May 16, 2022

UNEMPLOYMENT: Pension Savings withdrawals reverse 4yr trend




…As withdrawals by sacked workers rise 23.7% 

…NECA, TUC react, seek urgent govt intervention

By Rosemary Iwunze & Victor Ahiuma-Young

Withdrawals from pension savings by disengaged workers rose for the first time in five years, by 24 per cent to N21.52 billion at end of 2021, indicating worsening job losses and unemployment across the country. In 2020 the total withdrawals was N17.39 billion.

Also the  number of sacked workers  that approached their pension managers for withdrawals rose by 22.5 per cent to 38,846 in 2021 from 31,716 in 2020, indicating that 7,130 pension contributors lost their jobs during this period. 

Financial Vanguard findings from the National Pension Commission, PenCom, data shows the above development in withdrawals is in sharp contrast to the 45 per cent and 16 per cent decline in the number of contributors that lost their jobs and withdrawals from their pension savings between 2017 and 2020.

The Nigeria Employers’ Consultative Association, NECA,  and the Trade Union Congress of Nigeria, TUC, said the development portends grave implications for the country’s socio-economic environment while appealing for urgent government intervention to address the difficulties.

The Pension Reform Act 2014 permits the payment of 25 per cent of pension contribution to Retirement Savings Account, RSA, holders under the age of 50 years, who are sacked (disengaged) from work and unable to secure another job within four months.

The number of contributors that lost their jobs had declined steadily to 31,716 in 2020 from 52,416 in 2017 before the reversal in 2021.

Similarly, the value of funds withdrawn from the pension savings fell steadily during the four years to N17.39 billion in 2020 from N20.68 billion in 2017 before the spike in 2021. 

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Experts explain

Speaking on the development, Executive Director of the Centre for Pension Rights Advocacy, Mr. Ivor Takor, noted that the harsh economic realities of 2020 spilled over into 2021 thereby leading to massive job losses.

He stated: “2020 was a terrible year and because job losers have to wait for four good months before they can approach their Pension Fund Administrators, PFAs, for part of their pension savings, and the process of payment can drag for some time, that is why we have a spill over into 2021. 

“Many businesses were  hard hit and folded up as a result of the lockdown. Unfortunately, the current economic situation is still worrisome as people are still losing jobs. Many businesses are recording decline in profits, even as many disengaged workers are hoping to get some form of relief from their pension savings.”

Also speaking, Managing Director of Afriglobal Insurance Brokers, Mr. Casmir Azubuike, said that although the law permits contributors to withdraw 25 per cent of their pension savings in the event of job loss, the government should rebuild the economy to prevent job losses as pension savings should be for retirement.

Azubuike said: “The economy would have performed far better if only the government was responsive to its responsibilities and to the economy as a whole. Pension is for retirement as such the government should rebuild the economy to create jobs and prevent people from dipping their hands into their pension savings.

“So the commitment on the part of the government is hardly there and when you have a government that is not prioritising its spending, but rather kind of reckless in spending and borrowing, if you are expecting so much from them you are not likely to get it.

“So individuals are adopting cost reduction measures in response to rising inflation and the harsh business environment, which is why they are turning to their pension savings.”

NECA urges govt action

Reacting to the development, Nigeria Employers’ Consultative Association, NECA, noted that   the principles of the Pension Reform Act (PRA) 2014, a Retirement Savings Account (RSA) holder who is less than 50 years of age and has not been in any form of paid/gainful employment for a minimum period of four months after formal exit from employment is qualified to apply for 25 percent of the balance in his/her RSA in line with the Regulations for the Administration of Retirement and Terminal Benefits, was supposed to be a stop gap.

“Unfortunately, we have witnessed a trend where Nigerians are increasingly tapping their pensions prematurely as the economy has remained under severe pressure since 2019 when the world started experiencing declining oil prices which was closely followed by the advent of the COVID-19 pandemic. Nigeria’s working population was the worst hit as organisations disengaged or retired early their older workers to cushion the impact of the economic implication of the virus.

“Given the complexity and dynamics of managing through these extraordinary crises for which public and private sector collaboration can have the greatest impact, the Nigeria Employers’ Consultative Association continues to step up to help governments become more efficient, resilient and robust in performing their missions.  

 “On many occasions, we had urged the government to invest massively in technical skills acquisition programmes which are aimed at potentially creating decent jobs and promoting entrepreneurship. The immediate and long-term outcomes can guarantee a decline in unemployment.

“In addition, we had advised the government at all levels to create the enabling environment that supports enterprise creation, survivability and growth. We cannot overemphasise the need for the government to revive the nation’s moribund sectors such as, steel  mills and textile capable of significantly assuring job creation and revenue generation.

“The Nigerian Bureau of statistics put the Nigerian unemployment rate at 33% meaning one in every three adults who is capable of working is unemployed. It is of great concern that the spiking rate of withdrawal puts the plans of many Nigerians to take care of themselves and their loved ones in their old age at risk. 

“This implies that the long-existing perception of parents’ dependence on their children to care for them in their old age might not end anytime soon. It is, therefore, imperative that the pace of growth and job creation accelerates otherwise the country will account for a quarter of all people living in extreme poverty worldwide.

“Since the fundamental purpose of the pension system is to ensure there will be enough money to cover the pensions of employees after their retirement in the future, we appeal to the government to give attention to this unfortunate trend and make deliberate efforts at ensuring increase in contributions, rather than perpetual withdrawals from contributors’ Retirement Savings Account.”

Economy sick

Similarly, President of the Trade Union Congress of Nigeria, TUC, Quadri Olaleye, said,   “The huge withdrawals is a pointer to the fact that the economy is sick and at its lowest ebb industrially. Nigeria is a consumer nation and hardly produces 20 percent of what it consumes. Even the products/commodities that she has the comparative advantage the country is not taking advantage of. For example,  Nigeria is blessed with huge natural resources, especially oil yet we  refine outside the country. 

“By that, over 15 other by-products from crude are left in the countries they are refined and unaccounted for. The painful import of this is that Nigeria exports jobs while the unemployment rate oscillates between 33 and 35 per cent, causing a huge insecurity challenge and leading to mass relocation of both local and multinational companies to neighbouring countries. 

“Truth is, many are losing jobs and they rely on their little savings with the PFAs to at least feed first – God forbid that they fall sick – of course you know the health sector has also collapsed which is why politicians seek medical tourism abroad, wasting our scarce forex. 

“It is true that the Pension Reform Act 2014, permits the payment of 25 per cent of pension contribution to Retirement Savings Account, RSA, holders under the age of 50 years, who loses his or her job but we are working to increase the payment to 50 per cent, 25 per cent is too small for a retiree who has no roof over his/her head.”

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