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Tag: Pension Scheme

  • Ebonyi NLC splits over pension scheme

    Ebonyi NLC splits over pension scheme

    The controversy over the new contributory law recently signed into law by Governor David Umahi of Ebonyi state worsened Tuesday as a new group known as Junior Workers Association split from the state chapter of the Nigerian Labour Congress (NLC)

    This followed the rejection of the law for not following due process by NLC and the alleged deduction from workers’ salaries by the state government for the contributory pension.

    The faction at a briefing in Abakaliki, the state capital, denounced the NLC leadership in the state headed by Comrade Ikechukwu Nwafor.

    The Chairman of the new group, Uguru Uchenna while reading a communiqué issued at the end of their emergency meeting accused the NLC leadership of pursuing personal interest as against the overall interests of the union.

    Uguru noted that Ebonyi workers have been properly taken care of under Governor David Umahi, adding that the contributory pension law which the state government recently put in place was for the welfare of the workers.

    “We are in full support of the agricultural programme of the state government and are happy to participate in the programme taking advantage of soft loan provided by the state governor to embark on rice cultivation and other agricultural programmes.

    “We are delighted and grateful to the governor for the increment of 5 percent in workers’ salary and pledge our unalloyed support to the
    effort of the state governor to strengthen the pensions of workers of Ebonyi state”

    Uguru further accused the leadership of NLC of playing politics with the welfare of workers in the state.

    “We completely dissociate ourselves from the desperation of some so called Labour leaders in the state parading their own personal agenda, a development that can cause breach of peace in the state”

    He said it was grossly uncharitable to claim that workers of Ebonyi state are enslaved whereas, they are among the few that get their monthly salaries on or before 18th of each month and without arrears.

    “That we invite workers to ignore the desperate moves by some misinformed Labour leaders in the state to create an atmosphere of chaos and bad image to the dignity of labour unionism in the state and ‘affirm our total support to Governor Umahi and call on all workers in the state to remain calm because the state government meant well”

    The state Chairman of Nigerian Labour Congress (NLC), Ikechukwu Nwafor could not be reached for comment as his mobile phone was switched off.

  • Edo to begin contributory pension scheme next year

    Edo State Governor Godwin Obaseki has said his administration will begin the contributory pension scheme for state’s workers from January 1.

    The governor said the scheme would mitigate challenges pensioners were facing.

    Obaseki spoke in Benin, the state capital, when the leadership of the Nigeria Union of Teachers (NUT) visited him at the Government House.

    He assured the union leaders that by the end of his tenure, the government would have resolved teething problems about the payment of pensions and gratuities.

    Obaseki said: “The issue of pension is one that we will deal with. So, in this year’s budget, what I have said is effective January 1, all of us will now move into the contributory pension arrangement.

    “By the grace of God, the next generation of teachers will not go through what you are going through now. That is, the pension money is already there; it’s automatic. You know the money that is to be converted to annuities and there are liabilities, while the bulk sum is paid to them.

    “I was part of that arrangement when former President Olusegun Obasanjo set up the pension committee to review the pension system. So, by the grace of God, effective January 1, we are cutting everybody over.

    “We have made a provision in the budget for that monthly contribution. I think the contribution monthly is 15 per cent; 10 per cent on behalf of government and five per cent on behalf of you.

    “So, of everything you earn, we put 15 per cent aside every month until you retire. And that money is being managed.”

  • Fed Govt to float pension scheme for self-employed individuals

    Fed Govt to float pension scheme for self-employed individuals

    There is good news for self-employed individuals. They are to be brought under the Pension Commission (PenCom) umbrella. OMOBOLA TOLU KUSHIMO writes on Federal Government’s plan to roll out a micro pension scheme for artisans, lawyers, accountants among  others, early next year.

    PLANS are afoot to extend the pension scheme beyond the formal public and private sectors. The Federal Government is planning to organise a micro pension scheme for thousands of artisans, self-employed accountants and lawyers, among others.

    The proposed scheme, according to National Bureau of Statistics (NBS), underscores the government’s conviction that the informal sector remains a critical part of the economy.

    According to statistics, the sector which accounts for over 70 per cent of the working population, has been uncovered by structured pension managers.

    With the planned introduction of a micro pension scheme, the Federal Government, through the National Pension Commission (PenCom), would be bringing more Nigerians under the pension’s umbrella, thus ensuring that save for the rainy day.

    The pilot phase of the micro pension scheme is expected to kick off by the second quarter of next year.

    Going by Section 2(3) of the Pension Reform Act 2014 which extended coverage of the Contributory Pension Scheme (CPS) to self-employed persons, the Pension Reform Act 2014 established the legal framework for micro pension.

    According to the NBS demographic, 37.6 million (representing 40.1 per cent) of Nigeria’s 93.5 million adult population, operate within the informal sector of the economy.

    A further breakdown of the demographic shows that 8.6 million (representing 9.2 per cent) of the adult population earn their income from the formal sector; 49.4 million (representing 52.8 per cent) is under 33 years; 58.7 million (representing 62.8 per cent) own a mobile phones and 21.5 million (representing 23.0 per cent) have no education.

