The Nation Newspaper

Tag: Pension Scheme

  • Niger Civil Servants pull out of new pension scheme

    Failure of the Niger State government to comply with the guidelines governing the new pension contributory scheme, has forced the organised labour in the state to ask civil servants to pull out of the scheme.

    The Chairmen of Nigeria Labour Congress (NLC) and Trade Union Congress (TUC, Comrade Yahaya Idris Ndako and Yunusa Tanimu disclosed the pullout to newsmen Thursday in Minna after an emergency meeting of the leadership of the two labour unions.

    Ndako who spoke on behalf of the two unions said civil servants in the state demand for immediate stoppage of the deductions for non compliance of the guidelines by the government and new pension scheme administrators on 7.5 percent pension and 2.5 housing fund contributions.

    He added that workers were not only demanding for a stop on further deduction of 7.5 and 2.5 from their salaries but also asked the state government to pull out the state workforce from the new scheme.

    The two unions also demanded for the refund of deductions made since 2007 when the scheme started adding that a committee had already been set up to verify the total amount so far contributed by the workers to enable them know the amount to be refunded.

    According to Ndako, “part of the guidelines not complied with are lack of receiving the periodical alert notification indicating how much one contributed under the scheme and no bond certificate of contribution that is supposed to be issued every two years.”

    The TUC chair, Comrade Tanimu also corroborated his NLC counterpart and alleged that the deduction of the two percentages from the salaries of the primary schools teachers in the state from May, 2013 to date had not been remitted to the state government.

  • New pension scheme contributes 9.5% to GDP, says PenCom

    New pension scheme contributes 9.5% to GDP, says PenCom

    • Highlights new focus

    The contribution of the new pension scheme to Nigeria’s Gross Domestic Product (GDP) grew from 1.4 per cent in 2006 to 9.5 per cent in 2013, Acting Director-General of the National Pension Commission (PenCom), Mrs ChineloAnohu-Amazu, has said.

    The new pension scheme has N4.13 trillion in assets.

    Mrs Anohu-Amazu revealed this yesterday while presenting a paper with the theme: The Contributory Pension Scheme as a catalyst for economic development in Nigeria at the Eighth Annual Business Law Conference of the Nigerian Bar Association (NBA).

    According to her, the GDP grows at an average of 30 per cent yearly.

    She said the most significant proportion, about 63 per cent of the assets, equivalent to N2.64 trillion was invested in Federal Government Securities.

    She said assets were invested in authorised markets with portfolio limits.

    She added that it has generated appreciable pool of long term investible funds for the first time in Nigeria.

    On the benefits of the administration under the CPS, the  PenCom chief, however, noted that pebsioners receiving their benefits under the CPS as at March, this year were 95, 840.

    Of this figure, 86, 628 pensioners opted for programme withdrawal, while 9,212 opted for life annuity, she said.

    She further highlighted the outlook and the next steps of the commission.

    She said the enactment of the new bill, the Pension Reform Act 2014, that will facilitate compliance and enforcement, enhance supervisory powers of the Commission, expand coverage of the contributory pension scheme and create enabling environment for investment in the real sector, will be the focus of PenCom.

    She said other areas that the Commission will focus on is repositioning of the pension industry for the next decade, building capacity in the industry and engaging the services of skilled and experienced financial advisers for deal structuring.

    She said: “The Commission would sustain support for initiatives to provide affordable housing and infrastructure development. We will deploy strategies for increased compliance by employers, ensure participation by the informal sector and adoption of the Contributory Pension Scheme (CPS) by states and local governments.

    “We will also collaborate with other regulators and stakeholders in the financial services sector to create enabling environment for investment in infrastructure and housing.

    “There will be continual review of extant laws and regulations and reorganisation of the administration of public sector pensions and repositioning of the Pension Transition Arrangement Department (PTAD).”

  • Historical development of pension scheme in Nigeria

    Historical development of pension scheme in Nigeria

    Nigeria being a former colony of Britain, it’s been argued, received a pension tradition into her public sector that is entirely modelled after the British structure.

    The Country’s pension scheme had started in 1951 when the colonial British administration established a scheme through an instrument called Pension Ordinance. It, however, had a retroactive effective from 1946 and applied only to Untied Kingdom officials posted to Nigeria.

