The Nigerian Pension Industry – A journey with definite destination (2)

As 22 states refuse to implement new Pension Act

2019-2021 arrears to be liquidated by FG

By Rosemary Iwunze

There are indications that the pension gap between federal and state civil servants would widen in 2022 as most states fail to provide for the adjusted pension funding in the current budget. On the other hand federal civil servants will have their pension funds further boosted as the just signed 2022 Appropriation Act contains N20.7 billion provision for consequential adjustment on pensions of its workers for April 2019 to April 2021.

This comes on the heels of the Federal Government’s commencement of the payment of the 2.5 per cent differential for its employees and retirees following the 2014 amendment of the 2004 Pension Reform Act, PRA.

It will be recalled that the minimum pension contribution for employers was increased from 7.5 per cent to 10 per cent in line with Section 4(1) PRA 2014. However, the federal government failed to respect the provision and continued to remit 7.5 per cent for its employees.

READ ALSO:Zenith Bank: Leading with Investors’ Confidence

However, in July 2021, the National Pension Commission, PenCom, informed that N5 billion was disbursed for payment of the 2.5 per cent differential in the rate of employer pension contribution for Federal Civil Service retirees and employees.

Speaking on the issue, Head, Contribution & Bond Redemption Department of PenCom, Mr. Saleem AbdulRahman, said: “The federal government released about N5 billion for the payment of the 2.5 per cent differential which will be paid into the Retirement Savings Account, RSA, of employees. The money will also get to respective retirees. Some may likely get additional lump sum, some might likely get advanced monthly withdrawal pension, active employees will get the 2.5 per cent. This is only for treasury funded employees and retirees.

“Subsequently, the federal government is expected to continue with the payment of the 10 per cent rate of employer pension contribution for its employees, thus ensuring a remittance of at least 18 per cent monthly (employer 10 per cent and employee 8 per cent ) as provided by the PRA 2014.”

States compliance to CPS

Meanwhile, analysis of activities in the pension sector reveal that in terms of compliance to the CPS, 22 states were yet to key into the scheme about 17 years after the mandatory law was enacted. The states also failed to make provisions for the new pension requirements in 2022 budgets.

Only eight states which are Benue, Kaduna, Delta, Edo, Ekiti, Lagos, Ondo, as well as Osun, are implementing the CPS for their workers and have made same provisions in the 2022 budgets.

States yet to key into any pension schemes are Kogi, Kwara, Nasarawa, Plateau, Bauchi, Borno, Gombe, Taraba, Katsina, Sokoto, Zamfara, Akwa Ibom, Bayelsa, Cross River, Oyo, Abia, Ebonyi, Enugu, Imo, Adamawa, Gombe as well as Rivers.

Further analysis of the status of implementation of pension schemes in states reveals that some states have commenced some form of implementation but with hitches.

For instance, Niger State enacted a Law on the CPS in 2006. It suspended implementation of the CPS in April 2015 but amended its Law in 2017 to extend its transition period to exempt some employees from the CPS. The state resumed deduction of 10.5 per cent for employer and 7.5 per cent for employee pension contributions in June 2020 but remitted for only June and July 2020. It is currently deducting employer and employee pension contributions but not remitting same to employee RSAs.

Kebbi State on the other hand has enacted a law on the CPS and is remitting only 7.5 per cent of employee pension contributions.

Ogun State enacted a law on the CPS, deducted 7.5 per cent for employer and 7.5 per cent for employee pension contributions but stopped remitting same since 2015.

Anambra remitted employer pension contributions up to December 2017 and employee pension contributions up to August 2020 for the state employees. It remitted employer and employee pension contributions up to August 2018 for the local government employees.

However, some states are operating their own pension scheme as mandated by the Pension Act.

For instance, Jigawa State enacted a law on the Contributory Defined Benefit Scheme, CDBS, in 2005 and further amended the law in 2015. It is remitting 17 per cent for employer and eight per cent for employee pension contributions. The state remitted employee and employer pension contributions for December 2020 to March 2021, but yet to remit the backlog of employee and employer pension contributions for May 2020 to November 2020.

Yobe State is operating the Defined Benefit Scheme, DBS while Kano enacted a law on the CDBS in 2006 and implementing the scheme.

Speaking on the issue, Head of Corporate Communications, National Pension Commission, PenCom, Mr. Peter Aghaghowa, said that the autonomy that states have over their own pension schemes have been a challenge bedeviling the smooth operation of pension in states.

Aghaghowa said: “The implementation of pension in states is a different kettle of fish because of the autonomy they have over it. This is unlike what is obtainable in the federal pension scheme where we have a tight grip on.

“Unfortunately it is the workers that will bear the consequences of the default in remitting pension contributions because whatever benefit they are going to get at retirement is dependent on what is in the retirement savings account.

“So imagine how it will be if money is not going into their retirement account now. However, PenCom has not been resting. We have been engaging the state governments on regular basis. We have even gone as far as paying courtesy visits to some of them and taking the issues to the state governors themselves.”

Speaking on the way forward, Director, Centre for Pension Rights Advocacy, Mr. Ivor Takor, said: “The governors, past and present of the affected states, have demonstrably shown that they have no regard for the provisions of extant labour laws.

“Moreover, they ran, and continue to run, their states in grave violation or breach of the provisions of the constitution of the country, which they swore to uphold. Section 188(2)(b) provides that a governor or deputy governor may be removed from office if the holder of such office is guilty of gross misconduct in the performance of the functions of his office. Subsection 11 provides that: ‘In this section, gross misconduct means a grave violation or a breach of the provisions of this Constitution or a misconduct of such nature as amount in the opinion in the House of Assembly to gross misconduct.’ Failure to come up with a law on pension for state’ workers and withholding of their pension is a grave violation or breach of the provisions of the constitution, which makes it an impeachable offense.”

Subscribe to our youtube channel

Disclaimer

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