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Pension queues set to return as FG defaults in meeting obligations

By Rosemary Onuoha

MORE than 90,000 federal government employees could be forced to create pension queues again which the Contributory Pension Scheme, CPS, had eliminated.

This is because the federal government is yet to commence the implementation of the revised 18 per cent minimum pension contributions for its employees as stipulated under Section 4 of the Pension Reform Act (PRA) 2014.

Financial Vanguard investigations reveal that federal government is still remitting 7.5 per cent stipulated in the repealed 2004 Pension Act, three years after the law was amended.

The investigations also show that under the amended Act, over N150 billion has already been accumulated as the arrears owed to over 90,000 federal government retirees under the CPS as at December, 2016.

Although federal government’s total annual pension liability is over N388 billion, it was only able to appropriate about N200 billion in the 2017 appropriation Act, and even the appropriated amount has not been disbursed accordingly.

The CPS was basically structured to eliminate all forms of arrears and delays in payment of pensions upon retirement.

Stakeholders are of the opinion that the action of the federal government will no doubt cause the delay to return, as arrears are already building up.

The PRA 2014 stipulates thus: “The contribution for any employee to which this Act applies shall be made in the following rates relating to his monthly emoluments: a minimum of ten per cent by the employer; and a minimum of eight per cent by the employee.”

The figure was revised upward in 2014 stipulating that both the employer and employee contribute 7.5 per cent each to add up to 15 per cent monthly.

Operators who spoke to Financial Vanguard on the condition of anonymity stated that failure of government to implement its own laws three years down the line amounts to committing financial crimes.

On the part of the private sector, the National Pension Commission, PenCom, have instituted legal action against companies that deduct pension contributions from the emoluments of their employees but do not remit same to their Retirement Savings Account, RSAs, and the affected organizations are at different stages of prosecution at the National Industrial Court.

Accordingly, operators are of the opinion that since the federal government is guilty of similar offence, it should be taken to the industrial court as well. The PenCom officials declined comments on this.

Operators react: Managing Director of Trustfund Pensions Limited, Mrs. Helen Da-Souza, said that affected contributors are being short changed and denied their investment incomes that should have accrued to them had their pension deductions been remitted as and when due.

Unpleasant consequences

On his own part, the Chief Executive Officer of Stanbic IBTC Pension Managers Limited, Mr. Eric Fajemisin, said that failure to plan for retirement could lead to unpleasant consequences during old age, recalling incidents of pensioners collapsing and dying while on queues to collect their long delayed pension arrears.

Fajemisin said that people have the freedom to make choices about the kind of life they want to have in retirement, adding that a well organized pension scheme would be helpful in this choice.

Fajemisin also said that Nigeria’s current pension system, as enshrined in the Pensions Reform Act of 2014, is a powerful tool with which to set future goals and create the comfort and security necessary to enjoy fulfillment in retirement.

He stated further: “As people head towards retirement, a decision about the type of life they wish to live in retirement should not be made from the hip, but rather through a well-structured financial planning process. The process should commence from the day one takes on a first job and involves setting aside part of current income into a retirement savings account.”

PenCom’s position

However, according to PenCom, the PRA 2014 has been obeyed more in breach by the public sector employers who are yet to revert to the current applicable ratio.

A senior executive of the Commission speaking to Financial Vanguard in confidence, stated: “This poses another challenge on enforcement as the affected public service employer is the various tiers of government which is are critical stakeholders in the implementation process of the established Contributory Pension Scheme.”

Major challenges

According to the pension regulatory body the major challenge confronting the smooth implementation of the   Pension Reform Act 2014, is that the Retirement Savings Account, RSAs, are not funded as and when due.

Other major challenges of implementation in strategies for ensuring compliance with the PRA 2014 in the private sector, the Commission further said, are ensuring that eligible employers join the CPS; lack of data on eligible private sector organisations; poor wages to accommodate reasonable pension deductions; general poor compliance culture; weak economy which saw the pension contributions as a huge additional cost of doing business in Nigeria; and difficulty in securing compliance by the small sized companies in the private sector largely made up of portfolio companies.



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