    The demographic profile also states that Nigeria has a large rural population of 63.9 per cent, but there has been significant urbanisation since 2012. The Federal Capital Territory (FCT), Abuja’s population is growing at nine per cent per annum, Lagos is growing at three per cent and the national growth at two per cent.

    The Gross Domestic Product (GDP) as at the end of last year, stood at about N94.1 trillion, with the informal sector accounting for N38.7 trillion and N55.3 trillion from the formal.

    According to PenCom’s report on the current pension coverage, pension managers have 7.24 million contributors in their network as at September under the formal CPS. The figure represents about 7.7 per cent of labour force and above four per cent of contributors in private and public sectors.

    In a paper titled: “Understanding micro pension scheme: Features, prospects and expectations”, presented at workshop organised for  finance, insurance, labour and business editors in Calabar, Cross River State, PenCom Head, Micro Pensions Department, Polycarp C.N. Anyanwu, described micro pension as an initiative that exists for the provision of pension coverage to self-employed individuals.

    According to him, micro pension is a global trend and has been implemented in India, Kenya and Ghana. Anyanwu said the scheme engages and extends pension to the larger working population, especially those outside the formal sector.

    The PenCom official stated that micro pension in Nigeria covers three strata – the lowest, middle and high income earners.

    He listed artisans, accountants, lawyers, mechanics, tailors, traders, hair dressers, architects and engineers among others, who are self-employed in various trades and professions, as the commission’s target.

    Anyanwu noted that the micro pension scheme is an offshoot of the pension industry five-year strategic plan to expand the CPS coverage to 20 million contributors by 2019, adding that the pilot phase of the scheme would be targeting 250,000 enrolments within six months.

    He disclosed that trade unions and associations are expected to assist by introducing the scheme to their members ahead of the kick-off of the pilot phase.

    Anyanwu said: “To commence the pilot phase, we are targeting 250,000 contributors to enroll within 6 months, test ICT technology to ensure adequacy, test run the guidelines and framework, test the ease of operations, registration, contribution, withdrawal of savings portion and embark on capacity building for staff and operators.

    “The possible challenges from the scheme however are socio-cultural inclinations, documentation challenges, low level of financial literacy, lack of confidence in government, irregular income inflow, low level of ICT literacy, associated transaction costs and low level of education.

    “Some of the peculiarities of the individuals that operate within the informal sector are irregular flow of income, highly mobile and flexible jobs, lack of permanent work address, lack of official means of Identification and other documents, typically excluded from pension systems prior to PRA 2014and they are largely uneducated.

     

    Benefits, prospects and

    expectation

     

    Anyanwu restated the commission’s belief the scheme will enable contributors access regular stream of retirement benefits at old age; improve living standards of the elderly; benefit from the various incentives offered by PFAs; deepen financial literacy and secure financial autonomy and independence.

    He listed other benefits as passage of wealth to survivors in the event of death; increase in national savings and long term funds; promotion of capital growth and development and access to mortgage and insurance markets.

    Speaking on the prospects and expectations of the scheme, he said the flexibility of registration, contributions and withdrawal process will be contributors-friendly. He stressed that self-employed persons have a large population.

    Anyanwu said: “The pension industry need to carry out lots of enlightenment programs, Trade Associations & Unions would assist to educate members; financial literacy and inclusion drive of the Federal Government would assist, the commission would leverage on CPS zero-fraud reputation for the past 11 years, ubiquity of mobile telephony and internet, growth of pension assets would impact the economy while operators to establish incentives.

     

    Features of the proposed

    micro pension

     

    Anyanwu said the scheme will be characterised by a simplified registration process.

    He said: “The registration will be initiated through physical appearance, internet and mobile phone. There will be flexible frequency of contribution. The contribution and remittance will be made easy by splitting it to two – a smaller percentage of savings accessible to contributors and a greater percentage, strictly for pension.

    “The same individual portable retirement savings account will be managed by the PFAs and the funds kept by the Pension Fund Custodians (PFCs). A special micro pension fund will be established for the flexibility of withdrawals to guarantee safety and fair returns on investment”, he said.

    Speaking on the journey so far, he said the commission has established a micro pension department, developed a database, collaborated with potential contributors and the chambers of commerce and relevant government agencies like the Central Bank of Nigeria (CBN) and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).

    He said listed other achievements as the validation of Enhancing Financial Innovation and Access (EFinA) research on the preferences of target audience for the proposed scheme, review of its implementation in other jurisdictions such as Kenya and Ghana; formulation of guidelines and framework; consultations with licenced operators and enhancement of PenCom’s ICT capacity to accommodate the micro pension scheme.

    Anyanwu stated that the scheme is not a social security platform but for self-employed individuals.

    According to him, the commission has been appraising the micro pension guideline.

    His words: “On the guideline, we are taking our time to make sure we understand the people whom we are creating the micro pension product for so that when we finally release it, it will be successful.

    “We have moved from talking about guidelines and framework to plans for a pilot phase. The pilot phase and the guidelines will come out at the same time. We will approve the guideline and use it to test the pilot phase and whatever we get out of the pilot will be used to fine tune the guideline.

