Introduction
WE began an in-depth state by state discussion of the status of implementation, of the Contributory Pension Scheme (CPS) in states on February 25, 2021 based on information sourced from the website of the National Pension Commission (PenCom), the Regulator of pension in the country. We discussed Osun State last week. Today we will be discussing Kaduna State.
Status of implementation by Kaduna State
Kaduna is one of the states that has keyed into the CPS. We are therefore, going to look at the status of the implementation of the scheme in the state.
The state should save her senior citizens, who have spent all their active lives in developing the state and ensuring her progress, from old age destitution by adequately funding accrued rights and the Sinking Fund.
Enacted Law on Contributory Pension Scheme
Kaduna state amended law on CPS in 2016.
Establishment of Pension Bureaus
The state has established a Pension Bureau.
Registration of Employees with Pension Fund Administrators and the Rate of Contributions
The state has gotten her employees registered with Pension Fund Administrators (PFAs), where they have opened Retirement Savings Accounts (RSAs). The rate of contributions are as follows:
(i) A minimum of seven and a half per cent (8%) by the employer; and
(ii) A minimum of seven and a half per cent (7%) by the employee.
The state reduced the employer’s rate of contribution from 13% to 8%, in violation of the state’s pension law and the Pension Reform Act (PRA) 2014.
Conducted Actuarial Valuation
The state has carried out actuarial valuation of the Scheme. This is with a view to ascertain its pension liability based on accrued rights of workers who were in the service of the state before the commencement of the CPS. Haven ascertained the accrued rights of these workers; the state is expected to fund the accrued pension rights.
Retirement Benefits Bond Redemption Fund Account
The state has opened a Retirement Benefits Bond Redemption Fund Account, referred to as “Redemption Fund” with the Central Bank of Nigeria (CBN). The state government is consistently funding this account with 5% of total monthly wage bill. The CBN is expected to invest and manage the Fund, which is being used to pay accrued pension rights of employees who were in employment before the commencement of the CPS. However, the state has huge arrears of accrued rights.
Group Life Insurance Policy
The state replaced group life insurance with Sinking Fund to be domiciled with the CBN. However, the state is yet to commence setting aside funds in the Sinking Fund Account opened with CBN for settlement of death benefits.
The purpose of group life insurance is for the payment of death benefit for an employee who dies while still in service. Section 4(5) of PRA 2014 provides that: “In addition to the rates specified in sub-section (1) of this section, every employer shall maintain a Group Life Insurance Policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover.”
Subsection (6) further provides that: “Where the employer failed, refused or omitted to make payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period.”
The state, along with all other states that have adopted the CPS, adopted this provision of the PRA 2014 and domesticated it in their pension laws. The state, has now jettisoned this provision in favour of a Sinking Fund for the payment of death benefits.
No doubt, this may be a way to side-track the strict liability placed upon the employer on the provision of group life insurance policy. Unfortunately, the state has not commenced the setting aside of fund to be paid into the Sinking Fund Account with the CBN, which is meant for the payment of death benefits. The question that needs to be answer by the state government is where then lies the fate of employees who die within this period.
Conclusion
The huge arrears of accrued rights will become a clogd in the smooth implementation of the CPS in the state. Without adequate funding of Accrued Rights, employees will not be able to receive their retirement benefits immediately they retire. These delays should be appropriately put at the door steps of the state government and not that of Pension Fund Administrators (PFAs).
The state should save her senior citizens, who have spent all their active lives in developing the state and ensuring her progress, from old age destitution by adequately funding accrued rights and the Sinking Fund.
