Introduction
IN the first part of this article, answers were provided to some of the frequently asked questions about the Contributory Pension Scheme (CPS), with the aim of breaching the knowledge gap and bring about social protection inclusiveness among workers. The focus was on the introduction of the CPS.
In this second part, we focus on the registration and contribution remittance under the CPS.
How can an employee open a Retirement Savings Account (RSA)?
An employee should approach a Pension Fund Administrator (PFA) of his/her choice, complete the RSA Registration Form and provide the following supporting documents:
- Letter of Employment or Attestation Letter (in the case of Police Personnel);
- Valid means of identification (Staff ID Card; National Driver’s Licence; Permanent Voter’s Card; National Identity Card or data page of International Passport); or
- Enrollment Slip issued by the National Identity Management Commission (NIMC) indicating the National Identity Number (NIN).
The PFA would process the request for RSA registration and issue a unique Personal Identification Number (PIN).
Can an employee have more than one RSA?
An employee is required by law to open only one RSA, which should be maintained throughout his/her lifetime even if he/she changes employment, transferred his/her RSA to another PFA or retires.
What are the implications of an employee having more than one RSA?
Having more than one RSA would lead to incorrect remittances into the RSA and delay in payment of retirement benefits on retirement due to the need to reconcile the RSAs.
What should I do if I have more than one RSA?
You are required to present all your RSA PINs to any of the PFAs that issued them. The PFA would recapture your details including one of the registered PINs. The recaptured PIN becomes your PIN for life, while all other RSA PINs will be forwarded to National Pension Commission (PenCom) for deactivation after reconciling the balances (if any) in the RSAs associated with them.
Do I need to be recaptured even if I have only one RSA?
Yes. All RSA holders before 2019 in the public sector, private sector organizations and retirees, must participate in the data recapture exercise to update their biodata and biometric (picture and signature) information.
What is the implication of not participating in the data recapture exercise?
The implication of not participating in the data recapture exercise include:
- Inability to access retirement benefits at retirement.
- Non-resolution of multiple RSA registrations.
- Reconciliation of multiple registration of RSAs with balances will be hampered.
- Inability of RSA holders to update registration records in the future.
- Inability to transfer RSA from current PFA to another PFA.
Can an employer or a Union compel its workers or members to open RSAs with a particular PFA?
Section 11(1) of PRA 2014 makes the choice of a PFA for opening an RSA the exclusive right of an employee. It is not permissible for an employer or a Union to compel its employees or members to open RSAs with a particular PFA.
What is the role of an employer in opening RSAs by its employees?
All employers that have a maximum of 3 employees are required to obtain a unique identifier called “employer code” from PenCom by submitting a written request through any PFA of their choice. Every employee’s RSA is tied to his/her employer’s code.
What are the requirements for issuing an employer code?
a) Private Sector Employers:
- Written application on the company/organization’s letter-headed paper requesting for an employer code from PenCom;
- Certificate of incorporation/registration from relevant registering authority; and
- Evidence of Taxpayer’s Identification Number (TIN).
b) Federal Government Ministries, Departments and Agencies (MDAs):
i. Letter to PenCom on the MDA’s letter- headed paper requesting for the issuance of an employer code and stating the source of funding of the MDA.ii. The MDA’s Chart of Account number issued by the Office of the Accountant-General of the Federation (OAGF).
iii. State Government MDAs
Letter to PenCom from the State Pension Bureau/Board/Commission or Head of Service, as the case may be, requesting for the issuance of an employer code and stating the source of funding of the MDA.
Are fees charged by PenCom to issue employer code?
The generation and issuance of an employer code by PenCom to any employer is at no cost.
Who deducts and remits pension contributions?
The employer is obliged under Section 11(3) of PRA 2014 to deduct and remit pension contributions into the employee’s RSA not later than 7 working days from the date salaries are paid.
What happens when an employer fails to remit its employees’ pension contributions?
PenCom would mandate such employer to make the remittance already due, in addition to paying penalty, which would be at least 2% of the total unpaid contributions. Both the outstanding contribution and penalty would be paid into the employees’ RSAs. This is in line with the provisions of Section 11(6) of PRA 2014.
What is the purpose of the penalty imposed on the employer for failing to deduct and remit pension contributions as and when due?
The penalty is meant to compensate employees for the income that would have been earned through returns on investment, if their pension contributions were remitted as and when due because contributions in the RSAs of employees are invested for the benefits of the employees.
How are contributions of employees of Federal Government Treasury Funded Ministries, Departments and Agencies (MDAs) remitted into their RSAs?
For employees on the Integrated Payroll and Personnel Information System (IPPIS), the Office of the Accountant General of the Federation (OAGF) deducts and directly remits their contributions into their respective RSAs. However, for employees of Treasury Funded MDAs that are not yet on the IPPIS platform, their contributions are deducted by the OAGF and lodged into the Contributory Pension Account with the Central Bank of Nigeria (CBN). PenCom, thereafter, advises the CBN to remit the contributions directly into their individual RSAs based on the nominal rolls submitted by the MDAs.
Are pension contributions subject to tax deductions?
Section 10 of PRA 2014 stipulates that pension contributions shall not be taxed. However, income earned on voluntary contribution would be taxed if withdrawn before 5 years from the date the contribution was made.
Conclusion
In part 3, answers will be provided to some frequently asked questions on investment of pension funds under the CPS.