    “We are looking into what the age limit for enrolment or entry and at what point are they can exit. But at least we have minimum age of 18 years as law in the country. We are looking at a maximum age limit for enrollment but the exit will be determined by when the person want to retire. When the person is above 50, he can decide when he wants to retire.

    “We understand that these set of people may have money in a month and may not have in the other month hence contribution will be flexible. But we will encourage them to contribute as more as they can. The portion they can draw will also be made known.”

     

    Prospective managers speak

     

    The Managing Director of Premium Pension Limited, Wilson Ideva, spoke of his company’s plan to capture the informal sector, saying he was only awaiting PenCom’s guideline.

    Ideva said: “We have done a lot of awareness creation on the informal sector but everything we do in this industry has to be backed by a guideline. There is yet to be guideline on the take-off of the micro pension scheme.

    “PenCom has asked us to give our input and how we want it done. We have done that and the commission will come back to us on the guideline. Once that guideline is issued, every PFA will key into it.”

    “The contributory pension industry would in no distant time witness even more growth in all ramifications. There is now increased awareness and credibility around the scheme and that is more important than anything.

    “Even with the phenomenal growth in overall pension assets, there is still a growing sentiment that the present economic downturn occasioned by dipping commodity prices is already leading to a decline in pension contributions and consequently a squeeze in pension assets under management.

    “Management of pension funds is a long-term endeavor, the wellbeing of which cannot be measured by short-term macro-economic calculations. What is important today is how to profit from the rising importance of saving to grow the pension industry. And also, to capitalise on the extension of the coverage of CPS to the informal sector to promote micro-pension and further grow pension assets.”

    Executive Director, Finance & Operations, Pal Pension Limited, Godwin Onoro, said his company is bracing to take a strategic position of the evolving micro pension market.

    Onoro told The Nation that his company’s positioning would allow it take the chunk of the market share to expand its clientele base.

    He agreed that the micro pension market segment has remained untapped unexplored by the pension operators, noting that the segment holds the future of the industry and the economy.

    Onoro said: “While the operators are getting to the peak of the formal sector, the informal sector is yet to be explored. The exploration of the informal sector requires efforts of the entire industry which include the regulator and the operators.

    “Pal Pensions is already doing underground work in preparation for exploration of the informal sector market. The frame work has not been fine-tuned. All we are doing now is to prepare ground.

    “We will have activities when the regulation is released. The regulation will make the picture, the modalities for operation clearer but as it is now, there are still some limitations.”

  • ‘Pension scheme is foolproof’

    ‘Pension scheme is foolproof’

    Dr. Hamzat Sule Wuro Bokki, who has over 26 years cognate experience in human resource management, investment banking and corporate governance, among others, is the pioneer Managing Director/Chief Executive, NPF Pensions Limited, which manages the pensions of members of the Nigerian Police Force nationwide. In this interview with IBRAHIM APEKHADE YUSUF, he speaks on the prospects and challenges of running the company vis-à-vis in innovations in pension, among others.

    Why was NPF Pensions Limited established?

    This company is relatively young. It is the youngest pension fund administration company in Nigeria and it’s less than two years old. The NPF was licensed by the National Pension Commission (PenCom). It is owned by members of the Nigeria Police Force (NPF). Members of the NPF totalling over 300,000, expressed dissatisfaction with services provided previously by the other PFA companies managing their accounts and, therefore, the Federal Government granted their wish.

    They now own their own PFA company to manage their pensions accounts and  are now able to address all the issues involving the management and administration of their pensions. We actually started the transfers of the Police pensions in other PFAs in December 2014. That is, transferring their contributions from the 20 other PFAs. So far, we have transferred the accounts of over 220,000 police officers in this country back to NPF Pensions Limited. The transfers are ongoing.

    But in the past a lot of these pensions’ funds were misappropriated. With this new scheme, what measures are in place to forestall a repeat of the experiences of the past?

    No we don’t have such challenges in this scheme. The only challenge the police officers have had is lack of statements. There are two pension schemes. I want to clarify. The first one is the pay-as-you go, which is the defined benefit scheme. We’re not managing that one. That person has to go to the Federal Government, or the former police pension. This one operates under the Pension Reform Act, which has a system of checks and balances. The monies are kept with a Custodian, not with me or the NPF.

    So the PFAs managing these monies don’t have them as such, there is no question of mismanagement under this scheme. No.  What we have are customer service issues only. For instance, they’re entitled to quarterly statements, having zero balances and all of that. They’re having zero balances because the documentation was not being completed but the money is there in the system. So, it’s not like there is mismanagement. We celebrated 10 years of the new pension scheme in June 2014. As at that time, the industry was managing nearly N5 trillion. There was not one reported case of mismanagement.

    In this scheme there are strong safety nets. There is no way the PFAs will misappropriate your money. It doesn’t happen. But when you’re not satisfied with the information given to you by your PFA you have a right to complain. It’s like your bank been unable to give you a statement. Without the statement you may not know what your position is, but the money is there anyway. What I’m saying is that we’re trying to address the customer care issues that police officers have had. The issue of mismanagement has never arose.

