FG, states fail to fund workers’ retirement accounts

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Many workers who are retiring under the Contributory Pension Scheme are either unable to get their pensions or earning ridiculously low stipends because the government has been inconsistent with the remittance of its deductions into their Retirement Savings Accounts, NIKE POPOOLA writes

Four years after the Pension Reform Act was amended and employers mandated to raise their contributions into the Retirement Savings Accounts of workers under the Contributory Pension Scheme, the Federal Government has yet to effect the change.

Since the Pension Reform Act was amended in 2014, compliance with regard to remittances of pension contributions from the public sector at both the federal and state levels have been patchy at best.

Findings revealed that direct employees of ministries, who are not under the parastals but being paid by the National Pension Commission with the funds released by the Central Bank of Nigeria, were the most affected.

Latest PenCom figures revealed that only 10 out of the 26 states that had enacted their pension reform laws had commenced remittance of funds into the RSAs of their employees.

While only a few of them have been consistent with remittances, some states have outstanding remittances dating back to two years.

Figures from the commission, however, showed that private sector remittances had been more consistent than that of the public sector.

The PRA was enacted and signed into law in 2004 to provide a contributory scheme for the payment of retirement benefits of employees in both the public and private sectors.

The Act mandated employees to open the RSAs in their names with Pension Fund Administrators of their choice and notify their employers.

In mid-2014, Section 4(1) of the PRA increased the pension contribution from a minimum of 15 per cent to a minimum of 18 per cent of the employees’ monthly emolument.

The Accountant General of the Federation was mandated under Section 12(3) of the Act to effect the deductions of the pension contributions based on the 18 per cent rate and remit same to the RSAs of the Federal Government’s employees.

While many employers in the private sector have complied, the Federal Government has failed to implement its own law.

The low pensions paid under the CPS is a reason why many groups have been agitating for a significant upward increase in pensions, or a total pull-out from the scheme.

Industry experts have said that the default by the Federal Government in implementing the 18 per cent minimum contribution has denied the workers the extra interest that should have been added to their RSAs from the investment of pension funds over the years.

The Chairman, NTA Association of Contributory Pensioners, Alhaji Gbadebo Olatokunbo, observed that the PRA 2014 sought to take care of some of the shortcomings in the 2004 version of the law.

He noted that the PRA 2014 enriched the powers and privileges of PenCom in the affairs of pensioners under the CPS, but expressed worry that the commission was not proactive in solving the plight of the pensioners.

Speaking on the issue of short-changing pensioners in the payment of entitlements, Olatokunbo said, “While some ministries, agencies and departments had discovered wrong presentations to PenCom and acknowledged the mistakes and made corrections themselves, which were later represented, PenCom refused to act on such corrections, while the contributory pensioners continue to lament the wrong entitlement payments.”

The Executive Director, Centre for Pension Right Advocacy, Ivor Takor, stated that the Federal Government had not been adequately funding accrued rights of its employees, who were in service before the commencement of the CPS, thereby causing such workers not to be paid their retirement benefits when they retired from service.

“The government has also not commenced the implementation of the increase in the rates of contribution by employers and employees as provided for in the Pension Reform Act, 2014. This increase took effect from 2014 and meant to enhance the balances in the employees’ Retirement Savings Accounts,” he said.

Takor expressed concern that under the post-reform era, federal public servants were almost back to the pre-pension reform era, where under the Defined Benefit Scheme (Pay-As-You-Go), retired federal public servants were not sure when their retirement benefits would be paid.

“Federal public servants who retired as far back as October 2015 were not paid their retirement benefits under the Contributory Pension Scheme until early 2017. The same for the next of kin of deceased federal public servants within the period. To date, federal public servants who retired in January 2017 are yet to be paid their benefits,” he added.

According to Takor, private sector employees, who are under the same scheme being regulated and supervised by PenCom, using the same Pension Fund Administrators and Custodians, are not facing the same challenge like the federal public servants.

While noting that federal public service retirees and retirees from the states, with a few exceptions, are languishing in abject poverty, he added that the government lacked the political will to do the right thing.

He said, “The irony of the whole issue is that more than 50 per cent of the pension funds generated under the Contributor Pension Scheme are invested in the Federal Government securities and the money is mostly used by the government for recurrent expenditure.

“It is used for the payment of salaries of active staff and other overhead costs. The question then is why is part of that money not being used to fund the Retirement Redemption Bond Account from where the accrued rights of those who contributed to it are redeemed?”

The Acting Director-General, National Pension Commission, Aisha Dahir-Umar, in a memorandum submitted by the commission to the Senate Committee on Establishment and Public Service at the public hearing on pension, said that it was important to address the issue of delay in the payment of pensions to retirees under the CPS.

She attributed the major cause to inadequate funding of the pension accounts by the Federal Government.

The commission sought the implementation of its recommendations presented to the committee on how to address the lingering hardships faced by Nigerian pensioners.

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