THE National Pension Commission (PenCom) recently announced that President Buhari had approved a number of submissions it made to him on the payment of some critical aspects of outstanding pension liabilities of the federal government under the Contributory Pension Scheme (CPS).
Specifically, the President approved the payment of outstanding pension rights for verified and enrolled retirees of treasury-funded Ministries, Departments and Agencies (MDAs); payment of 2.5% differential in the rate of employer pension contribution for federal government retirees and employees, which resulted from the increase of employer’s contribution of 10% as provided for in the Pension Reform Act (PRA) 2014, with effect from 1st July, 2014 and funds made available for the settlement of the two stated liabilities.
The federal government’s liabilities on accrued pension rights arose because employees’ right to accrued retirement benefits for the previous years they had been in employment was guaranteed by PRA 2004 and later PRA 2014. For employees of the federal public service and the Federal Capital Territory (FCT), where pension scheme was unfunded, the rights was acknowledged through the issuance of a “Federal Government Retirement Benefits Bond” to such employees, under Section 15 of PRA 2014, while Section 39 provides for the redemption of the bonds.
The inadequate or total non-funding of the Redemption Fund against the annual projected pension liability of the federal government arising from voluntary and mandatory retirements, death of employees in service and the right of pensioners to pension review in line with section 173(3) of the 1999 Constitution (as amended) has been the greatest challenge of the CPS in the federal public service.
The CPS is a fully funded Scheme. Money is contributed into individual employee’s Retirement Savings Accounts (RSA) by the employee and his/her employer, to creat a pool of fund to pay his/her pension. From the inception of the CPS, the minimum rates of contribution were 7.5% each for employer and employee, as provided for in Section 9 of PRA 2004. But with the enactment of PRA 2014, Section 4 of the Act reviewed the minimum rates of contribution to the scheme. The employer is expected to contribute a minimum of 10% and the employee a minimum of 8% of monthly emolument.
The rates of contributions may, upon agreement between the employer and employee, be reviewed upward from time to time and PenCom notified accordingly. The contributions of employees are deducted at source from their monthly salaries before the payment of salaries. The federal government, the employer of public service employees, failed to comply with this provision of PRA 2014. Since the government was not complying with the new rates, it therefore lacked the moral standing to deduct the new rates from employees’ salaries. Consequently, employees’ liability to their pension contributions is .5% from July, 2014.
It is worthy to note that apart from paying the employer’s 2.5% arrears of employer’s contribution with effect from July, 2014, subsequently, the federal government is expected to continue with the payment of the 10% rate of employer pension contribution for its employees, and deduction of 8% employees deductions, thus ensuring a remittance of at least 18% monthly (employer 10% and employee 8%) as provided for in the PRA 2014.
Moreover, failure to adequately or outrightly not funding of accrued rights of retirees left retirees of MDAs and their families languishing in abject poverty and destitution for one year as a result of the non payment of their pensions. While this was going on, billions of naira were being budgeted annually by the federal government for a political project called poverty alleviation programme, where stipends are being distributed unregulated all at the expense of senior citizens who have given their all in federal public service, for the development of the nation.
There are retirees who are known to have been without pensions for over one year, with attendant negative economic and social effects on them and their families. The same is the case for families of employees who died in service. This is contrary to the objective of the pension reform carried out in 2004, which is to ensure that every person that worked in either the public or private sector receives his/her retirement benefits as and when due.
The approval of the President is therefore a significant development that has resolved the challenges in the administration of the CPS, as it affects federal government employees of since 2014. It is a welcome news to retirees, their immediate families and families of deceased federal civil servants. These category of citizens, have suffered tremendously as a result of the noncompliance by the federal government, with the provisions of PRA 2014.
The question now is how retirees of MDAs are going to get the arrears of the 2.5% paid by the federal government. The answer to this question is simply that for employees who are still in service, the arrears will be credited into their RSAs. Retirees under the CPS draw their pension through two sources. Those who draw their pension through Programmed Withdrawal administered by PFAs will get the arrears credited into their RSAs with PFAs and their monthly pension adjusted accordingly. Those who are on annuity, which is a product purchased from life insurance companies will have their arrears forwarded to the life insurance companies. Anyone under annuity, whose arrears is less than N100,000, the money will be credited into their bank accounts, while anyone whose arrears is above N100,000, the life insurance company will renegotiate and adjust their agreed monthly annuity, commensurate with the new amount.