    Now PenCom is a regulator and I think you can attest to the fact that we have never had one report of misappropriation since the inception of this scheme.  I don’t have means to misappropriate no matter how fraudulent one wants to be. The money is not with the PFA. Once the Federal Government wants to pay the pension of a police officer in my own case, they pay to First Pension Custodian. And when I want to invest, I take a paper and write to them, and say please buy the shares of Dangote Cement, at N1b then, I raise a cheque and they will go and execute it. If I want to place money with a bank, I will tell them, I have agreed with Access Bank to deposit N1b fund for a period of 90 days. It is First Custodian that would send the money to Access Bank. When the money matures, Access Bank will return the money to First Custodian. That is the relationship. I assure you the safety net is strong.

    In terms of reinvesting the income yielding assets, what modus operandi do you adopt?

    First of all, there are guidelines and appropriate regulations for these things as to where to put the funds. We just don’t put the funds where we like. For instance if we’re using a quoted company, it has to have declared profit in the last five years of its operations and must have paid dividend in the last three years within the same period before it is qualified for your investment. And in any case, you don’t invest more than five per cent of the funds in such an investment. So there are limits to what you can do. It’s something that is very regulated and that’s why PFAs have never lost money.

    According to the Pension Reform Act, a pensioner is eligible to collect his or her pension when he is 50 years old. Does this apply to the police too?

    Yes, it is the same Pension Reform Act that covers us. All the rules and regulations and guidelines are applicable to every participant irrespective of whether you’re a police or a teacher. We apply the same set of rules and regulations. But the police apart from the Pension Reform Act have their internal little contributions; I may not be competent to speak on that. I know they have their cooperatives and all of that. That is self-funded by them. But apart from that, the Pension Reform Act covers everyone equally.

    What have been the issues you have had to grapple with thus far?

    Most of the issues that we’ve been trying to address are issues that have been brought over from the management of their funds by their previous PFAs. Most of these issues range from underfunding of their accounts, nil balances in their accounts, to mention just a few. Imagine, in the past, an officer will wake up and just about the time he is retiring, realises that there is no money in his account, that it has not been funded overtime.

    Then there are issues of underfunding, whereby officers are promoted one or two ranks ahead, but the contributions being paid to their accounts are still the contributions of their former ranks. Let’s assume that an officer is promoted from a corporal to a sergeant and from sergeant to inspector. But you find that the contributions being paid into his accounts are that of the rank of a corporal, whereas what is being deducted is now for the rank of inspector. There is a shortage and it is hanging somewhere. It has to be brought back. And you also find officers; nearly half of the policemen in this country have not been receiving quarterly statements and all of that. These are some of the issues that we have been trying to address.

    What other specific measures do you take to prepare the officers and men for retirement?

    We undertake a number of activities. Most times, we interact with officers that are due to retire by the end of the year and get them informed about the processes and procedures of how to make the transition smooth and easy for them to collect their pensions at the end of their tour of duty. We talk to them about the documentation and how to go about doing it.  So that by the time an officer is due to retire in the effective date he will get his pensions as soon as possible. Most times, we go round this country to do the interface and discuss across the six geopolitical zones. We have started with the South west in the second phase because we know how important the formations and commands here and how large they are.

    Once we conclude the exercise in the south west, we hope to head to Bauchi and from Bauchi we go to Sokoto, where we will continue to execute the exercise and it’s a continuous one. We want to interact with our prospective retirees, give them pieces of advice and have their relevant medical conditions checked. We have specialists talk to them on entrepreneurship, on the psychology of retirement and to tell them that there is still life after retirement that they can still do a lot to the country and to their respective communities and families.

    What would you consider as the important milestones achieved by the company so far?

    I don’t want to say anything yet. But I think we’ve transferred 220,000 accounts out of about 330,000 and we have made very good returns which is far above industry average. So far, we thank God we’re getting the cooperation of the National Pension Commission as well as the cooperation of the police authorities and we’re getting the cooperation of all other stakeholders. So, I think we’re moving on as planned.

    What are the challenges so far?

    The challenges that we’re facing are negative publicity and negative impression being created by the other PFAs who have said all kinds of bad things against the new PFA, against the police authorities. But it is normal in a competitive industry environment. Not everyone would like the progress we’re making. But I think we’ve made some progress.

    You talked about having been able to transfer 220,000 accounts so far. What is causing the delay in doing the turnaround for the other 110,000 accounts?

    There is nothing causing it. As I said, it’s a continuous process because the National Pension Commission had decided in consultation with stakeholders not to transfer overnight because it could affect the investments of the other PFAs if they are to return these assets they have to liquidate some investments. And we don’t want them to lose money in the process because it is retirees’ money anyway and we have to be accountable. So we’re doing it gradually so that there are no sudden shocks on the market that may liquidate investments. So that is it. It’s ongoing and it was given a period of 18 months. So, it’s still ongoing and the process is seamless.  It’s just a matter of time.

