…As non-compliance in 22 states persists

…Non-compliance blocks N127bn pension contributions


By Babajide Komolafe & Rosemary Iwunze

Enrolment of new members into the Contributory Pension Scheme, CPS, fell by 38 per cent in five years to 257,462 in 2021 from 411,258 in 2017 driven by persistent non-compliance in 22 states.


Financial Vanguard analysis of annual reports of the National Pension Commission, PenCom, show that new membership into the CPS, as reflected by the number of new Retirement Savings Accounts, RSA, created, declined annually during this five years period with the exception of 2018.


According to PenCom data, new membership into the CPS fell by 11 per cent, year-on-year, YoY, to 411,258 in 2017 from 462,632 in 2016.


While new membership rose by 57 per cent to 645,346 in 2018 it however fell by 26 per cent to 480,279 in 2019. The downward trend continued in 2020 and 2021 as new membership fell again by 33 per cent and 20 per cent respectively to 322,129 and 257,462.


The above trend led to a steady slow down in the growth of total membership under the CPS, in five years from 2017 to 2021.


Total membership grew by 6.42 per cent (down from 7.6 per cent in 2016) to 7.413 million In 2017 from 6.885 million in 2016. The membership grew by 8.2 per cent to 8.469 million in 2018, by 5.7 per cent to 8.946 million in 2019, by 3.6 per cent to 9.271 million in 2020 and by 2.8 per cent to 9.529 million in 2021.

Thus, with the exception of 2018, annual growth in total membership into the CPS dropped steadily from 7.6 per cent in 2016 to 2.8 per cent in 2021.


This trend also persisted on a quarterly basis in 2021, as Quarter-on-Quarter, QoQ, growth in membership fall from 0.91 per cent in Q1’22 to 0.89 per cent in Q2’22, 0.84 per cent in Q3’22 and 0.71 per cent in Q4’22.

Cause of decline
Among other things, a major cause for the downward trend in membership enrollment is the persistent non-compliance by 22 states, which is in spite of agitations from workers, coupled with efforts of the National Pension Commission, PenCom, to bring all workers into the scheme.


The states are Kebbi, Rivers, Plateau, Borno, Akwa Ibom, Cross River, Bauchi, Katsina, Ondo, Niger, Ogun, Kwara, Bayelsa, Kogi, and Abia.


Others are Taraba, Imo, Sokoto, Adamawa, Ebonyi, Nasarawa, and Enugu.

What the law requires
It will be recalled that the Pension Reform Act, 2014 mandates employers to contribute 10 per cent of employees’ emolument into the Retirement Savings Account, RSA, while the employee will contribute eight per cent, which sums up to 18 per cent.


Under the Pension Reform Act 2014, which created the CPS, states are mandated to enact their own state pension laws. Accordingly, employers (states) are mandated to contribute 10 per cent of monthly emolument while the employee contributes eight per cent.


Given the total wage bill of N714.7 billion of the 22 defaulting states in 2021, their non-compliance blocks the inflow of about N127 billion in annual pension contributions to the total pension assets which stood at N7.58 trillion at the end of 2021.

Level of compliance
Financial Vanguard analysis of the status of compliance by the 22 states shows that 16 states have enacted pension laws but are yet to commence implementation, while six states still have pension bills in their various state houses of assemblies to be enacted into laws.


The 16 states that have enacted pension laws but are yet to commence implementation are Kebbi, Rivers, Ondo, Niger, Ogun, Kwara, Bayelsa, Kogi, Abia, Taraba, Imo, Sokoto, Adamawa, Ebonyi, Nasarawa, and Enugu have enacted pension laws but are yet to commence implementation.


The six states that still have pension bills in their various state houses of assemblies to be enacted into laws are Plateau, Cross River, Borno, Akwa Ibom, Bauchi, Katsina still have pension bills in their various state houses of assemblies to be enacted into laws.


Meanwhile, Jigawa, Kano, Yobe, Gombe, as well as Zamfara operate pension schemes different from the CPS.


Further analysis shows that four only four states are fully complying with the CPS namely Lagos, Kaduna, Edo and Benue are fully complying with the CPS.


However, there is partial compliance in five states and the FCT. The five states are Osun, Delta, Ekiti, Anambra, as well as Ondo states.

Efforts to attract non-compliant states
Workers in many of these states have agitated in various forms to compel their government to key into the scheme but to no avail. A couple of workers in various states have written petition letters to PenCom to intervene.


Accordingly, PenCom said that it has continued to intervene in various ways to attract these states into the CPS. These include sensitization workshops, capacity-building programs, and stakeholder engagement meetings.


The engagements include meetings with governors of various states to drive the implementation of the CPS, interactive meetings with constituted technical committees on the implementation of the CPS, enlightenment workshops with employees of various state governments and their agencies as well as local government education authorities of the Federal Capital Territory, enlightenment programme for the management and staff of Ministries, Departments and Agencies (MDAs) states.


Stakeholders’ position
Stakeholders worry that the non-implementation of a pension scheme in the 22 states have pushed retirees into old-age poverty, even as workers that are still in active service are gearing up to retire into poverty, coupled with the fact that their family members may not get any compensation in the event of the death of the worker while still in service or out of service due to non-compliance.


Speaking on the development, Executive Director of the Centre for Pension Right Advocacy, Mr. Ivor Takor stated that Section 188(2)(b) of the Constitution 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.


Takor said: “The 1999 Constitution (as amended) guarantees the right of pension for employees of state governments. Section 210(1) of the Constitution provides, subject to the provisions of subsection (2) of this section, the right of a person in the public service of a state to receive pension or gratuity which shall be regulated by law. Subsection (2) provides that any benefits to which a person is entitled in accordance with or under such law as is referred to in subsection(1) of this section shall not be withheld or altered to his disadvantage except to such extent as is permissible under any law including the Code of Conduct.”


Also a director in PenCom told Financial Vanguard that the autonomy that states have over their own pension schemes has been a challenge bedevilling the smooth operation of pensions in states.


Dahiru 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 a 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.”

The way forward
Speaking on the way forward, 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.

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“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 of 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 offence.”


Also speaking, Managing Director of Access Pension Fund Custodian, Mrs. Idu Okwuosa said: “It is absolutely immoral for governors to consistently fail to key into the pension scheme. It is even more immoral for those who fail to remit pension deductions of their workers to seek to borrow from the funds contributed by others, mostly by private sector and Federal Government workers.


“State governors and other political authorities should drastically lessen corruption and improve transparency in the financial processes of their states.”


Also speaking, former Managing Director of IEI-Anchor Pensions, Mr. Glory Etaduovie stated that the future is bleak without a good savings culture and no meaningful capital projects will take place on an individual, group or national levels.


Etaduovie said: “Savings culture is strongly related to wealth creation. Pension is one of the world’s best savings cultures. Civilised countries have deeply rooted pensions into their social welfare and development plans.

“Their aged and retiring ones look forward to going on safaris, adventure and a new life. It is neither good for individuals nor the government to hold a casual and or uninformed position on this important subject. Pension and pension plans are great stabilisers for the mind of workers and a steady development tool for the future for all.”

Vanguard News Nigeria

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