implies that the healthcare needs and expenses are likely to haunt us.

Pension plans also helps to cope with the changes in social structures. In spite of family support, many retirees prefer not to depend on the relatives or children for meeting post-retirement expenses. Maintaining independent lifestyle is sustainable only when backed with a financial cushion.

Finally, a credible pension plan offers an employee the rest and relaxation deserved after a lifetime of labour and work responsibilities. I am convinced that a deeper appreciation of the benefits of having a pension plan or strategy will solidify in our minds to the importance of ensuring effective pension management.