    In Nigeria such enabling legislations include the pension increase Decree No. 42, 1975:

    (a) Military Pension Act Cap (Chapter or No.) 119.

    (b) Pensions Act Cap (Chapter or No) 147.

    (c) War Pension Act Cap (chapter or no) 212.

    (d) Pension (special pensions) Act 1961 (chapter or no) 1961 no. 15.

    (e) Widows and orphans pension Act Cap 220.

    (f) Pensions (Statutory Corporation Service) Act 1961 no. 61.

    (g) Pension (Transferred Services) Act 1965 no. 28.

    (h) Special Constables Decree 1966 no. 7.

    (i) Police Pension Decree 1966 no. 60.

    (j)  Pensions (Federal Fire Service etc) Decree 1966 no. 74.

    (k) Pensions gratuities (war service) Decree 1966 no. 49.

    (l) Transferred offices and pension liability 1971 no. 8.

    (m) Military pensions (Amendments) Decree 1975 no. 13 by Mohammed, head of the Federal Military Government, Commander-in-Chief of the Armed Forces FRON 20/12/75.

    (n) The Pensions Act of 1979 Decree No. 102, which awarded and united all pensions, acts.

    (o) The Public services the recommendation review 1974.

    (p) The armed forces pension act no. 103 of 1974.

    (q) The pension rights judges Act no. 5 of 1985 and

    (r)  The amendment Act no. 51 of 1988, 29 of 1991 and 62 of 1991.

    The whole of the ordinance acts and Decree is capped up in the Decree No. 102 of 1979, which took effect from April 1, 1974. It consolidated all enactments on pensions and in corporate pension and gratuities seals devised for public officers by the Udorji Public Service Review Concision in 1974.

    In the same way, Pension Act No. 103 of 1979 like its counterpart Decree No. 102, of 1979, on the other hand, dealt with pension benefits, liabilities and seals devised for the agreed forces.

    Features of the past pension schemes

    In the past, civil servants bore no direct responsibility, by way of payroll tax, for the provision of pension; instead pension benefits were paid through budgetary allocations to be kept in the Consolidated Revenue Fund. Thus, in most cases, the amount released usually fell short of the actual appropriation for pension payment.

    Another issue was that the past pension schemes suffered because politicians, eager to capture the votes of the electorates, were in the habit of offering fabulous pension increases that they either knew they were not going to pay or which may fall on regimes other than theirs. And due to the fact that the pension account was not distanced from political control, politicians usually dip hands into pension funds to cushion up temporary fiscal shocks.

    It is also claimed that pension debts in the public sector mount, in part, because of the failure of some state governments to provide their counterpart funds necessary to make up the amount provided by the federal government, in situations where the affected pensioners worked for both federal and state governments.

    Both the way a record of pensioners in the public sector is kept and the procedure for payment of pension created avoidable problems. In some establishments, no accurate record of actual pensioners exists. Corruption breeds more in the absence of facts and figures. Therefore pension costs in the public sector were inflated through insertion of fictitious names on the list of pensioners.

    Another weakness found in the public sector system concerns the less than dignifying manner with which the senior citizens were treated. One observes how weak and frail-looking elderly citizens are compulsorily required to travel long distances to the point of pension payment.

    Worse still, they are left, under inclement weather for long hours and sometimes for days, before collecting their stipends. Some pensioners were claimed to have died while standing in a queue waiting to receive pension benefits. This shows poverty of ideas or unwillingness to deploy ideas in the way pension payment should be handled.

    Introduction of pension reform in Nigeria

    Before the enactment of the Pension Reform Act 2004, which establishes a contributory pension scheme for all employees in Nigeria, the country had operated a Defined Benefit (DB) pension scheme, which was largely unfunded and non-contributory.

    The Scheme led to a massive accumulation of pension debt and became unsustainable largely due to a lack of adequate and timely budgetary provisions, as well as increases in salaries and pensions. The administration of the scheme was very weak, inefficient, less transparent and cumbersome, leading to bureaucracy and highly liable to corrupt practices.

    Due to lack of reliable records of pensioners, huge amount of resources on what became yearly verification exercises were expended which did not result into the timely and efficient payment of pension.

    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.

  • How reformed is the pension scheme?

    The Contributory Pension Scheme (CPS) was established by the Federal Government ten years ago Nigerians are, however, skeptical about the level of compliance  to the laws guiding the scheme, Bukola Afolabi reports.

