Another Look At Contributory Pension Act (2)

This is the concluding part of the article carried in our last edition Another problem with the Contributory Pension Scheme is the flagrant violations of the Employees’ Right under the scheme. According to the Pension Commission PenCom the Pension Reform Act  (PRA 2014) confers certain rights on employees, providing protection, compensation and alleviation to the employees and the loved ones during their service years and upon their retirement. The rights include the Right to Pension for workers in the Public Sector, Private Sector and Informal Sector as stipulated in Section 3(1) of the PRA (2014); Right to Employer’s Contribution of a minimum of 10 percent of monthly emolument (Section 4 (1)); Right to Insurance (Section 4(5)); Right to Determine how to access Retirement Benefits by choosing programmed withdrawal or Annuity. Specifically, Section 7(1) of the Pension Reform Act states: A holder of a retirement savings account shall upon retirement or attaining the age of 50 years whichever is later, utilise the amount credited to his retirement savings account for the following benefits:(a) Withdrawal of a lump sum from the total amount credited to his retirement savings account provided that the amount left after the lump sum withdrawal shall be sufficient to procure a programme fund withdrawal or annuity for life.
The Pension Reform Act stipulates “Right to choose a Pension Fund Administrator (PFA) in his or her name (Section 11(1).” Right to Timely Remittance: Under the Section 11(1) of the Act, employers are required to “not later than seven working days from the day the employee is paid his salary, remit an amount comprising the employee’s contribution and the employer’s contribution to the Pension Fund Custodian specified by the Pension Fund Administrator of the employee”. Some of the employees’ rights violated include: Right to employer’s Contribution of a minimum of 10 percent of monthly emolument as enshrined in Section 4 (1), which many States and Local government areas have failed to comply with. In fact, the Status of implementation of the contributory Pension is still deficient as many States, and Local Government Councils are yet to remit their employees’ contributions. Many States are yet to make their counterpart contribution for their employees to the fund since January 2018, according to PenCom. Some States including Gombe, Zamfara, Adamawa are still operating the Defined Benefit Scheme. As at March 31, 2023, about eleven States are yet to implement the Contributory Pension Scheme.
Meanwhile, some retirees lament their inability to access payment. Another snag is the outrageous and unsolicited deductions or shortchange of contributions on the scheme that is essentially saving in nature and ought to be “remedial” to the old Defined Benefit Scheme. According to the PenCom, the Status Contributory Pension Assets as at April 30, 2023 is N15.77 trillion. Instructively, the Contributory Pension Scheme started in 2015 following the enactment of the Pensions Reforms Act (PRA 2014).The Scheme is intended to enable employees “Seamlessly transfer their accumulated funds when changing jobs, ensuring continuous growth and uninterrupted savings accumulator.” This mobility is aimed at empowering workers to “Pursue new opportunities without sacrificing their retirement security”.
Presently in Nigeria, there are two extant Pension schemes under the National PenCom. According to the Commission, PenCom on differences between the Defined Benefits Scheme (DBS) and the Contributory Pension Scheme, the Defined Benefit Scheme under PenCom is administered by a Federal Government Agency, the Pension Transitional Arrangement Directorate (PTAD) while the Pension Fund assets under the Contributory Pension Scheme are privately managed by Pension Fund Administrators (PFAs) and kept in custody by Pension Fund Custodians (PFC).
The PFAs and PFCs are Private Pension operators licensed by the National PenCom. The Defined Benefit Scheme covers existing workers who have retired from service before the enactment of the Pension Reform Act and employees exempted from the Contributory Pension Scheme (CPS) such as: Judicial Officers, Personnel of the armed forces, Personnel of the intelligence and security services. However, the Contributory Pension Scheme covers: public servants working for the Federal Government of Nigeria, public servants working for the Federal Capital Territory (FCT), or working for each of the 36 States of the Federation, or the local government councils in Nigeria, employees in the Private sector organisations where there are at least  three, and those in the informal sector which covers any economic activity or source of income that is not fully regulated by the government and other public authorities. As relating to the Funding of the two pension schemes, the Pension Transitional Arrangement Directorate (PTAD) is funded from the budgetary provisions by the Federal Government while the Contributory Pension Scheme is funded through monthly contributions from the employees’ salaries and the contributions of the employers.
There are no individual Pension accounts under the Defined Benefit Scheme. But there are individual Pension accounts under the Contributory Pension Scheme. By the provision of the Pension Reform Act , everyone is required to open a Retirement Saving Account (RSA) of his or her choice. The RSA which has a unique Personal Identification Number (PIN) is for life, regardless of transfer of service or change of employment. According to the National Pension Commission, the total number of Retired Saving Account registration as at April 30, 2023 is 9,968,388.
The challenge associated with the Defined Benefit Scheme is the lack of adequate funding by the Federal, State and Local governments to pay retirees under the scheme. This alleged lack of funds, informed the Contributory Pension Scheme as the only veritable alternative.  But the Contributory Pension Scheme which is supposed to improve on the old Defined Benefit Scheme is fraught with several hydra-headed and multi-dimensional problems that negate the welfare of workers and retirees. So the hue and cry of public servants should be appreciated. No public servant would spend his or her productive years in  serving the State or country only to suffer loss in the long run.

By: Igbiki Benibo