Old age and pension
There comes a time in a person’s life circle when he can no longer be fit for active economic activities in earning regular income through work. It is a period of rest, for those who have planned for it and a period of poverty and destitution for those who failed to plan for it. Organisations plan for their employees’ old age by putting in place pension schemes for them, which provides monthly income in retirement.
Constitutional guarantee of pension rights of employees of state governments
The Nigeria 1999 Constitution (as amended) guarantees the right of pension for employees of state governments. Section 210(1) of the Constitution provides, subject to the provisions of subsection (2) of this section, the right of a person in the public service of a state to receive pension or gratuity which shall be regulated by law. Subsection (2) provides that any benefits to which a person is entitled in accordance with or under such law as is referred to in subsection(1) of this section shall not be withheld or altered to his disadvantage except to such extent as is permissible under any law including the Code of Conduct.
Prior to the pension reform of 2004, pensions of employees of States and Local Governments were administered under the Pension Act 1990.
Reform of pension administration in Nigeria
The reform of pension administration in Nigeria was necessitated by many problems that confronted both the public and private sector pension schemes. The public sector, federal, states and local governments, operated the ‘Defined Benefits Scheme’ under the Pension Act 1990, which was of universal application in the whole public services in the country. The scheme was unsustainable due to lack of adequate and timely budgetary provisions and increases in salaries and pensions. There were also demographic shifts due to rising life expectancy; thus, pensioners were beginning to leave longer. Pension administration in the sector had been largely weak, inefficient, less transparent, very corrupt and cumbersome.
The reform therefore sort to introduce measures aimed at developing a system that is sustainable and has capacity to achieve the ultimate goal of providing a stable, predictable and adequate source of retirement income for each worker in the country. In a nutshell, this was what led to pension reform, which gave birth to the pension industry as we know it today. The reform brought about the enactment of the Pension Reform Act 2004, which introduced the Contributory Pension Scheme (CPS). Section 99(1)(a) of the Act, repealed the Pension Act 1990 that was of universal application in the federal, states and local governments public services. The Pension Reform Act No. 2, 2004 as amended, was repealed and replaced with Pension Reform Act 2014.
The lacuna in the Pension Reform Act 2004
On the enactment and commencement of the Pension Reform Act 2004 on 25th June, 2004, a lacuna was created in the public service pension law of the country especially as it affects states and local governments’ employees.
Section 99(1)(a) of the Act repealed the Pension Act 1990, which as stated earlier, was of universal application in the federal, states and local governments’ public services. Section 1(1) of the Act provides that there shall be established for employment in the Federal Republic of Nigeria a Contributory Pension Scheme for payment of retirement benefits of employees to whom the scheme applies under the Act.
Section 1(2) of the Act further provides that subject to section 8 of the Act, the scheme shall apply to all employees in the public service of the federation, Federal Capital Territory and the private sector. Thereafter, section 2 of the Act provides that the objectives of the scheme shall be to ensure that every person who worked in either the public service of the federation, Federal Capital Territory and the private sector receives his retirement benefits as and when due; establish a uniform set of rules, regulations and standards for the administration and payment of retirement benefits for the public service of the federation, Federal Capital Territory and the private sector.
From the above, what became obvious was the fact that employees of states and local governments were not covered by or were excluded from the coverage of the Pension Reform Act 2004.
Mischief by members of the National Assembly created the lacuna
The exclusion was not an oversight by the Committee that carried out the reform. Neither were states and local governments’ employees not covered in the Executive Bill that was sent to the National Assembly by the President to the National Assembly.
What happened was that upon the Bill reaching the National Assembly, governors mobilised representatives of their states in both chambers of the National Assembly to remove employees of states and local governments from the Bill before it was passed into law. Their reason was that the country was under civil rule; therefore, there must be the practice of true federalism, which does not allow the National Assembly to make laws for the states on an issue such as pension, which does not fall in the exclusive legislative list of the Constitution.
Steps taken to cure the lacuna
Years into the implementation of the Pension Reform Act 2004 and the Contributory Pension Scheme, no state government enacted a law to protect the pension rights of its workers. Disturbed by this lacuna, in 2006 or thereabout, the Board of the National Pension Commission (PenCom) approached the National Council of States on the issue, presenting it with a draft Bill to be adopted by states. The Council agreed to and adopted the Contributory Pension Scheme for employees of state governments, but stating that state governments should get State Houses of Assembly to enact their own pension laws, guided by the draft bill that was presented to Council by PenCom.
Pension Reform Act 2014
The mischief that found its way into the Pension Reform Act 2004 as highlighted above was cured in the Pension Reform Act 2014. Section 2(1) of the Act provides that the provisions of this Act shall apply to any employment in Public Service of the Federation, the Public Service of the Federal Capital Territory, the Public Service of States and the Public Service of Local Governments and the Private Sector. However, no state has adopted the Pension Reform Act 2014 for implementation.
How do states stand with the decision of Council of States
In discussing this, we are going to categorise states as follows: Flagship states, which are states that have adopted the Contributory Pension Scheme and are fully complying with their laws. The next are the Hibernating states, these are states that have stopped at enacting laws. The most dangerous ones, the Red flag states are states that don’t intend to do anything about pension laws. Finally, there are states that have adopted Contributory Defined Benefits Schemes.