    Over nine years ago, the Federal Government introduced the Contributory Pension Scheme with the aim of helping Nigerians have something to fall back on when they retire from active work.  The scheme involves a certain percentage deducted from worker’s salary and saved into a pension saving account by the establishment where the person works, be it public or private. The scheme was expected to be embraced by both the public and private sectors of the economy.

    However, ten years into its introduction, there are concerns over whether the scheme should be cancelled or not as a result of various reports of non-remittance of pension funds to workers’ accounts, most especially by many private establishments.

    According to recent reports from the Pension Commission (PENCOM), only 28 out of the 36 states are yet to fully become part of the scheme. More worrisome is the report that only six of 21 state governments that have enacted their laws on the CPS have remitted N26.17billion into the Retirement Savings Accounts, RSAs, of their workers under the scheme.

    Evidence that the pension funds are being tampered with was made evident in 2013 when a former assistant director in the federal civil service, John Yakubu Yusuf, alongside four others;  Atiku Abubakar Kigo (Permanent Secretary), Ahmed Inuwa Wada (Director), Veronica Onyegbula (Cashier) and Sani Habila Zira (ICT Officer),  were charged for stealing N32. 8billion naira police pension fund.  They were sentenced by an Abuja federal high court to two-year jail terms each but with a N250, 000 fine option.

    As if that was not enough, the Head of the Pension Reform Task Team, Abdulrasheed Maina, was also arraigned before the court for stealing billions of naira of police pension funds. He was, however, set free with a fine of N750, 000.

    As a way of curbing the incessant stealing of pension money, the government on April 30 this year, through the House of Representatives, passed a Bill which prescribed a 10-year jail term for pension thieves.

    The Chairman House Committee on Pension, Ibrahim Kamba, and his deputy, Samson Okwu, had  said the that Bill was passed because of the ease with which the management of pension was being manipulated by fraudulent officials and employers and expressed hope that it would sanitise the pension industry.

    “The bill we have just passed creates new offences and prescribes stiffer penalties that will serve as deterrent. It prescribes harsher penalty of a 10-year jail term for anyone who misappropriates pension fund in addition to refunding three times the amount embezzled.

    “The establishment of Pension Transmittal Arrangement Department (PTAD) to take over the remittance of benefits to pensioners under the Defined Benefits Scheme would enhance efficiency and accountability in the administration and payment of pensions.

    “Under PTAD, pensioners are now to receive their pensions directly, rather than through the various Pensions Departments, which have been a problem to pensioners. With this, the story of pension fund looting will become a thing of the past,” he had expressed hope.

    He also added: “Apart from introducing uniform rules, regulations and standards for the administration of pensions for public and private sectors at the federal, state and local government levels, the bill will ensure that workers get their retirement benefits as and when due.  This is a legislation we can all be proud of because it fulfils the expectations the Nigerian people have in us and will enhance the dignity and livelihood of workers and senior citizens. We believe this pension reform bill will also be a veritable tool in the fight against corruption, especially in our public sector. When workers are certain of getting their full retirement benefits, it decreases the temptation to loot public funds preparatory to their retirement.”

    However, investigation revealed that in spite of the 10year jail term, failure to remit these pension funds to RSA accounts is yet to abate. Many employers in the private sector are yet to comply with the rules and regulations guiding the scheme as they still blatantly refuse to remit deducted pension money into their workers account.

    Many are worried that their years of labour working in an establishment might be of no use because they have nothing to fall back on after retirement as their contributions are being deducted monthly from their salaries yet not remitted to their accounts.

    Fraudulent practice by employers who capitalise on the lack of job in the country to defraud their workers is threatening the scheme. This they blame on the lack of god management by the National Pension Commission whom they have accused of not doing much to checkmate the activities of these private sectors.

    Grace George, who has been working with a popular communication company for the past seven years, said that for the past two years to date, her deducted pension money from her salary is yet to be remitted to her account.

    ” The last time I received a message that my RSA account has been credited was two years ago, yet the company deducts the money monthly. By now, I ought to have over N200, 000 in my RSA account, but currently all I have is not up to N50, 000,” she lamented.