     

     

  • ‘CPS is safest pension scheme’

    ‘CPS is safest pension scheme’

    The Contributory Pension Scheme (CPS) remains the safest pension scheme with no record of fraud since its inception in 2004, the Director-General,  National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu, has said.

    Mrs. Anohu-Amazu, who gave this assurance while speaking to reporters in Lagos, said the feat was made possible by the pension law, the Pension Reform Act 2004 as repealed by the Pension Reform Act 2014.

    She stated that the commission has been able to address the myriad of challenges which beleaguered pension administration in Nigeria, both in the public and private sectors.

    According to her, prominent among those challenges were lack of transparency in pension administration, un-sustainability due to the accumulation of huge pension liabilities and insufficiency or absence of retirement benefits coverage in the private sector.

    She said: “It is heartwarming to note that within a decade of the pension reform and the implementation of the CPS, modest achievements have been recorded by PenCom.

    “Payment of pension under the CPS is now both prompt and consistent since 2007. From a story of about N2 trillion pension deficits under the defunct Defined Benefit Scheme (DBS) as at 2004, the CPS has accumulated a large pool of investible fund of over N5.3 trillion pension assets as at February 2014.”

  • Nigeria’s suffocating pension scheme

    The government appears audacious in its quest to bring about ‘change’ but it should be careful for the ‘real change’ would remain scarce if life after service is spent in agony, and retirement a misery.

    The pension scheme in the country is a no-no, to say the least. The system, itself, is self-destructive and the mismanagement of billions of retirement funds only spell a deeper shade of trouble for the nation’s pension system. And despite the resulting decline in government revenue in the face of a troubled economy, government must pay pensioners.

    While it is logical that government will not pay salaries forever, the pension system must be made to work and even sustainable enough to cater for the beneficiaries for a lifetime.

    Here is a reality check. The average retirement age in Nigeria is 65, considered a positive as only 3.1 per cent of the population are 65 and above, but it is disturbing that 34.4 per cent (around 60.6 million) of the population are in the working distribution and more than four per cent of them (6.8 million) will retire before 2025 in an unpredictable mono-economy.

    Despite fluctuations in government revenue, these figures will be state responsibilities, and with the current state-regulated system, it would be only a matter of time before the vagaries of welfare statism crash the economy. Greece is still fresh in history books for those who care to know.

    When current workers provide pension funds for the retired generation predominantly through tax remittances, and the next generation of workers subsequently provides pensions for the current working class, it becomes a dangerous cycle; one that would be unravelled by the slightest drops in government revenue.

    In a desperate measure to pay pensions when revenue drops, governments usually increase the retirement age and make more borrowings as it has done in recent past, while in some cases it prints more notes and effectively ignite future economic hardships it has not been there to steer since leadership is not permanent.

    On the contrary, Nigerians should be free to decide how to invest in retirement from the onset and not cajoled into some untenable welfare scheming, and having vigorously served for 65 years, excuses of misappropriations of promised jumbo-pays cannot be enough. The present administration should make positive choices to end the sorry narrative as the 2014 Pension Reforms still promotes government dominance.

    Government is already overwhelmed with major problems as annihilation of insurgency and a deplorable healthcare system; it should urgently privatise the pensions completely. Another body should entirely be in charge of pensions just like in advanced economies, and the only body in the modern market that can effectively give an investment driven system that will not only improve pension services but also expand government tax base is the private enterprise.

    If privatisation is adopted, three initial positives will materialise: the private enterprise invested pension funds will create jobs which will increase tax base, while generated income are reinvested to spark increase in both individual pension benefits and investor’s profits, nullifying the hectic pay-as-you-go order.

    Liberal economists predicted the advent of pension funds to be a key determinant of capital in the modern economy, for it would hold greats stocks in the investment market, a prophecy exhibiting before us as we can only deprive the economy’s potentials to expand. Liberals do not only believe that a complete privatisation of the pension system will bring about healthy market competition that will promote service quality, but also foresee perpetual improvements in retirement benefits as it is in most developed countries.

    On the contrary, successive administrations have questioned the capacity of the individual to resourcefully manage his retirement savings, since the consequences of waste boil down to the hills of the state as it would be compelled to provide welfare. However, our swiftly enterprising world consumes their paranoia. In fact, statistics have revealed that people are more likely to manage effectively their retirement benefits than their regular salaries.

    The continuous government domination of the pension system undermines self-determinism and disregards human dignity. Nigerians should be at will to choose from arrays of suitable retirement plans deemed beneficial. People that worked for money determine how best it is managed.

    Governments should discontinue being custodian of the pension system since it has no permanent administrative resident. Pension policies often change with administrations and long-term reforms might be hard to achieve as far as politicians prefers to adopt popularity plans i.e., increasing pension benefits to cajole electorates, instead of correct choices to avert future economic problems. Private enterprises on the contrary are in better position for long-term pension planning, for their pedigree and corporate survival are always at stake.

    Centralisation does not make the pension system cheaper or secure; it only neglects potentials for improvements. And the absence of competition minimises choice and levies questionable service quality from the state. Chile completely privatised its pension system in the 1980sand achieved high rates on individual pension accounts, which served as a template for other Latin American countries.

