By Victor Young

ONE of the major challenges facing the Contributory Pension Scheme, CPS, is the issue of poor remittance by private sector employers. In this interview with the Acting Director-General of the National Pension Commission, PenCom, Mrs. Aisha Dahir-Umar, she gives insight into how the commission is addressing the challenge, among other issues.

Mrs. Aisha Dahir-Umar

Excerpts:

The level of remittances by private sector employers has been a major drawback to the CPS. How are you addressing it and what have been achieved and the challenges?

The Commission has developed a Framework for Compliance with the provisions of the Pension Reform Act, PRA, 2014. The Framework outlines the strategies being adopted to drive compliance. The strategies include the appointment of consultants to review the pension records and recover unremitted pension contributions and penalties from defaulting private sector employers. Other strategies are the issuance of Pension Clearance Certificates, Complaints Resolution and Monitoring of Compliance through onsite inspection of employers, Public Awareness, Engagement and Collaboration with social partners and relevant stakeholders.

The implementation of these strategies has improved the level of remittances of pension contributions by the private sector employers. The appointment of Recovery Agents, RAs, to recover unremitted pension contributions plus penalty has been largely successful. It has boosted the confidence of contributors and encouraged non-participating employers to embrace the scheme. Through this initiative, the Commission has recovered  N15.53 billion comprising principal contribution N7.99 billion) and penalty (N7.54 billion) from defaulting employers. The penalty is remitted to the employees Retirement Savings Accounts, RSAs, to compensate for the income that would have been earned if the contributions were remitted as and when due.

The Commission issues Pension Clearance Certificates, PCCs, to private sector employers with three or more employees. The PCCs are renewed on yearly basis. Through this initiative, the Commission has ensured the remittance of N124.6 billion from 16,536 private sector organisations who applied for the certificate in 2018.

Furthermore, the Commission drives compliance by private sector employers through public awareness campaigns and engagement. This initiative aims at educating employees/employers and expanding the coverage of the Contributory Pension Scheme. In addition, the Commission monitors compliance through onsite inspections to ensure that employees of private sector organisations open Retirement Savings Accounts, RSAs and pension contributions are remitted as and when due.

Meanwhile, in a bid to ensure compliance with the CPS, the Department had faced challenges. Some of these challenges include: Reluctance of some employers to remit pension deductions due to perceived increased personnel cost; Non or irregular funding of RSAs by private sector employers as a result of weak business environment; Absence of a comprehensive database of private sector employers and their accurate addresses. So far, the Commission has relied mainly on information provided by complainants and returns rendered by operators for data on defaulting employers.

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It  is being insinuated that PenCom is afraid to take on the media believed to be the most recalcirant in private sector, thereby endangering the retirement life of staff of these organisations. What is your response?

The Commission engages defaulting employers, including media organisations, on non-remittance of pension contributions and penalty in line with its Regime of Sanctions. Furthermore, the Commission had also appointed RAs to review the pension records of employers and determine their level of compliance with the provisions of the PRA 2014.

So far, the Commission has identified and assigned 20 defaulting media organisations to the RAs. To date, the sum of N238.19 million has been recovered from 11 of the media organisations as three of them have fully settled their outstanding pension liabilities while eight  made partial remittance of their established pension liability. Furthermore, 12 media organisations (inclusive of some who have made partial remittance) are being prosecuted by the Commission on non-remittance of pension contributions.

In addition, we urge employees in the media sector to report cases of non-remittance of pension contributions to the Commission.

Is the Federal Government up to date with remittance in the core civil service and parastatals?

The pension contributions of permanent employees of the Federal Government of Nigeria under the treasury funded Ministries, Departments and Agencies, MDAs, are deducted regularly at source by Budget Office of the Federation, BOF,/Office of the Accountant-General of the Federation, OAGF, and credited to the Contributory Pension Account at Central Bank of Nigeria. Thereafter, the Commission remits the pension contributions of such employees from the CPA into their respective Retirement Savings Accounts, RSAs, with Pension Fund Administrators, PFAs.

The Federal Government of Nigeria through the BOF has continued to promptly deduct and release pension contributions to the Contributory Pension Account, CPA, domiciled with Central Bank of Nigeria for onward remittance into the employees’ RSAs. In essence, the FGN has been up to date with the remittance of Pension contributions for the core Civil Service and Parastatals.

What is the status of implementation by state governments?

Pursuant to the enactment of the Pension Reform Act, PRA 2014 which mandated the participation of employees of the public service of the Federal Capital Territory, States and Local Governments as well as the private Sector in the contributory Pension Scheme, the National Pension Commission (the Commission) has consistently been engaging various state governments, trade unions, relevant stakeholders and the general public on the full benefits of the CPS with a view to bringing them to full implementation of the scheme.