    She added, “When I tried to find out the reason behind it, I was told that the company uses the deducted money to pay us salary every month. What it means is that when pension fund is deducted from each of the staff salary this month, instead of sending it to the pension administrator, the company will keep the money till the following month and use it to pay us for that month. So it is like using our money to pay us again, which is a fraudulent practice. At the end, nothing goes into the pension account.  So what are we to fall on when we quit the job? I hope government would do something about it.”

    Grace further said that because the private sectors are not monitored by the government, it allows them to perpetrate such fraudulent activities.

    “I think public sector is better monitored because it has to do with government but the private sector is the worst. As a staff, you cannot complain because if you do, the company would find a way to ease you out. Most times, the management of a company practically embezzles the money.”

    Okey Nwachukwu, who also works with a private university, said pension administrators are also culpable in the fraudulent practices.

    “I quite agree that many employers in the private sectors are guilty of these sharp practices. It is like somebody working for nothing because, in the first place, you are paid pittance as salary and the little contribution you are making through pension is being taken away by someone you have laboured for. But you can also blame pension administrators too who most times fail to remit the money into the account even after being remitted to them by the company,” he said.

    He continued: “You also look at the fact that in most cases, these pension administrators are subsidiaries of these companies. It is rampant in the banking industry where many banks are also pension administrators and they use these pension companies to siphon their workers contributory funds.”

    It would be recalled that of recent the Nigeria Police decided to opt out of the scheme as a result of the fraudulent practices by pension administrators and some corrupt officials as exemplified by the case of Maina.

    As a result, The National Pension Commission, PenCom, recently issued an Approval-in-Principle to NPF Pension Limited, to manage the pension assets of the force.

    The Oronsanye Committee had advised that apart from the military, no other federal government institution or force should be exempted from the contributory scheme, prompting the police authorities to incorporate a limited liability company, the Nigeria Police Force Pensions Limited, to manage the pension fund of the force.

    This will make them feel secured, with the assurance that their retirement savings will never be pilfered by anybody since the funds are under the custody of a licensed Pension Fund.

    Meanwhile, the chairman of the association, Mr. Misbahu Yola, said, while addressing newsmen in Lagos recently, that the number of contributory pension schemes is supposed to be increasing.

    He said the number of contributors under the contributory pension scheme is expected to rise significantly this year, anchoring his optimism on the fact that many stakeholders are now collaborating to achieve optimum compliance.

    He explained that compliance with contributory pension is now a necessary condition that corporate bodies have to meet before the Federal Inland Revenue Service (FIRS) would issue Taxpayers’ Identification Number (TIN) to them.

    The PenOp chairman also argued that since TIN number is a necessary condition for doing business with government, the level of compliance with contributory pension would definitely rise.

    “We expect more compliance because institutions are beginning to work together. The award of government contracts and other businesses in government is tied to the Taxpayers’ Identification Number (TIN) and to get a TIN, companies are required to produce evidence of having complied with contributory pension,” Yola said.

    In addition to the above, he said the National Pension Commission (PenCom) is currently designing a workable means of absorbing the informal sector, and when this is done, contributors in the informal sector would raise the number of contributors and further boost the level of compliance under a contributory pension scheme.

    Yola identified the dearth of investment options as one of the problems the industry is facing now, adding that this is likely to escalate if the regulator fails to take necessary actions to give the operators approve more and varied investment instruments for pension assets as soon as possible.

     “PenCom’s remarkable growth and development in just less than 10 years of its establishment, shows that Nigeria is capable of institution-building. With 20 PFAs, seven closed pension fund administrators, four Pension Fund Custodians with turnover of billions of naira, about N3.7 trillion worth of pension fund assets and 5.83 million registered workers, Pencom deserves commendation,” declared Yola.

  • ‘New pension scheme’ll eradicate corruption’

    ‘New pension scheme’ll eradicate corruption’

    The Contributory Pension Scheme (CPS) would eventually end corruption in the country if the law guiding its operation are adhered to, Managing Director of Premium Pension Limited, Mr. Wilson Ideva has said.

    He spoke at the Pension Fund Administration Summit for Education Ministries, Agencies and Institutions organised by Exam Ethics Marshals International in Lagos at the weekend.

    He said people steal what they do not need for fear of the unknown.

    According to him, the scheme has provided an umbrella that guarantees decent life for workers on retirement and secures a large pool of funds that could be deployed to national development.