There are critical stakeholders of the CPS when it comes to employees of MDAs. The takeaways from the President’s approval are different for each stakeholder. These stakeholders are the federal government, who is also the employer of employees of MDAs; PenCom; employees of MDAs; Nigeria Labour Congress (NLC); Trade Union Congress of Nigeria (TUC) and industrial unions, especially those in the public sector.
The federal government is the employer of all federal public servants of MDAs. The administration of former President Goodluck Jonathan, who assented to PRA Bill 2014 into law on 1st July 2014, was in office up to 29th May, 2015 and for 11 months, did not implement the rates of contributions as provided for in the law he assented to. President Muhammadu Buhari came into office as President on 29th May, 2015 and for 6 years; his administration did not comply with the provisions of the law, thereby mortgaging the future welfare of workers.
Moreover, failure to adequately or outrightly not funding of accrued rights of retirees left retirees of MDAs and their families languishing in abject poverty and destitution for one year as a result of the non payment of their pensions. While this was going on, billions of naira were being budgeted annually by the federal government for a political project called poverty alleviation programme, where stipends are being distributed unregulated all at the expense of senior citizens who have given their all in federal public service, for the development of the nation.
The final stakeholders, and by no means the least, are NLC, TUC and trade unions, especially public sector unions; should note that it is their responsibility to ensure compliance with the provisions of the PRA 2014 by both the public and private sector employers. The whole issues surrounding the CPS are connected with the welfare of workers in their old age. It is about taking them out of destitution and poverty in their old age.
The non-compliance with the PRA 2014, also has unintended outcomes. One of them being that it unwittingly reversed the fight against corruption in the public service. Federal public servants, who see their colleagues retiring and staying for upward of one year without retirement benefits, may be tempted to look for their pension upfront through fraudulent practices, while still in service thereby compounding the already endemic corruption crisis in the public service.
One of the drawbacks of the pre-pensions reforms in Nigeria was that all the pension schemes in existence then lacked effective supervision and regulation. It is for that reason that PenCom was established in PRA 2004 and PRA 2014, with the principal objectives to enforce and administer the provisions of the Act; co-ordinate and enforce all other laws on pension and retirement benefits; and regulate, supervise and ensure the effective administration of pension matters and retirement benefits in Nigeria.
PenCom has lived up to expectations in carrying out its duties. To enforce compliance in the private sector, the Commission has engaged the services of recovery agents who are ensuring compliance as contributions are being recovered from non-complying employers, including penalties with some being prosecuted in courts for non-compliance. The weak link in the work of PenCom, however, has come from the public sector. The non-compliance of the federal government, the largest single employer in the country, has already been discussed above.
PenCom, no doubt, as an agency of the federal government has its limits in enforcing compliance of the federal government. In the face of this, we suspect that the Commission would have become a beggar, rather than an enforcer. However, it goes without saying that it is the begging and diplomatic shuttles of officials of PenCom that we are today celebrating the President’s approval.
We hope that the Presidency, the Office of the Secretary to the Government of the Federation; Federal Ministry of Finance; Budget Officers of the Federation; and the Office of the Accountant General of the Federation; and the National Assembly will not allow federal pensioners to travel this route again and the labelling of the administration as being insensitive to the welfare and plight of our senior citizens. The government should not allow PenCom to be seen and ridiculed as a one-sided regulator.
Employees of MDAs should realise that they are also liable to themselves to the sum of .5% of their monthly salaries from July 2014 to date. This represents the difference between the 8% rate in PRA 2014, which took effect from 1st July 2014 and the 7.5% they have been contributing. As they await the crediting of their RSAs with federal government arrears of 2.5% contribution, they should be aware that they are also guilty of non-compliance.
The final stakeholders, and by no means the least, are NLC, TUC and trade unions, especially public sector unions; should note that it is their responsibility to ensure compliance with the provisions of the PRA 2014 by both the public and private sector employers. The whole issues surrounding the CPS are connected with the welfare of workers in their old age. It is about taking them out of destitution and poverty in their old age.
In the face of non-compliance with the rates of contributions by the government, if Labour had insisted on compliance on the side of workers, they would have put a moral burden on the government. Labour should ensure that state governments that have not keyed into the CPS do so, and those that have done so, should comply with the provisions of their own pension laws.
All said; we at the Centre for Pensions Rights Advocacy laud the approval of the President, which came at a time of great financial challenges to the nation. We congratulate PenCom officials for their diplomatic shuttles to government officials, which culminated in the President’s approval.
