‘Exclusion of paramilitary from CPS will destabilise retiree benefits scheme’

Govt’s debts hit N140 billion
Nigeria’s Contributory Pensions Scheme (CPS) that came into place by the Pension Reform Act 2004, as amended in 2014, faces a major challenge capable of eroding the successes already achieved, which have helped provided succour to retirees in the past 13 years.

Stakeholders in the sector, and the regulator, the National Pension Commission (PenCom), some lawmakers, who should align with the government to suggest ways of raising revenue, are pushing bills to increase financial burden seeking exemption of security personnel from Contributory Pension Scheme (CPS) in Nigeria.

This comes as the Federal Government, which is under a moral obligation to sanction other employers guilty of not remitting workers’ contributory pension into the PenCom account, also owes the scheme about N140billion that had already been deducted from workers’ salaries.

Not bothered by government’s financial position, a member of the National Assembly, Honourable Oluwole Oke, from Obokoti/Oriade, Constituency, Osun State, on May 16, sponsored a bill seeking to amend the law.

The proposal is titled: “Amend — Lie Pension Reform Act 2014, to Exclude Members of The Nigeria Police, The Nigerian Security and Civil Defence Corps, Nigeria Customs Service, Nigeria Prison Service, Nigeria Immigration Service, and Economic and Financial Crimes Commission from the application of the Contributory Pension Scheme and Other Related Matters.”

The Bill had passed its second reading, and referred to the relevant Committee of the House of Representatives for further action.

The Bill, which is similar to that of the Armed Forces and Intelligence Agencies, also sponsored by Oke, seeks to fully exempt the listed organisations from the CPS, and return them 100 per cent underwritten in relation to pension arrangements by the Federal Government. In other words, return them to the erstwhile Defined Benefit Arrangement.

The arguments advanced by the promoters of the Bill as stated in the Legislative Digest (Pension Reform Amendment Bill 2016) include: National Security — the identity, data, addresses and family ties of security personnel are best handled internally by the relevant service, and not kept in civilian custody which may be easily compromised.

But operators under the auspices of Pension Fund Operators Association of Nigeria (PenOp), however urged the Federal Government and the National Assembly to respectively decline the request in the Bill for exemption of the Police and other Paramilitary Agencies from the CPS in 2011, despite the above arguments are still valid.

PenOp Chairman, Longe Eguarekhide, speaking on the effect said the argument against exemption is today further reinforced by many other economic, fiscal, social and public policy reasons.

He said: “The exemption of the personnel of the Police and other Paramilitary Agencies means additional financial burden on the Federal Government by way of unsustainable pension obligations. For instance, in the last 10 years, the number of FGN employees that retired under the CPS from the six agencies sought to be exempted are 50,730. The total Accrued Benefits of these personnel amounted to N208.22billion, which had been redeemed by the Federal Government, paid into their respective Retirement Savings Accounts (RSAs), and consolidated with their monthly pension contributions to fund their retirement benefits.

“These retirees are currently receiving their retirement benefits promptly as and when due. Exempting them from the CPS would imply that Government would shoulder the huge financial obligation of payment of their pensions as well as that of future retirees through budgetary provisions, with no guarantee of availability of funding and; or timeliness of payment.”

Occupational Hazard — the nature of the service provided by the paramilitary is unique and hazardous, and the burden of paying their pensions should therefore be borne by the government.

Delays in the payment of entitlements – low Monthly Pensions being paid to the retired personnel accounts for the preference for the DB system where workers who had worked up to 35 years were entitled to 70 per cent of their last monthly salary and directors received l00 per cent.

The Federal Government is already overburdened with the payment of pensions as contained in the 2016 Appropriation Act, which made a provision under the Service Wide Vote for the sum of N200.170billion as total Pension and Gratuities Allocation, which is insufficient to fund its pension liabilities.

For instance, the 2016 Pension Transitional Arrangement Directorate (PTAD)’s Budget proposal indicated a total Annual Pension Liability of about N388.321billion. Out of the total sum, about N255.897billion constituted unfunded liability inherited by the PTAD mostly due to outstanding payments of 33 per cent pension arrears to pensioners under the Defined Benefits Scheme.

PenOps noted that the Federal Government pension liability burden under the Defined Benefits Scheme is much higher than the PTAD proposals in view of the provisioning of about N74.53billion for the Military Pension Board, N7.64billion for the State Security Service, and N1443.71billion for the National Intelligence Agency. Consequently, it argued, it would be fiscally imprudent to increase the number of this category of retirees under that Scheme, as it would also render the retirees financially vulnerable and insecure.

In addition, it is evident that the Defined Benefit pension system is not sustainable as exempting the Military, Department of State Security, and the Nigeria Intelligence Agency, has resulted in very high allocation of resources to fund their retirement benefits.

As is evident in the various Appropriation Acts since their exemptions, their combined allocations were 49.4 per cent; 49.1 per cent; 45.1 per cent; 41.99 per cent, and 43.1 per cent of total allocations for pensions in the 2013, 2014, 2015, 2016 and 2017 Appropriation Acts respectively.

The figures will be staggering and clearly unsustainable if the personnel of the Police and other Paramilitary Agencies were to be exempted in view of the fact that the number of Police personnel is significantly higher than the number of the personnel of the three exempted Agencies combined.