FG: Pension remittance, a commitment that must not wither

The success of the Contributory Pension Scheme (CPS) following enactment of the Pension Reform Act in 2004 as amended in 2014 is based on the unreserved commitment of the Federal Government towards compliance and remittance. Achievements of the scheme, which has been recognized within and outside the country, cannot be taken away from the good example government showed from inception. This also did not only encourage private sector participation and compliance, but also helped to build confidence in the pension system, to the extent that the Nigerian worker is happy and hopeful of a pensionable retirement.

But what has happened in the past one year, when the Federal Government failed to meet its obligation of funding the Retirement Benefits Bonds Redemption Fund (RBBRF) for public sector retirees. This is about to rob the system of the success it has achieved over the past years. It is also about to create a bad precedence, undermine confidence and encourage bad practice by private sector employers who looks to government for good example.

Current figures reveal that Federal Government has not remitted pensions in the last 11 months beginning September 2015, so making it difficult for Pension Fund Administrators (PFAs) to commence payment of pension benefits to affected public sector retirees that left employment within that period.

This is further worsened with the appropriation of a N50 billion in the 2016 budget for payment of Federal Government Employees’ retirement accrued benefits, against N91 billion required to fund the scheme, indicating a N41 billion short fall according to calculations by the industry.

“The shortfall in the appropriation bill, would mean government compounding the sufferings of more retirees who would be unable to access their retirement benefits, says a market analysts who is worried by the situation.

Olufemi Sobanjo, adviser on pension matters said Government must as a matter of urgency device means to pay up pension accrued rights so that the current pension scheme is not dragged into disrepute.

“What this county cannot afford to do is to destroy the current pension arrangement, the CPS (Contributory Pension Scheme), because we have had a terrible bad experience with government managing pensions.

Eguarekhide Longe, chairman, Pension Fund Operators Association of Nigeria (PenOp) said compliance with regard to remittances of pension contributions from the Public Sector on both the Federal and State levels have lagged notably.

“While remittances from the Federal Government through the National Pension Commission (PenCom) were last received since September 2015, some states have outstanding remittances dating back over two years.”

Longe expressed regrets that some of retirees had not been able to access their pension even at presentation of bonds issued to them by government. “This is so because there aren’t enough resources from the Federal Government to meet the obligation.”

The affected retirees are Federal Government employees who had four years or more to retire at the Commencement of the Contributory Pension Scheme (CPS), but had been part of the old pension scheme Defined Benefit Scheme (DBS).

Pension Reform Law mandates the federal government to set aside a percentage of its total monthly wage into a retirement savings bond account so that upon the retirement of the affected individuals this bond will be redeemed and then paid.

Section 15(1) (a) (b) of PRA 2014 states that the transfer entitlement (the accrued rights to retirement benefit) for any non-exempted public service employees who had been under any unfunded DB pension scheme existing before the commencement of PRA 2004, shall be recognized in the form of a bond to be known as Federal Government or Federal Capital Territory Retirement Benefits Bonds (RBB) issued by Debt Management Office (DMO).

The Director General of PenCom, Chinelo Anohu-Amazu had informed that at the beginning of the reform there was cut-off date and those who had three or less number of years to go didn’t have to join the scheme, while those who had four or more years to go, joined the new scheme. “Already, they were mid way into their career and so had some rights due them. So the law says, those right are to be computed as though they had retired in 2004 and then converted as bond to be redeemed at the time of their retirement.”

This is the issue, and the PFA’s saddled with managing RSA under the CPS are unable to pay because the payment schedule says they will need to add both the accrued rights and the contributions together so that there will be agreement on whether it is for lump sum, programmed withdrawal or it’s for annuity. It will have to be a totality of what is due you; otherwise, it will not be a realistic payment.”

The Pension Fund Operators Association of Nigeria (PenOp) recently said the CPS has been working perfectly, but the delayed accrued rights payment by government is dragging the shadow of the old scheme into the new scheme, making it look ineffective.

According to the Pension Reform Act 2014,the objective of the CPS among others is to ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory, States and Local Governments or the Private Sector receives his retirement benefits as and when due. Apart from that, it is also to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.

Culled from Businessdayonline.com