Pensioners still find it diffucult to access their pensions despite the claim that the process has been made easy by the introduction of the Contributory Pension Scheme (CPS). The employees and their employers contribute to the CPS. But in most instances, the contributions are not remitted. The National Pension Commission, PenCom, is set to address the ugly trend, reports Ibrahim Apekhade Yusuf
The idea of pension is to ensure that workers get something to fall back on after retirement. But the ideas seems to have been defeated in Nigeria where retirees do not get their pension as when due. In some instances, many have died, while waiting to collect their pension. The story is the same whether in the public or private sector. People who worked hard, expecting a decent pension to enable them enjoy life in retirement are being shortchanged, no thanks to their employers that fail to remit their pensions regularly.
It is against the backdrop of this mismanagement and the attendant misery that pensioners have had to live with, that the 2004 Pension Act was enacted.
The Pension Fund Act of 2004 was designed to eliminate the abuses the pension fund was subjected to in the past. This explains why the fraud was only perpetrated on the “old pension scheme” and not on the current “contributory pension scheme”, which is regulated by the Pension Commission (PENCOM).”
Several checks and balances were built into the Pension Act which makes it almost impossible for the type of monumental fraud perpetrated on the Police Pension fund.
For instance, under the Act, the pension funds and assets are domiciled with the Pension Custodians while the administration of the asset/fund is the responsibility of the Pension Fund Administrators (PFAs).
Former President Goodluck Jonathan signed the 2014 Pension Reform Bill into law to replace the old pension law which had been in operation since 2004. The new pension law introduced several key changes including: increase in the minimum contribution.
Crackdown on defaulting employers
Worried by the huge portfolio of unremitted pension assets, the National Pension Commission, PenCom, The Nation gathered have since made moves to crackdown on defaulting employers.
In a chat with journalists during a programme in Lagos about the level of compliance and sanction against defaulters, PenCom’s Head of Compliance and Enforcement, Mr. Mohammed Bello, recalled that he commission did engaged the services of recovery agents about four years ago to recover debts from employers, adding that the agents have since concluded their jobs and any employer(s) still defaulting is expected to face the full weight of the law.
“With respect to remittance, yes there are issues with respect to non-remittance of contribution by some employers. But I will not say that all employers are not remitting contributions. But I can tell you that some private sector employers are not remitting as at when due.”
Pressed further, he said: “As you are probably aware, we have the report on a monthly basis because we have a way that we get returns every month on remittances made by employers. Now what you have to understand is that there over 200,000 employers and we get information on that. Big time employers in the organised private sector are fully complying.
“Where we have problems are mostly small-scale and medium-scale employers. What we normally do when we observe that employers are not remitting contributions is that we engage them. Based on the data we receive, we monitor and see if like one, two or three months an employer has not remitted, then we write a letter formally to the employer and say look, we observe that you have not remitted these contributions for this period and it is against the law, it is a violation of the law.
“We will quote the sections and also quote the penalty and then ask the employer to remit within a certain period, mostly we give four weeks. After four weeks if the employer fails to comply, we now send a warning letter. If you go to our website, you will see our sanctions regime spelling out what we normally do as the level of non-compliance escalates.
“From ordinary letter to caution, to warning then we go as far as litigation.”
Redeeming the situation
The recovery agents, Bello said, have recorded some achievements thus far.
“The recovery agents have made significant progress and some recoveries were made and in fact penalties were even paid. Some of the employers we have contracted for litigation, we have engaged some lawyers to prosecute them and they are at various levels. Usually, what we have noticed is that the moment you get to the level of notice of prosecution, the employers come and then quickly comply.”
Speaking on what happens to interests and penalties on recovered funds, he added that “everything goes to the employee. For example what it means is that if your monthly contribution is N100,000 and the penalty is N50,000, N150,000 will be credited to the worker’s account. It is PenCom that will pay the recovery agent from its funds.”
Small mercies
The Nation gathered that the recovery of outstanding pension contributions programme instituted by PenCom is already paying off as some N6.73 billion pension assets have been recovered from various employers who were fraudulently keeping them.
The update on the recovery of outstanding pension contributions and interest penalty from defaulting employers was contained in the PenCom 2015 first quarter report of the commission.
“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 said.
The report also indicated that six states moved into the contributory pension scheme (CPS) bracket and several others are making concerted attempts to sign on.
Giving the update on the implementation of the CPS by state governments, the report indicated that “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.”
The report further shows that 8 out of the 36 states had commenced remittance of contributions into the RSAs of their employees.
Besides, six states have commenced the funding of their Retirement Benefit Bond Redemption Fund Accounts (RBBRFAs). The states include: Lagos, Rivers, Niger, Osun, Osun and Delta states.
The update on compliance by the private sector, the report indicated that “during the quarter, the commission received 1,050 applications for issuance of compliance certificates, out of which 840 employers were issued the certificates while the remaining applications were rejected on the ground that they did not meet the requirements.”
Rising pension assets
It is however instructive to note that ten years after the inception of the Contributory Pension Scheme, CPS, following the Pension Reforms Act, PRA, of 2004, the pension assets have hit N4.746 trillion.
The first quarter report of 2015 released by the National Pension Commission, PenCom, said the scheme’s membership has increased to 6,515,736, noting that since the fourth quarter of last year, no fewer than 120,046 contributors have joined the scheme.
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.
“The total pension contribution by both the public and private sectors into the RSA of employees was N2.953,09 trillion as at the end of first quarter, 2015. This was an increase of N79.87 billion, representing 2.70 percent over the total contributions remitted as at the end of December, 2014.
“While the public sector contributed 34.43 per cent of the total contribution, the private sector contributed the remaining balance of 65.57 per cent during the quarter. The private sector contribution increased from N1.229.77 as at the end of December, 2014 to N1.282.14 as at the end of the first quarter of 2015, representing an increase of 4.26 percent.
“The average monthly contributions by the private and public sectors were N17.46 billion and N9.17 billion respectively during the quarter.”
Ranking the contributions of Pension Fund Administrators, PFAs, the report said the top five PFAs (not named) accounted for 67.83 percent of total contributions received as at the end of the quarter under review. Similarly, the top 10 PFAs accounted for 90.56 percent of total contributions received over the same period.
It disclosed that while the bottom five PFAs accounted for 1.52 percent of total contribution received, the bottom 10 PFAs accounted for 9.44 percent of total contribution in the quarter.
The report added that “the total value of pension assets increased from N4.611.29 trillion as at the end of the fourth quarter of 2014 to N4.746.00 trillion at the end of the first quarter of 2015, representing an increase of N134.71 billion (2.92 percent) RSA Active Fund accounted for 63.99 percent of total pension assets under management during the quarter.
“The fund also accounted for 80.07 percent of assets growth during the quarter. This was partly explained by growth in pension contributions that averaged N26.62 billion in the quarter. The Closed Pension Fund Administrators, CPFAs, and Retiree Funds followed with proportional contributions of 33.19 and 4.05 percent of total pension assets respectively.”
“The Approved Existing Schemes, AESs, witnessed a decline of N11.79 billion, representing 1.80 percent during the quarter. The FGN Securities continued to dominate total pension fund investment portfolio. This asset class accounted for 66.22 percent of total pension fund investments during the quarter.
“This could be explained by the uncertainties that characterised the stock market in 2014 and the persistent volatilities in the stock market. Hence, operators saw FGN Securities as ‘flight-to-safety’ strategy.”
