CONTRIBUTORY PENSION: Still A Bleak Future For Pensioners

• Scheme is Loathed By States, Low Compliance By Private Sector• Only nine states embrace scheme, uncertain future several workers • Contributions now crawl to N2.953 trillions in 11 years• Pension fund investment portfolio at N4.746 trillion• PenCom blames irregular contributions on harsh economic realities• Tasks workers to take destiny in their own hands• Recovers N6.73 billion from registered non-compliant entities

ELEVEN years after the New Pension Reform Act in Nigeria was enacted, workers still seek a secured future at retirement. Though, the 2004 Act insulates them from pains and penury associated with irregular pension and other entitlements by their employers, however, two major stakeholders of labour end users in the country — the state governments and organised private sector — are yet to fully key into the new scheme —the Contributory Pension Scheme (CPS).

The new scheme, which became operational in 2004, provides for joint pension contribution by the employee and employer, and equally, places the pension account, though escrow, in the control of the employee, such that, access to the funds upon retirement, is made easy and less cumbersome than the old scheme which puts a lot of encumbrances on the path of the employees, some who never benefit from the package until they die.

Only the Federal Government and its agencies have fully keyed into the scheme plus a few private sector organisations, some of who are yet to comply fully with the funding requirements, by promptly reemitting their workers’ contributions, as specified to their chosen Pension Funds Administrators (PFA). Only about nine states have embraced the scheme, while the others are yet to fully commence the funding of their workers’ contributions.

The states that have braced the odd in spite of the dwindling federation allocation revenue to provide for their workers future are: Anambra, Lagos, Delta, Niger, Ogun, Osun, Rivers and Zamfara.

Prior to the enactment of the Pension Reform Act 2004, pension schemes in Nigeria had been bedeviled by many problems. The public service operated an unfunded Defined Benefits Scheme (DBS) and the payment of retirement benefits were budgeted yearly. The budgetary allocation for pension was often one of the most vulnerable items in budget implementation in the light of resource constraints. In many cases, even where budgetary provisions were made, inadequate and untimely release of funds resulted in delays and accumulation of arrears of payment of pension rights. It was, obvious, therefore that the DBS could not be sustained.

In the private sector, on the other hand, many employees were not covered by the pension schemes put in place by their employers and many of these schemes were not funded. Besides, where the schemes were funded, the management of the pension funds was full of malpractices between the fund managers and the trustees of the pension funds.

This scenario necessitated a re-think of pension administration by the administration of President Olusegun Obasanjo. The outcome of the reform was the enactment into law of the Pension Reform Act 2004 as recently amended by the 2014 Act.

If the Act implementation status report by the National Pension Commission (PenCom), the new pension sector regulator in Nigeria is anything to go by, then a very bleak further awaits many Nigerian workers both in the states and in the private sector, particularly, given the economic downturn, which has visited the nation with drop in income from oil resources.

According to the Report, a first quarter 2015 account of the performance of the pension industry, many states shy away from embracing the scheme, while a few private organisations that have embraced the scheme, have to be chased around by PenCom to recover contributions on behalf of their workers.

Little wonder, therefore, that in almost 11 years of the scheme’s operation, only a little above six million Nigerians are fully covered, whose pension, as at now, can be said to be guaranteed at their retirements, while the rest vast working population’s fate continue to hang in the balance.

According to the Report: “As at the end of the first quarter, 2015, 26 state governments had enacted laws on the CPS, while the remaining 10 were at the bills stage. Eight out of the 36 states had commenced remittance of contributions into the Retirement Savings Account (RSAs) of their employees. Similarly, six states have commenced the funding of their Retirement Benefit Bond Redemption Fund Accounts (RBBRFAs). Records show that Lagos State had remitted N10.00b, while Ogun, Niger and Rivers states had remitted N1.43b, N9.10b and N3.10b into their RBBRFAs respectively as at the end of the quarter under review.”

The report also put the total contributions made by workers of both the public and the private sector since inception at just N2.953 trillion, stating regrettably that it has to engage debt recovery agents to collect contributions from some entities. It said its portfolio investment now has grown slowly to N4.746 trillion

It said, “the total pension contributions by both the public and private sectors into the RSA of employees was N2,953.09b as at the end of first quarter, 2015. This was an increase of N79.87b, representing 2.70 per cent over the total contributions remitted as at the end of December 2014, while the Public Sector contributed 34.43 per cent of the total contributions, the private sector contributed the remaining balance of 65.57 percent during the quarter.

“The private sector contributions increased from N1,229.77 as at the end of December 2014 to N1,282.14 in the first quarter of 2015, representing an increase of 4.26 per cent. The average monthly contributions by the private and public sectors were N17.46b and N9.17b respectively during the quarter.”

A review of the compliance reports forwarded by PFAs to the Commission during the quarter revealed some issues of non-compliance, which included: non-compliance with investment limits by some PFAs; delay in the payment of retirement benefits; receipt of pension contributions without appropriate schedules; unresolved customer complaints; and non-implementation of disaster recovery plans. Subsequently, the Commission conveyed these issues to the concerned operators as well as monitored them in their efforts at resolving the identified issues.

“The Commission retained the services of Consultants in order to follow-up and conclude work on the recovery of outstanding pension contributions and penalty from defaulting employers. During the quarter, the sum of N540.94 million representing principal contributions of N145.85 million and penalty of N395.09 million was recovered. This brought the total recoveries made to date to N6.73 billion,” the report revealed.

The Guardian gathered from the report that to get the buy in of the informal sector in the scheme, the Commission has developed and distributed the framework for the sector participation in the CPS to all stakeholders for comments.

The inputs from various stakeholders have been collated and subsequently incorporated into the framework. Consequent upon this, the Commission commenced work on the guidelines and other modalities that would facilitate the participation of the informal sector in the scheme

The total value of pension assets increased from N4,611.29b as at the end of the fourth quarter of 2014 to N4,746.00b at the end of the first quarter of 2015, representing an increase of N134.71b (2.92 per cent).

RSA Active Fund accounted for 63.99 per cent of total pension assets under management during the quarter. The fund also accounted for 80.07 per cent of assets growth during the quarter. This was partly explained by growth in pension contributions that averaged N26.62b in the quarter. The Closed Pension Fund Administrators (CPFAs) and Retiree Funds followed with proportional contributions of 33.19 and 4.05 per cent of total pension assets respectively. The Approved Existing Schemes (AESs) witnessed a decline of N11.79b, representing 1.80 per cent during the quarter.

Attempts to get the Director General of PenCom, Mrs. Chinelo Anohu- Amazu to comment on the lack of interest in the scheme by states and some private sector operators were not successful, but a key personnel of one of the Commission’s directorate told The Guardian that the reason could not be divorced from the harsh economic realities pervading the Nigerian economy.

According to the director, who preferred to remain anonymous: “How can you expect states, some of whom are finding it very difficult to pay workers for more than seven months to begin to talk of funding pension accounts under the new scheme? They will rather push the liabilities to next administrations while they manage to bear the current headache. I can tell you that some of these states have already passed the pension legislations, but can’t just kickstart the process because of low revenue inflow to them.