Given the immense economic, development, and investment benefits inherent in the Contributory Pension Scheme (CPS), it is befuddling that most state governments are unwilling to do away with the cumbersome, burdensome and corrupt-laden non-contributory alternative. According to the Acting Director General of the National Pension Commission (PenCom), Ms Omolola Oloworaran, only seven states and the Federal Capital Territory, FCT, Abuja have fully implemented the CPS. This is sad, as it simply adds to the retirement anxiety of workers, even as their future is not assured.
Before the enactment of the Pension Reforms Act of 2004, the pension administration system in Nigeria was shrouded in opaqueness. The previous regime was laissez-faire as payment of retirement benefits was solely at the whims and caprices of employers. Retirees in the public sector suffered harrowing adversity due to the unethical and fraudulent implementation of the Defined Benefits Scheme (DBS), while most of their private counterparts were entitled to minimal or zero gratuity and pension.
The current legal framework (now embodied in The Pension Reforms Act, 2014) marks a watershed in pension management in Nigeria. It radically shifted the paradigm with the introduction of the CPS and the establishment of a sole regulatory body, the National Pension Commission (PenCom). The Act significantly cures the deficiencies in the DBS and guarantees a better post-employment life for workers in the formal sector. Further, it relieves the government at all tiers and other employers from bearing the pension burden alone as employees are also obligated to contribute their quota.
Despite the failure of many states to embrace the modern pension system, Oloworaran further revealed that pension assets under the CPS have grown to N20.79 trillion as of July 2024. Highlighting the merits of CPS, she remarked as follows: “It will interest state governments to note that one of the significant benefits of adopting the CPS is access to accumulated pension funds for infrastructural development through issuance of state bonds. Indeed, five states, including Lagos, Niger, Osun, Ekiti, and Delta, have successfully issued state bonds that were subscribed by pension funds. Notably, the Lekki-Ikoyi Bridge in Lagos was partly financed by pension funds.”
The failure of some state governments to embrace CPS is untenable. Although, the Pension Reforms Act exempts judicial officers, members of the Armed Forces, the Intelligence and Secret Services of the Federation; existing retirees, and employees who had three or fewer years to retire as of June 30, 2004; it extensively caters to the post-service entitlements of nearly every other person working in a formal setting.
In the main, CPS provides a uniform system whereby every worker receives his retirement benefits as and when due and assists improvident individuals to make savings for their old age. Experts assert that CPS is superior to past pension schemes in terms of “accountability, accessibility, ease of payment of pension and gratuity, funding, management of pension fund, transparency, auditor’s control, and corporate governance.” Additionally, it allows for shared funds control between the Pension Fund Custodian and Pension Fund Administrator (who are private actors) with PenCom as the supervisory authority.
Further, CPS provides financial security and stability to millions of workers during their retirement years and supports national economic growth by mobilising long-term savings and channelling them into productive investments. It also minimises the risk of non-remittance and fraudulent diversion of pension funds as employees can conveniently monitor the funds in their Retirement Savings Account; and choose and change their preferred Pension Fund Administrator at will. They can also raise the alarm whenever their employers fail to remit their monthly pension within the statutorily prescribed timeline.
In contrast, non-contributory benefits are fixed pensions paid to pensioners based on their salary and years of service. The DBS is solely funded and managed by the government and other employers and places no direct responsibility on them to deduct pensions via payroll tax. For instance, under this Scheme, the pension benefits for public servants are paid via budgetary allocations kept in the Consolidated Revenue Fund. The Scheme is susceptible to mismanagement, fraudulent manipulation and usually observed in default. The amount disbursed for public pensions constantly falls short of the budgetary allocations. Also, the government scarcely offsets the humongous arrears of unpaid pensions.
This explains why some state governments are still overwhelmed with outstanding pension obligations. Equally worrisome is that pension funds are embezzled by those entrusted with the administration of the same without grave consequences. For instance, the six-year jail term imposed by the Supreme Court on a former Police Pension Official, John Yusufu Yakubu, who had initially walked free after paying a paltry N750,000 fine ordered by the trial court, is not adequately punitive. Meanwhile, at the receiving end are the pensioners who are condemned to untold hardship, squalor and sometimes premature death while waiting for their pensions. Put in simple words, the DBS is neither desirable nor sustainable.
Without any gainsaying, every Nigerian worker is more burdened with post-employment life thoughts than ever considering the austere realities. Potential retirees are confronted with major challenges of unabating inflation, rising costs, increasing health care costs, and currency fluctuations with its attendant erosion of purchasing power, among others. Consequently, any scheme that assuages these concerns via a secured system of seamless and prompt assessment of retirement benefits; and contributes to social welfare by alleviating poverty among retirees, ensuring that they have a stable income to cover their basic needs and maintain a decent standard of living should be embraced. Essentially, the CPS puts pensioners in a better position to navigate the ageing landscape without (much) financial worries.
So why would any state government insist on maintaining absolute control over pension administration and management if not for ulterior considerations? What is the rationale for sustaining a system that shuts out most private employees from retirement benefits? Is there any justification for subjecting ‘senior citizens’ who have served the nation dutifully and meritoriously for decades to undue misery? Pray, where is the social justice for a class of people to enjoy life pension and other jumbo allowances, including houses at the FCT, for occupying the executive seat for four or eight years while the retirement interests of those who sacrificed their productive years in national service are trivialised. The lead organised labour, the Nigerian Labour Congress (NLC), should show more interest in the post-work welfare of its members in the Non-CPS states. The concerned states are charged to adopt the Contributory Pension Scheme in the overriding interests of their people.
