In the concluding part of his series, OMOBOLA TOLU-KUSIMO writes that the continued success of the pension industry will largely be hinged on the ability of employers to honour their obligations as and when due.
Speaking on “The Pension Industry – The Way Forward” the pioneer Director-General of the National Pension Commission (PenCom), Muhammad Ahmad said it is important to note that even though we are not where we should be, we are also not where we need to be as industry.
Ahmad, who is currently the Chairman of Polaris Bank, is pleased that within the seven years since he left the commission, the pension fund assets have increased from N4.7 to N9.8 trillion as at October this year.
He said the questions to ask therefore are what should stakeholders in the industry do to ensure that, as a minimum, pension fund assets double at least every five years and what are the potential roadblocks that will hinder the growth trajectory of the industry as an enabler of economic development and a safety net for many who would not have had any form of “fall back” in their retirement years?
He stated that the first issue is for the Federal Government to prioritise the payment of accrued rights of retirees.
He noted that although the government had been religiously paying the monthly pension contributions based on the old rates, it has not been able to meet up with the adequate and regular payment of accrued pension rights.
He observed that this is causing untold hardship and pain to many who have been waiting for years for their RSA to be funded appropriately.
This is non-negotiable and we should constantly bring this up at every opportunity until these accrued rights are funded by the government.
He revealed that although PenCom has been statutorily empowered by the PRA 2014 to direct the Accountant-General of the Federation to deduct at source unpaid accrued pension rights, that power had never been exercised because of political constraints.
He said: “The continued success of the pension industry will largely be hinged on the ability of employers to honour their obligations as and when due. In the recent past, the members of the National Assembly had assisted in getting the government to accelerate the payment of the arrears of accrued pension rights.
“It would appear another tier of unpaid obligations have been built and the industry would once again require the collective efforts of all stakeholders for the timely payment of the accrued rights. It should be reiterated that the hallmark of the pension reform is the establishment of a fully funded scheme that guarantees the payment of retirement benefits as and when due.”
Related to this, Ahmad said, is the need for state governments to be compliant with the provisions of the PRA 2014 and also fund their pension liabilities.
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The non-compliance by a number of states, he said, negates the intent of the Act and the spirit of the pension reforms. Since the governments at all levels employ the greatest number of Nigerians, the funding of accrued rights and the compliance to the Act by state governments will go a long way in ensuring that more Nigerians benefit from the pension reforms.
He further revealed that he is aware that a bill is being sponsored to compel state governments to comply and to criminalise non-payment of pension liabilities.
He urged legislators as the representatives of the people of Nigeria to get behind the piece of legislation.
He said aside from issues of non-payment of pension liabilities, it is important to note that in some cases, deductions are actually made from employee’s salary account and payments are indeed done, but the employers are using the old rate of 15 per cent under the 2004 Act as opposed to the new rate of 18 per cent as stipulated under the 2014 Act as amended.
“Essentially, we need to ensure compliance-both in respect of payments, for those who do not pay at all and for the correct percentage to be paid by those who still use the previous rate. In addition, we need to stipulate consequences for non-compliance and look for ways to incentivise those that have complied.
Again, this is where you, Senators and Representatives, would play a significant role in ensuring that effective legislations are made to address the identified challenges.
“Speaking about incentives, we need to remove any form of encumbrance to the employer and contributors (whether mandatory or voluntary) from making their contributions in the scheme”, he added.
He further appealed to operators, legislators and regulators to regard their roles as a call to serve.
“Calls to serve those Nigerians that have no voice – those Nigerians that have worked diligently hoping to retire to a decent life. Do not take this call lightly. If we get this right, posterity will judge us fairly and we all can retire in peace knowing that we have created a system for millions of Nigerians to also retire in peace”, he said.
PenCom, on its part, believes the lack of political will by state governors has remained a huge challenge to the scheme.
The commission revealed that out of the 36 states, 25 have enacted the CPS while nine states and the FCT have commenced implementation, remitting both employer and employee pension contributions.
While speaking at the 2019 Journalists workshop entitled “Expanding Coverage of the Pension Industry” held in Benin, the Head, States Operation Department, Mr. Babatunde Philips said the need for states to adopt the CPS cannot be overemphasised as it presents opportunities for state governments to access available pension fund to deepen infrastructural development in states.
He observed that delay in adoption of the scheme by some states is due to poor understanding by other state officials and labour unions.
He said: “The CPS stands as a legacy against old age poverty as well as enhances the integrity of state governments’ payroll. The right of states to enact their own pension laws had been a clog in the wheel of progress as some states delay in enacting their laws. The lack of political will by some state governors had also hindered the implementation as the decision more or less depends on the states’ governors.
“Steps towards ensuring full implementation of the CPS in states include enactment of the state pension law, establishment of state pension bureau, commencement of actuarial valuation to determine accrued rights of employees and opening of RSA for all eligible employees, among others.”
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