NATIONAL Pension Commission, PenCom, has warned that excluding paramilitary institutions from Contributory Pension Scheme, CPS, will have serious consequences for the pension industry and nation’s economy.
In a position paper, the commission recalled the state of hopelessness of public sector pensioners before the advent of CPS 12 years ago following the Pension Reform Act, PRA, of 2004, as amended in 2014.
PenCom’s position is sequel to a Bill seeking to amend the Pension Reform Act 2014 to exclude members of the Nigeria Police, the Nigeria Security and Civil Defence Corp, the Nigeria Customs Service, the Nigeria Prison Service, Nigeria Immigration Service and the Economic and Financial Crimes Commission from the application of the Contributory Pensions Scheme.
The commission recalled that the “reform was necessitated by the many problems bedeviling the public and private sectors’ pension schemes in Nigeria. In the public sector, the Defined Benefits Scheme was faced with the problem of huge pension liabilities arising from lack of adequate and timely budgetary provisions as well as increases in salaries and pensions.
Pension administration was largely weak, inefficient, less transparent, cumbersome and marred with corrupt practices. Many private sector organizations did not have any pension arrangement for their employees and where it existed, it was characterized by very low compliance ratio due to lack of effective regulation and supervision of the system.
PenCom equally recalled that the PRA 2004 was “amended by the National Assembly in 2011 to exempt the personnel of the Armed Forces and the Intelligence and Security Agencies from the CPS.
The 2004 Act was further repealed and replaced in 2014 by the Pension Reform Act 2014 (PRA 2014), which, among other things, enhanced the benefits accruable to the contributor upon retirement, enhanced the protection of pension fund assets, unlocked the opportunities for the deployment of pension assets for national development, reviewed the sanctions regime to reflect current realities, provided for the participation of the Informal Sector and also expanded the coverage of the Contributory Pension Scheme to include employees of States and Local Governments.
PenCom noted listed some of achievements the CPS since inception and lamented that in spite of these achievements, there had been recent actions, both legislative and administrative, aimed at undermining the pension reform in Nigeria.
PenCom said: “Exempting some government agencies would lead to divestment from FGN securities before maturity, which would have ripple negative effects on not only the finances of Government, but on the entire financial system.
Another immediate negative impact of exempting these Agencies is the erosion of the pool of long term investible funds accumulated under the CPS, which is suitable for economic development of any nation as illustrated in other jurisdictions including developed economies.
“This would thereby undermine the process of the attainment of development initiatives in the infrastructure, housing and real sectors of the economy, which are largely hinged on the utilization of a portion of the pool of pension fund assets. Indeed, the pension industry had actively participated in the establishment of the Nigeria Mortgage Refinancing Company and had already invested the sum of N83.36 billion in its securities and other mortgage refinancing initiatives of the Federal Government.
“Exemption of some agencies of Government would also result in loss of confidence in the pension reform and other reform initiatives of Government. The growing culture of national savings built within the last decade would be destroyed.
It is pertinent to note that due to the successful implementation of the pension reform, the discipline with which the industry players have been discharging their responsibilities and the resultant impact on the Nigerian economy, foreign investors have invested heavily in some major Pension Fund Administrators.
There are still some expressions of interest by foreign investors to obtain stakes in the pension administration business in Nigeria.
Indeed, the private sector, including these foreign investors in the Nigerian financial sector and the Nigerian economy, would question the commitment of Government to the pension and other reforms due to such policy reversals.”
The commission added that exemption would also “be contrary to public policy for the Federal Government to succumb to the clamour for exemption of its employees from the CPS, which has so far proven to be efficient, effective and beneficial as a pension administration system. Indeed, it is the benefits of the CPS that are attracting increasing number of State Governments in Nigeria as well as other African countries to adopt and implement the Scheme in favour of their respective employees.”