    This administration should know that contemporary governments do not over-occupy themselves with divisible responsibilities anymore, especially as it concerns retirements and investments, for statehood and welfarism could be very hard and often destructive to balance, and Nigeria must be aware.

     

  • Dissecting Nigeria’s pension scheme

    Dissecting Nigeria’s pension scheme

    Citizen Stanley Nwabia is a young Nigerian. With the country’s economy currently in the throes of financial crunch, he has only lately been inquiring of how to liquidate his pension funds.  “I want to liquidate my pension account and why must they tell me to wait till I turn 50?” – tweeted Stanley Nwabia. Citizen Nwabia is certainly not alone in this. No doubt, there are millions of Nigerians who like Stanley Nwabia, do not fully understand nor appreciate the Pension Reform Act of 2004 and the detailed workings of Nigeria’s Contributory Pension Scheme (CPS). Nwabia’s question obviously approximates those on the lips of many of our compatriots forced by the current economic circumstances to leave their employments before attained age 50.

    This was the background of the social media round table recently held in Lagos with the objective of tackling many of the contentious issues surrounding the operations of the pension law.

    The forum, Google Hangout, #AskPenComDG linked to live twitter feeds – something of a novelty – presented a perfect vista for the Nigerians Pensions Commission to interface with the general public. Notably, it held under the personal direction of the Director General (DG), National Pension Commission (PenCom), Chinelo Anohu-Amazu. The panel was made up of regulatory officials and pension industry experts.  On the PenCom team were Lana Loyinmi – Head, Benefits and Insurance, M. B. Umar – Head, Compliance and Enforcement, Farouk Aminu – Head Research and Corporate Strategy, G.E. Usoro – Head, Public Sector Pensions and M.S Muhammad, Commission Secretary /Legal Adviser. They were joined by Misbahu Umar Yola – Managing Director, Legacy Pension and Wilson Ideva – Managing Director, Premium Pension. Their task: to clear misgivings of the general public on the operations on the new pension law.

    The Nigerian pension industry has certainly come a long way. Pension and related issues had received significant attention over the recent past with the aim of solving the myriad of challenges bedevilling the retirement benefit system. The public sector scheme became unsustainable due to lack of adequate and timely budgetary provisions and increases in salaries and pensions.  There were demographic shifts due to rising life expectancies, which was a phenomenon that affected the family support ratio. In addition, Pension Administration had been largely weak, inefficient, less transparent and cumbersome.  The private sector schemes, which were largely akin to the Provident Fund Schemes, had been characterized by very low coverage and compliance ratio due to lack of effective regulation and supervision.  This resulted in complete paradigm shift from the Defined Benefits Schemes (DBS) as operated by both the public and private sectors to the Contributory Pension Scheme.

    The essence of the pension reform is to introduce a pension system that is sustainable and has the capacity to achieve the ultimate goal of providing a stable, predictable and adequate source of retirement income for each worker in Nigeria. The reform also seeks to establish a uniform set of rules and regulations for the administration and payment of retirement benefits in both the public and private sectors; stem the growth of outstanding pension liabilities; reduce fiscal cost of pension to government; stimulate domestic savings; and generate pool of long-term funds for financing developmental projects and increase private investments.

    Unfortunately, many Nigerians are still largely ignorant about the operation of the law hence the #AskPenComDG forum.

    For many like Citizen Nwabia, what they do not know is that the Retirement Savings Account (RSA) is a retirement rather than employment benefits. Indeed, a major issue that emerged from the panel was the relevant sections in the Nigeria’s Pension Law (Pension Reform Act of 2014) that had to do with withdrawing from a RSA. A question that repeatedly popped up was why contributors could not withdraw from the RSA any time they deemed fit.

    This issue is obviously borne out of a lack of awareness of the provisions of the Pension Reform Act 2004.  This is because the law actually sets out detailed conditions for withdrawals. These include, retirement, permanent medical incapacitation/disability (to be confirmed by a medical board), and temporary loss of employment (loss of job without securing another for at least four months). The idea was to ensure that retirement funds serve the purpose of providing a means of livelihood to a worker at retirement, having actively provided service while in employment.

    This no doubt brings to mind the Hausa proverb about the one who asks questions not getting lost, one other question that emerged was the number of staff that an organization should have to qualify for enrolment in the pension scheme. Here again, the panel was explicit: it was mandatory for employers who have a minimum of three employees.

    Also addressed in detail was the process of accessing an RSA for a mortgage facility to own personal homes. Until recently, the Nigerian Pensions Fund law limited the contributor from using part of his pension to secure a mortgage. Happily, the amendment Act of 2014 has since rectified this by the provision of Section 89 (2) of the Act which provides that “notwithstanding the provisions of sub section 1 ( c ) of this section, a Pension Fund Administrator (PFA) may, subject to guidelines issued by the commission, apply a percentage of the pension assets in the RSA towards payment of equity contributions for payment of residential mortgage by a holder of a RSA”.