Flagship states (states that have largely complied)
1. Kaduna: Fully implementing all aspects of the scheme but with arrears of accrued rights.
2. FCT: Covered by PRA 2014 and fully implementing the scheme.
3. Ondo: Fully implementing the Scheme.
4. Edo: Implementing the scheme and currently in the process of determining accrued rights.
5. Lagos: Fully implementing the scheme.
6. Ekiti: Implementing the scheme but yet to commence setting aside funds for accrued rights.
7. Delta: Fully implementing the scheme, however with backlog of accrued rights.
8. Osun: Implementing the scheme but with huge arrears of accrued rights and contributions.
Hibernating states (states with laws but not fully compliant
1. Kebbi: Enacted a law on CPS in 2009 (amended the law in 2014); established a Pension Bureau; Registered employees with PFAs; remitting only employees’ portion of pension contribution.
2. Anambra: Enacted a law on CPS in 2013 (amended some sections of the law in 2014); registered employees with PFAs; remitting employees and employer contributions albeit inconsistently; conducted actuarial valuation; opened Retirement Benefits Bond Redemption Fund Account with a PFA for the local government employees as provided for in the law; funding Accrued Rights for only local government employees.
3. Rivers: Enacted law on CPS in 2009 and re-enacted its pension law in 2019; established Pension Bureau; registered employees with PFAs; stopped remitting employee and employer contribution in 2016 and 2019 respectively; opened a Retirement Benefits Bond Redemption Fund Account with a PFA in line with state’s law.
4. Benue: Enacted law on CPS in May 2019.
5. Nasarawa: Enacted law on CPS in 2009
6. Sokoto: Enacted law on CPS in 2007; registered some employees with some PFAs
7. Ogun: Enacted law on CPS in 2008 (amended the law in 2013 to extend its transition period); established two Pension Bureaus (State & Local governments); registered employees with PFAs; deducting pension contributions but stopped remitting same since 2015.
8. Oyo: Enacted law on CPS in 2010 (in the process of amending the law to commence CPS implementation.
9. Abia: Enacted law on CPS in 2017
10. Ebonyi: Enacted law on CPS in 2017 (amended the law and forwarded to the Commission and the Commission communicated its observations on the law to the State).
11. Enugu: Enacted law on CPS in 2014.
12. Imo: Enacted law on CPS in 2008.
13. Taraba: Enacted law on CPS in 2009.
14. Bayelsa: Enacted law on CPS in 2009; established two Pension Bureaus (state and local governments).
15. Adamawa: Enacted law on CPS in 2013.
16. Kogi: Enacted law on CPS in 2018.
17. Niger: Enacted law on CPS in 2006; suspended implementation of CPS in April 2015 but amended the law in 2017 to extend its transition period to exempt some employees from the CPS; established Pension Bureau; registered employees with PFAs; stopped remitting pension contributions since 2015.
Red states (states that are still at bill level)
1. Akwa-Ibom: Bill on CPS has been at the State House of Assembly.
2. Bauchi: Drafted a Bill on Contributory Defined Benefits Scheme (CDBS) in 2015.
3. Borno: Drafted a Bill on CPS in 2008
4. Cross River: Drafted a Bill on CPS in 2012.
5. Katsina: Drafted a Bill on Contributory Defined Benefits Scheme (CDBS) in 2017.
6. Kwara: Presented Bill on CPS before the State House of Assembly in 2016.
7. Plateau: Drafted Bill on CPS in 2016 (the draft Bill has been in the State House of Assembly since then).
8. Yobe: Still operating a Defined Benefits Scheme (DBS). However, the state is contemplating embracing the CPS.
The following states adopted contributory defined benefits scheme.
1. Jigawa: This State is the flagship of the states that have adopted Contributory Defined Benefits Scheme (CDBS). The state enacted law on CDBS in 2005 and further amended the law in 2015; established a Pension Bureau; remitting pension contributions under the CDBS to selected PFAs regularly and has conducted actuarial valuation on the scheme.
2. Kano: Enacted a law on CDBS in 2006 and implementing the scheme; deducting pension contributions under the management of a Board of Trustees instead of PFAs.
3. Gombe: Enacted a law on CPS in 2008 but amended the law to introduce CDBS in January 2019.
4. Zamfara: Repealed the law on CPS and enacted law on CDBS in 2019. Employees are exiting from the CPS and RSAs opened under the CPS to be flagged off.
The above is a helicopter view of pension administration obtainable in the states across the country which I hope would be of interest to states employees, their unions and labour centres and indeed the general public on the type of old age life style that state governors, past and present, prepared and are preparing for workers in the states they governed and are governing.
Conclusion
The Contributory Pension Scheme, unlike the old Define Benefit Scheme that it replaced, has inbuilt safeguards meant to protect the fund from mismanagement and fraudulent practices. The scheme is fully funded through monthly contributions, which are put into Retirement Saving Accounts (RSAs) owned by employees. Employers cannot access the funds. The funds are warehoused by Pension Fund Custodians and managed by Pension Fund Administrators. The law established the National Pension Commission, among other objectives, to regulate, supervise and ensure the effective administration of pension matters and retirement benefits in Nigeria.
The adage that “rest is sweet after labour” may after all not hold for employees of most states and local governments in the country. The adage holds sway only for employees who have gotten their rest planned for them by their employers during the period of their labour. Unfortunately for employees of most states and local governments, this type of planning is alien to the managers of their states affairs.