    He said the tremendous successes recorded by the industry in a short time would encourage workers to do their jobs honestly in the expectation that their future would be guaranteed.

    He averred that the funds could be used to hold down inflation and fix the country’s infrastructure gap.

    Ideva described the new scheme as an ‘unsung revolution’ adding that more than N4 trillion is already being managed under the scheme even when only six million out of the estimated 70 million workforce have embraced the scheme.

    He said: “What would happen if only a quarter of workers enlist in the scheme? There should be a signpost on every project executed with pension funds indicating the source of the funds to make Nigerians aware that the pension scheme has already begun to contribute to national development.

    The Head, Research and Corporate Strategy Department, PenCom, Dr. Farouk Aminu, represented by the commission’s Secretary and Legal Adviser, M. S. Mohammad, said: “The contributory pension industry can no longer be ignored as it has proved to be a veritable platform for attaining the Federal Government’s Transformation Agenda.”

  • Imo to join new pension scheme soon

    Imo to join new pension scheme soon

    HE Imo State government has set up a committee to work on the modalities of incorporating workers and retirees of the state into the Contributory Pension Scheme (CPS), its Deputy Governor, Prince Eze Madumere has said.

    Prince Madumere, who spoke with The Nation in Lagos, said the state was expecting the report of the committee soon so that it could kickstart the process of joining the scheme.

    On the recent protest by the pensioners of Imo Broadcasting Corporation (IBC) over arrears, he said the state experienced 12 years of bad pension management before the administration of Governor Rochas Okorocha took over.

    He said the state had met with the IBC pensioners, following their protest last week and was trying to find a solution to the problem, saying the state had been able to exceed what it met on ground and even surpassed it in terms of pension payment.

    Meanwhile, the Pensioners Association of IBC, has given the Government 10-month ultimatum to pay the 40-month pension arrears owed the corporation’s retirees.

    The retirees, who converged on the premises of the corporation in Owerri, urged the government to pay their arrears in four instalments from March to December.

    The Chairman of the association, Mr. Chidi Madu, said Governor Okorocha inherited five-month pension arrears from the previous administrations.

    He said seven members of the association had died due to lack of finance to access medical treatment, adding that the government constituted a technical team in 2012 to look into the issue.

    He said: “We will not relent in our agitation for payment of our entitlements until government meet s our demands. We will never stop to protest because the government is not doing anything to solve the problem.”

  • Delta retirees denounce implementation of pension scheme

    Delta retirees denounce implementation of pension scheme

    Scores of elderly men and women gathered in a dilapidated television viewing centre on a hot sunny day. The wooden walls of the makeshift viewing centre had fallen off in many places and one could look into the next compound.

    Some of them sat quietly on improvised contraptions waiting patiently for their leaders to commence the meeting, others moved around exchanging pleasantries with long lost friends, raising small dust clouds as they moved.

    It was a motley crowd of middle aged persons, the elderly; many who looked frail and sickly, not from age, but from a realisation of an uncertain future what with the deprivations suffered in the last few years since retirement. Behind the façade of happy faces at the reunion, fear, dejection, hopelessness and resignation lurked.

    Many had come in their numbers from cities across the State including Sapele, Oleh Warri ,Ughelli,Ogwashi-Uku ,Issele-Uku , Agbor and Asaba to register their displeasure at the uncertain future foisted on them as a result of the poor implementation of the new contributory pension scheme .

    These retirees who having invested their youthful lives in the service of the State and now retired are unsure of the future as sickness and disease continue to decimate their ranks.

    In an interview with NDR, Joseph Okproma, Secretary, Association of Contributory Retirees of Delta State, painted a gloomy picture of the plight of retirees.

    Okproma stressed that many marriages have become strained due to the inability of the breadwinner to provide for the basic necessities of life.

    His words, “It is painful that this scheme that is expected to be good as purported has turned out what it is now in Delta State. The retirees under this contributory pension scheme are passing through hardship; some are facing health challenges. Their marriages are broken, children are out of school. Some that have not been able to build a home are being harassed by landlord and have health problems such as hypertension.”

    Continuing, “The problem retirees are facing is that their benefits is delayed .By the programme when you retire not more than six months we ought to get our benefits six months after retirement, but retirees wait for three years without payment. For me I got my retirement benefit two and a half years after. I retired 2011, I got my benefits in 2013.You can image the stress. A young man can withstand the stress but what about those who are advanced in age. Delay is one of our major problems with the contributory pension scheme.