    There were also complaints about the RSA transfer window, with social media users asking, ‘when will the RSA transfer window be open to enable a contributor to switch PFAs? To this, the panel explained the efforts of PenCom in providing the structures to facilitate easy transfers once the window is opened.

    Importantly, the panel stressed its readiness and willingness to assist employees who had issues and even went ahead to ask contributors to report organizations preventing their employees from enrolling into the Contributory Pension Scheme (CPS). There was the issue of non-remittance by some organizations despite debiting a staff’s pay for pension contributions. Contributors were advised to report to PenCom for enforcement action. Questions relating to the integrity of the CPS were also raised, however, it was stated in clear terms that the management and custody of pension assets was exclusively vested in the licensed operators – PFAs and Pension Fund Custodians (PFCs) who are regulated and supervised by PenCom. This concern became more pertinent in the context of high profile pension fraud cases that have been widely reported. The celebrated pension scam is still fresh in the minds of Nigerians.

    Engaging with the Nigerian public via this #AskPenComDG event is obviously a classic example of e-governance that comes highly recommended at this time. The discussion forum has no doubt gone a long way to explain to the general public, the intricacies of the pension scheme and how it affects the personal lives of contributors and also, the social economy in general. One hopes that such interactions will become regular, offering a more direct means for interfacing with public institutions and citizens like Nwabia to get them better educated and informed and to understand and appreciate that the future shouldn’t be slaughtered on the altar of “enjoyment” today, at the detriment of the future.

    • Abdulkadir writes from Abuja.

     

  • Fed Govt retirees averse to new pension scheme

    Many retirees in the Federal Civil Service are yet to understand the new pension scheme – the Contributory Pension Scheme (CPS), investigation by The Nation, has shown.

    Many of them do not like the formula for computing pensions in the new scheme, while others  prefer the Pay As You Go scheme.

    The retirees are not happy with what they described as meagre lump sum and monthly pension payment to them under the new scheme and are unaware of the benefits and the aim of the government in ensuring a pension system that secures the future of older persons in terms of income security.

    Findings by The Nation showed that there are still misconceptions and ignorance about the new scheme among retirees of Federal  ministries, departments and agencies.

    Nigeria operated defined benefit schemes between January 1, 1946 and June 2004. The Pension Reform Act (PRA) was enacted on June 25, and became effective on July 1, 2004. The reform established a Defined Contributory (DC) scheme named the Contributory Pension Scheme (CPS) as against the old Defined Benefits (DB) scheme also known as Pay As You Go. The Act has, however, been repealed by the new Pension Reform Act, 2014.

    A defined benefit pension scheme, sometimes called a final salary pension scheme, promises to pay out an income based on how much a retiree earns after retirement. In this case, the amount a retiree gets at retirement is guaranteed and is paid to him.

    Under the old scheme, an employer promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee’s earnings history, tenure of service and age, rather than depending on individual investment returns.

    Whereas the CPS, which is the defined contribution plan, a contribution rate is fixed. For instance, an employee contributes eight per cent of his monthly emolument while the employer also contributes 10 per cent. The retirement benefit is variable depending on the performance of the investment selected by a chosen Pension Fund Administrator (PFA).

    The old scheme was mostly unfunded, discriminatory and not portable. The employee was not entitled to pension benefits if he is dismissed from service. Also, there was no adequate provision to secure the pension fund. Following the unsatisfying nature of the old scheme, the unpleasant experiences faced by retirees and pensioners and the huge pension liabilities, it became apparent that there was need for reform.

    A major problem of the pension fund administration was the non-payment or delays in the payment of pension and gratuity by the Federal and state governments. For instance, the pension backlog was put at about N2.56 trillion as at December 2005.

    Sadly, millions of retired workers either lived in abject poverty or were often neglected after retirement. Retirees went through tough times and rigorous processes before they were paid their pensions, gratuity and other retirement benefits. Many times, the money to pay their benefits was not available. All of these problems in the old pension scheme led to the pension reforms of 2004, now repealed by the PRA 2014.

     

    The New Pensions 

    Reform Act of 2014

    The Pension Reform Act 2014 was enacted by the National Assembly  on July 1, last year to repeal the Pension Reform Act No. 2 of 2004 (“the 2004 Act”). The objective of the Act is to create a more effective pension administration system in Nigeria, to boost participation in the Pension Reform Scheme and to enforce worker’s welfare.

    A major innovation of the Act is the creation of a uniform Contributory Pension Scheme that applies to both public and private sectors. Essentially, the scheme  uniformly applies to all employees in the service of the Federation, the Federal Capital Territory (FCT) and the private sector and is meant to ensure that workers receive their retirement benefits promptly.

    Other key changes in the Act include an increase in the rate of employer, employee minimum contribution to the scheme, an increase in the minimum number of employees an employer is required to have to make contributions mandatory under the Act.

     

    Retirees’ impulse

    Ikushika Williams, a soon-to-be retiree of the Nigeria Customs Service is excited that he will be retiring in less than six months from now after 35 years of service.

    For him, the administration of the CPS is okay but prayed that government makes it ‘pay as you go’.

