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Prosecute pensions fraudsters now!

By Editorial Board
16 December 2018   |   4:00 am
A report the other day that fraudsters have devised some ways and means of collecting death benefits of retiring workers by presenting fake documents has again highlighted the expediency of harmonising all national identity card.....


A report the other day that fraudsters have devised some ways and means of collecting death benefits of retiring workers by presenting fake documents has again highlighted the expediency of harmonising all national identity card schemes into a national database in the country.

The novel contributory pensions scheme is too important to be left so vulnerable to the whims and caprices of dubious characters in the Labour sector. The Pension Reform Act 2004 elicited some glimmer of hope at the time given the multifarious problems that had bedevilled the old under-funded benefit scheme for public servants.

In the old scheme, budgetary provisions made by government were fraught with a lot of inadequacies and vulnerability worsened by untimely release and accumulation of arrears of payments for pension beneficiaries. Thus the 2004 Pension Reform Act was one of the very good policy initiatives of the Olusegun Obasanjo administration. It came as a positive reaction to the sorry state of retired workers who littered the pension verification centres across the country then. The gruelling pursuits of retirement benefits actually led to death 0f hundreds of pensioners.

Since inception, the 2004 pension reform, the pension assets have grown by leaps and bounds from about N4.21 trillion in May 2014 to about N8.14 trillion in May 2018. This has been a very good development given that prior to the enactment of the 2004 Act, pension assets were reported to have been in deficit to the tune of about N2 trillion.

The success of the scheme has been largely accentuated by the fact that it is contributory and thus commits both employer and employee to put aside certain proportions of earnings for pension purposes. The Pension Reform Act 2004 thus introduced a great degree of certainty into the pension business with checks and balances introduced with the establishment of the National Pensions Commission, as regulator provision for Pension Fund Administrators, (PFAs), Pension Fund Custodians, (PFCs) and the employers and most importantly the employees. All are there as partners in the monitoring of funds from the point of deduction to that of payment to qualified beneficiaries.

Given identified deficiencies of the 2004 Act, the Pension Reform Act 2014, which followed, addressed some of these issues though it has itself, also become a subject of further scrutiny by a number of stakeholders. The 2014 Act had provided for the creation of a pension protection fund and given employees the right to choose their pension funds administrators even if their employers operate a closed pension scheme.

It has also introduced some measure of liberality in the withdrawal from one’s pension account, at retirement or on attainment of the age of 50 years as well as enlarged the base of computing the deduction, in addition to providing for some employee-friendly means of dispute resolution, which goes beyond the resort to arbitration or to the Investment and Securities Tribunal.

These benefits notwithstanding, calls have been made for the review of certain aspects of the 2014 Act. For example, in bill sponsored by Senator Aliyu Wamako of Sokoto State, which has already gone through the first and second reading on May 17, 2016 and May 10, 2017 respectively, proposed that definite percentages be provided which a retiree can withdraw from his retirement savings account as well as generally easing withdrawals from the retirement savings accounts.

Among others, this bill proposes that there should be an introduction of “75% as the maximum limit of withdrawals that can be made on a retirement savings account under Section 7(1) (a) of the 2014 Act. These are some of the issues that are currently arising from the implementation of the Act where challenges are being encountered in its operationalisation. This clearly implies that there are matters arising from the implementation of the country’s pension scheme.

Which was why a recent report of “unidentified fraudsters under the disguise of being relatives of workers and retirees under the Contributory Pension Scheme” approaching PFAs to collect the pensions of contributors has been disturbing. Such acts are usually performed with fake documents. According to the report, these fraudsters have successfully deceived the PFAs and collected pension benefits of some living workers and retirees with forged evidence that they were dead. This is quite unfortunate.

There have been a series of complaints in this regard. This is indeed worrisome that such loopholes could still exist, in spite of the remarkable milestones recorded in the entrenchment of a well-acclaimed pension scheme in the country. According to the regulator, the NPC, “…the commission has received series of complaints from retirees, who alleged that their PFAs have wrongfully paid their benefits to their next of kin or legal beneficiaries, while they are still alive and in active service without their consent.” It continued that, “…following these complaints and reports by the PFAs, it has become imperative to issue additional measures to curb these complaints and strengthen the processes and practices of processing and payment of death benefits.”

Though the National Pensions Commission, as the regulator in the sector has reviewed some guidelines in this regard, what has taken place shows that it is not yet “uhuru” regarding the pension scheme in the country.

Aside from this worrisome issue, another matter arising from the implementation of a functional pension scheme in the country is that many state governments have not even subscribed to the scheme. Some others deduct money from their employees but do not remit to the PFAs through the Custodians. That is tantamount to daylight robbery of the innocent employees. The National Pension Commission has its work cut out for it and needs to raise its game in addressing these anomalies. It needs to safeguard this system and provide a guarantee to the generality of toiling employees who make contributions to the scheme, that whenever it comes to withdrawal, stories of misappropriation would not be told.

This is very critical, particularly in a society where poverty has become so prevalent that the country has been declared the “poverty capital of the world.”

So, while these issues are being looked into, the scheme should also be reviewed to widen the net and bring in the informal sector, to guarantee the financial security of their workers at old age. The provision in the 2014 Act that mandatory contribution is applicable to only enterprises with at least 15 employees should be reviewed with the provision of five employees in the 2004 Act, which appears more realistic, adopted in bringing more employees into the pension bracket.

No doubt, the key issue is effective regulation by the National Pension Commission. This would place sufficient responsibilities on the various operators in the sector, from the employers to ensure prompt remittance, to the PFAs, to ensure internal control in their operations and the PFCs to guarantee the safety of pension funds with them. In the main, the employee should always keep an eye on their pension investments with regular interaction with their PFAs and with readiness to blow the whistle whenever they discover anything untoward in the entire process.

But the incipient fraudsters should not be allowed to go scot-free. The dubious character should be investigated, identified and prosecuted. That is the only way this criminality can be checked in managing pensions funds.