By Omobola Tolu-Kusimo
Lack of political will by state governors in the country has remained the bane of the success of the Contributory Penion Scheme (CPS).
The state governors are yet to embrace the scheme 15 years after it was established through the Pension Reform Act (PRA) 2004, as repealed by PRA 2014.
According to the National Pension Commission (Pencom), out of the 36 states, 25 have enacted the CPS while nine states and the Federal Capital Territory (FCT) have commenced implementation, remitting both employer and employee pension contribution.
The Nation, however, gathered that the 25 states that have enacted the law have not implemented the scheme. Only Lagos, Edo, Kaduna and the FCT have fully implemented the laws of the scheme.
Head, States Operation Department, PENCOM, Mr. Babatunde Philips, while speaking at the 2019 Journalist Workshop titled” Expanding coverage of the pension industry” held in Benin, said the need for states to adopt the CPS cannot be overemphasised.
He said this is because it presents opportunities for state governments to access available pension fund to deepen infrastructural development in the states.
He observed that the delay in the adoption of the scheme by some states was due to poor understanding by state officials and labour unions.
Philips 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 the enactment of their laws. The lack of political will by some state executive governors had also hindered the implementation as the decision more or less depends on the state 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, opening of RSA for all eligible employees amongst others,” he said.
Speaking on the benefits of the CPS, Philips said it will reduce pension burden and stem further growth of pension liabilities.
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Continuing, Philips said: “The contribution structure allows for shared responsibility between the employer and the employee, incremental accumulation of pension funds and assets, sustainability of pension arrangement. Periodic and spaced out payment of contributions also ensures fiscal discipline and financial sustainability, and provision for instalmental payment of past pension rights of employees.”
He also said it enhances integrity of State Governments’ payrolls, while biometric requirement for opening RSAs ensures data credibility, even as elimination of ghost workers reduces governments’ personnel costs.
“It also frees states from unnecessary hassles of pension administration. It is a legacy against old age poverty and economic empowerment of the vulnerable segment of the society,” Philips said, adding that it is an opportunity for states to access available RSA funds for infrastructure.
Also, it is an efficient avenue for financing state governments’ long term borrowing needs like state bonds, corporate bonds. It also enhnaces access to RSA balances for affordable housing scheme
In other words, state employees with RSAs can also use part of their RSA balances as equity payment to secure mortgage financing for their private homes.
On the challenges, Philips said the right of states to enact their own pension laws had been a clog in the wheel of progress as some states delay in enactment of their Laws and/or enact laws that are at variance with PRA 2014 and CPS principles
His words: “The lack of political will by some state governors has been a hindrance to the implementation of the CPS by states as the decision more or less depends on the states’ chief executives. Inadequate funding of the CPS in some states that had implemented the scheme negatively impacted the smooth implementation of the Scheme.
“There is also knowledge gap. Resistance to the implementation of the scheme by state officials and labour unions due to poor understanding of the scheme has delayed the adoption of the scheme by some states.
“Partial implementation, deduction and remittances of only employee portion, deduction and non/incomplete remittances etc by some states had led to wide dissatisfaction and resistance of the CPS.” he noted.
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