By Victor Ahiuma-Young
A former board member of the National Pension Commission, PenCom, and Executive Director, Centre For Pension Rights Advocacy, CPRA, Ivor Takor, has called on employers not to shy away from paying gratuities to their workers, saying the Pension Reform Act, PRA, did not stop gratuity.
Takor in a presentation at the Social Protection Cover, roundtable organised by Nigeria Labour Congress, NLC, said there was a link between social protection and social progress.
According to him, “The 2004 Nigeria’s Pension Reform was fashioned after that of Chile, which was the first country in the world to adopt a comprehensive reform of its pension scheme, moving from Pa-As-You-Go Defined Benefit Scheme, DBS, to Contributory Pension Scheme, CPS.
“Under the old Defined Benefits Scheme, DBS, retirees were paid gratuity. Gratuity is the momentary amount, payable to the employee by the employer. Under the Contributory Pension Scheme, CPS, Section 7(1)(a) makes provision for withdrawal of a Lump Sum from the total amount credited in the RSA of the contributor.
“In the private sector, gratuity was a product of collective bargaining. Now employers have stopped paying gratuity to their retiring employees, claiming gratuity is not part of the CPS.
“In the next amendment of PRA 2014, employers should be made to pay gratuity. The credit in the RSA should be used for the payment of pension. Pension Reforms didn’t stop gratuity”.
The CPRA Executive Director explained that “Section 173(3) of the 1999 Constitution (as amended) provides that pensions of Federal Public Servants shall be reviewed every five years or together with any salaries review, whichever is earlier.
“This has been the case with pensions under the DBS. Unfortunately, pensions under the CPS have not been reviewed in line with the provisions of the Constitution. There have been two palliative enhancements on pensions under the CPS.
“The Federal Government should carry out reviews of pensions under the CPS as it is being done with pensions under the DBS.
“There are pensioners who are earning as low as N4,000 as monthly pension and this far below the national minimum wage.
“Section 84 of PRA2014 makes provisions for a guaranteed minimum pension as may be specified from time to time by PenCom.
“Section 82(2)(a) provides that the minimum guaranteed pension is to be paid from the Pension Protection Fund, established and maintained by PenCom. The sources of funding the Pension Protection Funds shall be from an annual subvention of 1% of total monthly wage bill payable to employees in the Public Service of the Federation.
“Annual pension protection levy paid by PenCom and all licensed pension operators at a rate to be determined by PenCom from time to time, and income from investment of the Pension Protection Fund. It is time to implement the minimum guaranteed pension provision in PRA 2014.
Takor noted that “Section 89(2) permits the application of a percentage pension asset in RSA towards payment of equity contribution for payment of residential mortgage by the holder of the RSA.
“PenCom should engage the Federal Mortgage Bank of Nigeria on how this provision can be implemented to bring affordable housing to workers. The partnership the FMBN has with private housing developers cannot bring affordable housing to workers. The costs of their houses are far beyond the reach of workers and this is being done with the contribution of workers. What it means is that workers are contributing and non -contributors are benefitting.
“During the working life of workers, they are part of NHIS unfortunately, when they retire, at a time they need health care most, they are no longer part of the NHIS. PenCom should partner with NHIS to ensure that on retirement, pensioners remain part of NHIS.”
He added that “Nigeria has to commit herself to working towards the realisation of human right to social protection. The challenge is to put this commitment into practice.”