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One other issue addressed by PenCom in the framework is the issue of Minimum Guarantee Pension as provided for in Section 84 subsection 1 of PRA 2014. The section provides that all RSA holders who have contributed to a licensed PFA for a number of years to be specified by the Commission shall be entitled to a guaranteed minimum pension as may be specified from time to time by the Commission.
The framework directs PFAs to continue paying pensions to retirees that have fully exhausted their RSAs from their statutory reserve, pending implementation of Minimum Pension Guarantee. Section 81 of PRA 2014 creates a Statutory Reserve Fund to be maintained by every PFA as contingency fund to meet any claim for which the PFA may be liable as may be determined by the Commission. The Fund shall be credited annually with 12.5 per cent of the net profit-after-tax or such percentage of the net profit as the Commission may, from time to time stipulate.
Section 82 of PRA 2014 on the other hand, creates a Pension Protection Fund, from where the minimum guarantee pension will be paid.
The Pension Protection Fund shall consist of an annual subvention of 1 per cent of the total monthly wage bill payable to employees of Public Service of the Federation towards the funding of the minimum guarantee pension; annual pension protection levy paid by the Commission and all licensed pension operators at a rate to be determined by the Commission from time to time; and income from investment of the Pension Protection Fund.
It is now incumbent upon PenCom, to immediately put in place modalities for the full implementation of Minimum Pension Guarantee because in our opinion, what has been introduced through the Pension Enhancement Framework is just a palliative measure.
Consequently, we want to believe that the Pension Protection Fund from where the Minimum Guarantee Pension is to be funded, is being adequately funded in line with the provisions of Section 82 subsection 2 of the Act.
We opine that the liability of PFAs with regards to Minimum Pension Guarantee is limited to the levy prescribed in Section 82 subsection 2 paragraph b. The above notwithstanding, we have faith in the ability of the PFAs to implement the palliative measure, since PenCom’s regulations, guidelines and frameworks are always products of consultations between the Commission and operators in the industry.
The framework on pension enhancement for existing retirees on Programmed Withdrawal Under the Contributory Pension Scheme, has succeeded in addressing some critical questions on the lips of these categories of retirees and indeed, other RSA holders as well as correcting the misinformation on Programmed Withdrawal. The first issue being whether or not pensioners under the Contributory Pension Scheme can have increases in their pensions as provided for in the Constitution.
The second issue being that Programmed Withdrawal has no legal or administrative terminal date, so long as the PFA continue to invest the balance in the RSA of the retiree to generate additional fund.
Finally, in the event that the balance in the RSA of a retiree is exhausted, such a retiree will be paid minimum guarantee pension from the Pension Protection Fund. We wish to submit that political will on the part of the federal and state governments, effective regulation and supervision of the industry by PenCom and compliance with the provisions of the PRA 2014 as well as regulations, rules and guidelines issued by PenCom from time to time by all stakeholders is what is required to sustain the reform of the pension industry.