    His objections, however, are based on what he described as worrisome, saying it is akin to a situation where some people are controlling his money as if he is a child who is incapable of managing cash.

    He said: “The only painful thing for me is the fact that I have to be told what and how I spend my money. But I abide by the scheme because that is how the government wants it.

    “The good thing is that I don’t have to wait endlessly and queue under scorching sun before I get paid my pension.”

    But a woman lecturer at a federal university, who is retiring at the age of 60, is not pleased with the new system.

    She lashed on regulatory body, the National Pension Commission (PenCom), asking why the government would think pensioners were incapable of spending their money efficiently.

    She said: “I don’t know why PenCom would think that we are incapable of managing our finances if they give it to us. They are playing God and determining our age and death.

    “I think they should give us our money because we may even have better options. They are collecting our money now and in the future some group of people will mismanage or steal it. What did government do to people that stole the money in the past?

    ‘’A majority of us think this way and we have expressed ourselves to our various management.‘’

    A woman, who works with the Ministry of Defence, and will not want her name mentioned, said she is not happy with the new scheme, saying she prefers the old scheme.

    According to her, she could have received more money as against what she will receive under the new scheme.

    She said all they needed was for the government to work and improve on the old scheme.

    She said the new scheme would encourage workers to lie about their age because they would not want to retire early.

    An employee of the Nigerian Institute for Oceanography and Marine Research, Oparim Sabinos, hailed the government on the pension reforms.

    He said the old system was not consistent and was susceptible to fraud.

    “It is good to retire and receive your pension when you are still alive. I believe that one should not play pranks but retire when necessary.

    “The new pension system has been working well. The fact that they alert us and prepare us six months before retirement and after retirement, we can begin to receive pension payment one month after shows that it is a good system.

    “The CPS is good and I urge the new government of President Muhammadu Buhari to ensure that there is no corruption in the pension industry because it will endanger the lives of pensioners in the country.”

    Chief Okoli of the Nigerian Immigration Service, who worked for 35 years, is also happy with the new pension system.

    He however urged PenCom to continue to work and improve its achievements.

  • Provost praises pension scheme

    The Provost of Adeyemi College of Education (ACE), Ondo, Prof Olukoya Ogen, has lauded the Cooperative Pension Scheme of the workers of the institution.

    Ogen, who was represented by the chairman, Committee of Deans, Dr Gbade Ikuejube at cooperative 28th annual general meeting of the group, described the scheme as an excellent relief package for retirees as they leave service.

    The Coop Pension Saving Scheme is a retirement saving scheme organised to ease the immediate problem encountered by workers after retirement.  The scheme was fashioned in such a way that a retiring officer, who had contributed to this scheme, will collect his contributions, plus the dividend.

    Congratulating the society at its AGM, Ogen urged them to explore other areas of investment in order to enlarge their horizon.

    The provost also admonished members to patronise the cooperative loans, which are more convenient than banks with interest rates that are moderate.

    In his report, president of the society, Mr. Enoch Orunko, said the society made a net surplus of N15,106,012.50 last year compared to N14, 595,001.24 made last year.

  • 91% of workers out of pension scheme

    91% of workers out of pension scheme

    About 91 per cent of workers are yet to key into the contributory Pension Scheme (CPS), Managing Director, Premium Pensions Limited, Wilson Ideva, has said.

    Ideva, who spoke with reporters in Lagos, said out of about 80million workers, the scheme has only  enrolled a subscriber base of 6.5 million.

    He noted that though the achievements are significant considering  that it is a new scheme, there was need for more persuasion and enforcement by the regulator.

    He said: “I believe that as an industry and as individual PFA (Pension Fund Administrator) , we need to do more on public awareness. If you look at 6.5 million, as against 70 million, that is about nine per cent penetration. This means that we still have 91 per cent untapped. You also look at the fact that it is a new scheme, so compliance level is low, which is expected. We in the industry are also worried about that.

    “You also consider that people are still worried and contending about what happened to the investment in the past, such as National Provident Fund (NPF) and other social security schemes which all failed.

    “When you look at the figure, it looks like the industry is still at a scratch; but we know that by the nature of Nigerians which has a lot of what you call family businesses, it will take a lot of persuasion and enforcement to get people to key into the scheme. We believe that much of that untapped potential lie within this highly informal sector and that is where the industry is going.”

    The Premium chief, however, said the regulators are worried about this and are fashioning ways to address the huge market that is yet to be tapped.

    He said the pension operators were expecting the regulator to release a guideline that would help to address the informal sector.

    He said this is important because there is no one that will not get old whether as fish seller in the market or a labourer, adding that when people get old, the only way they will be maintained is through some form of pension.

    According to him, the telcos are the most profitable anywhere in the world, stressing that people who are really spending money on telephony are not the upper class but people who are down the ladder.

    “If the regulator is able to programme their mind, and say you can drop N1, 000 every month for your pension, I believe that people will key into the scheme. Our return on investment is quite high and they would not get such rate of return if they were doing normal savings. The huge gap we are experiencing today between 70 million working population and 6.5 million enrolment is the difference between the people in the formal and informal sector,” he said.