    The scribe said his members yearn for a return to the 300% gratuity and 80% monthly pension of the pay-as-you-go scheme which was agreed upon during their entry into public service.

    He described the new contributory pension scheme as “disadvantageous” to their members, adding that it offers only a “paltry 25% lump sum and poor monthly pension”.

    Okproma accused government of using the 2008 salary structure to calculate workers terminal benefits while majority were still in service up to their respective dates of retirement.

    “Secondly, instead of using 2010 salary structure to calculate the benefits of people who are still in service, government used 2008 salary structure to calculate their benefits. The retirees enjoyed 2010 salary structure when they were in service before they retired so what justification does government have to calculate their retirement benefits using the 2008 salary structure? Delta State government should correct that error for us. The law says that at the point of retirement the retiree’s benefits should be calculated” he added.

    He urged Governor Uduaghan to ensure that ordinary civil servants retire with their correct entitlements just as he ensured judges and permanent secretaries in the public service retire with their full salaries for life.

    According to him many retirees have endured untold hardship as a result of delays in implementing the scheme, adding that over ten persons have lost their lives while waiting for their retirement benefits to be paid.

    His words: “We have lost over ten persons to this problem which we are faced with.”

    But Chairman, Bureau for State Pensions, Mrs. Christiana Siakpere admitted that the new contributory pension scheme has been fraught with difficulties, blaming teething problems associated with the new scheme as responsible

    Her words: “Delta State is the best when pension matters are discussed in Nigeria. Delta has performed marvelously well even before the new contributory pension scheme. But a new thing for what it is we may not have gotten all correctly because this

  • What you need to know about the new Pension Scheme

    The new pension scheme is contributory, fully funded, privately third party custody of the funds and assets based on individual accounts.  It ensures that everyone who has worked receives his or her retirement benefits as and when due.  It covers all employees in the Public Service of the Federation, the Federal Capital Territory and the Private Sector of the economy.  The existing pensioners, employees who have three years or less to retire and the categories of persons covered by the provisions of section 291 of the 1999 Constitution of the Federal Republic of Nigeria are exempted from the new pension scheme.  Any employee with more than three years to retire comes under the new pension scheme.

    The new pension scheme is mandatory for all categories of employers and employees covered under the Pension Reform Act.  There is no merger of private sector pension with that of the Public Sector pension since the sources of funding are not the same.  However, both are now being regulated under same rules and regulations.

    The main objectives of the Pension Reform Act 2004 are as follows:

    • To ensure that every person who worked in either the public service of the federation, federal capital territory or private sector receives his or her retirement benefits as and when due.
    • To assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age and
    • To establish a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the public service of the federation, federal capital territory and private sector.

    This is different from the old pension scheme because most of the old pension schemes are not fully funded.  Therefore, upon retirement, there were no ready funds to pay the pensioners.  The new pension scheme is fully funded.  Money is contributed into individual employee’s Retirement Savings Account (RSA) and when he or she retires, there will be money in his or her RSA to pay his or her pension.  Private sector pension schemes will be allowed to continue provided if there is evidence to show that the pension scheme is fully funded at all times, any shortfall made up within 90 days, pension fund assets are segregated from the assets of the employer/company, the pension fund assets are held by a licensed Custodian and the scheme is specifically approved by the National Pension Commission (PenCom).

    An employee shall make monthly contributions of a minimum of 7.5 per cent of the total of his or monthly emoluments (that is, monthly basic salary, transport allowance and housing allowance) into the RSA.  The employer also shall contribute a minimum of 7.5 per cent of the employee’s monthly emoluments towards the retirement benefits of the employee.  However, an employer can make all the contributions on behalf of the employee without making any deduction from the employee’s salary except that such contribution by the employer shall not be less than 15 per cent of the monthly emoluments of the employee.  Your contributions are just savings out of your emoluments towards your old age and the employer’s contribution will only increase such savings.

    Pension contributions are paid directly to the PFC to be held on the order of the PFA.  A fully funded pension scheme exists where pension funds and assets match pension liabilities at any given time.