This pursuit of the Commission is yielding better result as more state governments are inching towards enacting laws to facilitate their full adoption of the CPS. To date, 24 states have enacted Laws on the CPS which are substantially in tandem with the provisions of the PRA 2014 while six  other states – Kwara, Benue, Plateau, Cross River, Borno and Akwa-Ibom – have drafted Bills on the CPS and are currently undergoing the legislative processes towards their passage into law. On the other hand, three states – Jigawa, Kano and Adamawa – have embarked on the Contributory Defined Benefits Scheme while Bauchi and Katsina states have also drafted pension reform bills on the CDBS. Yobe State has, however, decided to continue with the Defined Benefits Scheme.

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Out of the 24 states with pension laws on the CPS, five states – Lagos, Kaduna, Ondo Edo, Ekiti states, Anambra Local Government and the Federal Capital Territory, FCT, are currently remitting both the employer and employee pension contributions of their employees while four states, namely: Zamfara, Kebbi, Rivers and Anambra remit only employee portions of pension contributions of either the state or local government employees.

On the determination and funding of the past service benefits of the employees (accrued rights) in states that have adopted the CPS, seven states and the FCT have conducted Actuarial Valuation while Kaduna, Osun, Delta, Lagos States, Anambra Local Government and the FCT are funding their Retirement Benefits Bond Redemption Fund Accounts RBBRFA. However, only Delta, Kaduna, Osun states, Anambra Local Government and the FCT have opened RBBRFAs for domiciliation of their employees’ accrued rights.On compliance with the requirement for the procurement of a Group Life Insurance Policy for workers under the CPS, only Kaduna State and the FCT currently have valid Group Life Insurance policies for their employees. Similarly, Lagos, Kaduna, Delta, Osun states and the FCT have commenced a hitch-free and timeous payment of pension contributions under the CPS.

On the requirement for setting up a proper administrative structure to drive implementation of the CPS in states, in line with their respective state pension laws, only 14 states have established the Pension Board/Bureau/Commission to implement their pension reforms. The reluctance to establish the necessary structures to drive implementation of the reform in many states has, however, contributed to the poor compliance status among states in the country.

The implementation of the CPS has indeed been quite challenging for the states and local governments, amidst the tough financial constraints occasioned by low internally generated revenues and dwindling crude oil receipts into the Federation Account. Other key challenges militating against the implementation of the CPS as observed in various states have been the lack of political will on the part of the state governments and the inordinate allocation of scarce resources to less impactful projects.  Many state executives would rather invest in infrastructure that could be visible and therefore serve as a means for gaining political capital than settle pension obligations to retirees.

Furthermore, history has shown that accruing pension liabilities under the Defined Benefits Scheme carries very little, if any, repercussions as some State Executives had served their full terms (four years) without paying gratuity or pension and nothing happens. This contrasts with the CPS which, to some extent, has measures to guide against defaults in contributions and/or remittance by government (the employer).

Other than lack of political will on the part of many State Executives, the Nigerian workers are generally apprehensive towards the CPS due to ignorance of the workings of the scheme.  Many workers, including those vested with the responsibility of ensuring smooth implementation of the Scheme fail to realize that the CPS protects their interest more than the Defined Benefits Scheme.  As a consequence of this ignorance, therefore, they fail to ensure timely and adequate deduction of pension contributions or remittances of same. This leads to the phenomenon of unfunded RSAs or delayed remittances with the attendant effect of loss of income on pension assets.

Another obstacle to the adoption or full implementation of the CPS in many states is the reluctance by senior public servants in the States to embrace the Scheme.  The apprehension towards the CPS is worse among the senior public servants who keep shifting the goal post for the adoption of the scheme to a time when they would have retired from service under the defined benefits scheme.  This has resulted in unending shifts in the commencement dates of the CPS by many States or feet dragging in the adoption of the scheme in States.

The modest achievements made by some states, despite the daunting economic challenges, are a clear pointer to the fact that the Scheme is highly sustainable but requires the political will and conviction of the State Executives to succeed. The Commission therefore is optimistic that through increased employee awareness and consultation, the State and Local Governments would exercise the required political will and fully adopt the CPS for all the employees.

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What is the level of enrollees’ participation in the RSA Multi-fund Structure?

The RSA Multi-Fund Structure, which commenced in July 2018, was conceived by the Commission to align contributors’ risks appetite with the investment of their pension contributions, at each stage of their life cycle.  All Retirement Savings Account (RSA) holders in the Contributory Pension Scheme are automatically enrolled in one of the Four Funds (Fund I, II, III and IV) under the RSA Multi-fund structure. Therefore, the total number of enrollees as at 31 December, 2018 is 8.41 Million.

As at 31 December, 2018, the ratio of Investments in the four funds were as follows:

Fund      Value N’billion   Weight %

Fund I   7.90        0.12%

Fund II  3,801.36               57.97%

Fund III 2,064.22               31.48%

Fund IV                683.86   10.43%

Total:     6,557.34               100.00%

Table : Fund Value – RSA MultiFund Structure as at 31 Dec., 2018

Please, note that the information on members of the individual funds is currently not available but would be forwarded as soon as it is available from the PFAs.

Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.