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 started with Lagos State, followed by the Federal Capital Territory, Abuja. Today we will be discussing Osun State.
Status of implementation by Osun State
Osun State is one of the states that have keyed into the Contributory Pension Scheme (CPS). We are therefore going to look at the status of its implementation of the scheme.
Enacted Law on Contributory Pension Scheme
Osun State enacted law on CPS in 2008.
Establishment of Pension Bureaus
The state has established two pension bureaus, one for employees of the state and the other for local governments.
Registration of Employees and the Rates of Contribution
The state has gotten her employees registered with Pension Fund Administrators (PFAs), where they have opened Retirement Savings Accounts (RSAs). The rates of contribution are as follows:
(i) A minimum of seven and a half per cent (7.5%) by the employer; and
(ii) A minimum of seven and a half per cent (7.5%) by the employee.
Remittance of pension contributions is inconsistent, leading to backlog of unremitted contributions. What is not very clear is whether employees contributions, which are deducted monthly from workers salaries when salaries are being paid, also form part of the backlog or it is only employers contribution that account for the backlog.
If employees’ contributions are deducted and not remitted within seven days of payment of salaries, then the state government is short-changing the workers as it is depriving them of return on investment from money already deducted from their salaries.
Conducted Actuarial Valuation
The state has carried out actuarial valuation of the scheme. This is with a view to ascertaining its pension liability based on accrued rights of workers who were in service before the commencement of the CPS. Haven ascertained the accrued rights of these workers; the state ought to fund their accrued pension rights. Unfortunately, the state has huge arrears of accrued 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 expected to make periodic payments into the Fund. The CBN is to invest and manage the Fund, which will be used to pay accrued pension rights of employees who were in employment before the commencement of the CPS.
Group Life Insurance Policy
In line with the provisions of the pension law, the state has taken a group life insurance policy for all its employees. When an employee dies, his entitlement under the life insurance policy shall be paid to the beneficiaries named in the death benefit nomination form in line with section 57 of the Insurance Act. The law provides for the payment of three (3) times the annual total emolument of the employee.
Conclusion
The backlog of unremitted pension contributions and huge arrears of accrued rights is the reason why employees of Osun State cannot be paid their retirement benefits by Pension Fund Administrators (PFAs) immediately they retire. Unfortunately, some of them are dying without being paid their retirement benefits. Retirement benefits are paid from the balance of an employee’s Retirement Savings Account (RSA) and accrued rights for those entitled to. The balance in RSA is made up of contributions of both the employer and employee as well as return on the investment of the contributions. For employees who were in service before the commencement of the CPS, their previous pension rights, is what is referred to as accrued rights.
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 ensuring that contributions deducted from workers salaries, and the state government’s contributions as an employer are paid into their RSAs within seven days after paying salaries as the law provides and also fund the huge arrears of accrued rights, which is the workers entitlement by law.