    RSA is similar to a bank account except that no contributor can withdraw money from the RSA before his or her retirement.  The PFA is required to invest the money and issue statements of account at least once every quarter to the contributor.  Movement from one employment to another does not affect pension under the new scheme.  The Reform has removed the bottleneck associated with transfer of service from one organization or sector to another, especially with regard to qualification for pension and the sharing formula for payment of pension as between employers.  When you change jobs, the RSA remains with the PFA of your choice for as long as you want.  You simply notify your new employer of the details of the PFA that manages your account and thereafter, your contributions will be sent to the Custodian of the PFA.

    Employee’s right to accrued retirement benefits for the previous years he or she has been in employment is guaranteed by the Pension Reform Act 2004.  In the case of the public service of the federation and the federal capital territory, where pension scheme was unfunded, the right would be acknowledged through the issuance of a “Federal Government Retirement Bond” to such employee.  The bond will be redeemable upon retirement of the employee.  The Federal Government has established a Retirement Benefits Bond Redemption Fund Account in the Central Bank of Nigeria.  The federal government is already making a monthly payment into the fund of an amount equal to 5 per cent of the total monthly wage bill payable to all employees of the federal government and the federal capital territory.  Any company operating a Defined Benefit Scheme must, in addition to satisfying other conditions specified in the Act, open RSAs so that the pension funds can be held by a custodian.

    In the case of funded pension schemes in the public service of the federation and the private sector, employers shall undertake actuarial valuation of the employee’s accrued benefits and credit the RSAs of the employees with such funds and in the event of any deficiency, the shortfall shall become a debt and shall be treated with same priority as salaries owed.  The employer shall also issue a written acknowledgement of the debt and take steps to meet the shortfall.

    When a PFA (Pension Fund Administrator) fails or is liquidated, the pension funds and assets in the RSA are kept by the PFC and as such the liquidation of the PFA will not affect the funds and assets.  Besides, every PFA is expected under the Pension Reform Act 2004 to maintain a statutory reserve fund as contingency fund as may be determined by National Pension Commission.  The Pension Reform Act 2004 allows any employee to complain about any PFA to the National Pension Commission (PenCom).

    The government cannot tamper with the pension funds in your RSA because it does not have access to the account.  Besides, the government is primarily concerned with ensuring the safety of the money in your RSA through the enforcement of strict rules and regulations.  The new pension scheme entrenches the principles of transparency and accountability as reflected in the reporting requirement of the PFAs and PFCs to the Contributor and the National Pension Commission.  An employee has the right to choose who manages his RSA and the right to receive statements of his account on quarterly basis with details of contributions made and returns on investment.

    Upon retirement, an employee can withdraw a lump sum from the balance standing to the credit of his or her RSA provided the balance after the withdrawal could provide an annuity or fund monthly payments that would not be less than 50 per cent of his monthly pay as at the date of his or her retirement.  However, an employer may choose to pay any other severance benefits over and above the retirement benefits payable to the employee subject to the terms and conditions of his or her employment.

    A programmed withdrawal is a method by which the employee collects his or her retirement benefits in periodic sums spread throughout the length of an estimated life span.  While an annuity is an income purchase from an approved life insurance company which provides monthly or quarterly income to the retiree during his or her life time.

    Where an employee who has been contributing under the new pension scheme dies before his or her retirement, the retirement benefits shall be paid to his or her beneficiary under a Will or the spouse and children of the deceased or in the absence of a wife and child, to the recorded next-of-kin or any person designated by him or her during his or her life time or in the absence of such designation, to any person appointed by the Probate Registry as the Administrator of the Estate of the deceased.

  • Ekiti begins contributory pension scheme

    Ekiti State Government has begun the Contributory Pension Scheme (CPS) for workers in the civil service and in the 16 councils.

    The scheme, which takes effect from August 1, will, according to the Chairman of the Pension Commission, Chief Oluwole Ojo, allow deductions of agreed 7.5 per cent apiece from the workers, who represent the employees and the state government, making a total of 15 per cent.

    Chief Ojo, represented by Chief Segun Ajibulu, a commissioner in the commission, said the deduction affected the worker’s basic salary, rent and transport allowances, adding that it would be made on first line charges by the Pension Fund Administrators (PFAs), “that is the pension deductions are made before any other deductions from the workers’ salaries.”

    He said the commencement followed an earlier field work and a thorough assessment and cleaning of the deductions by the PFAs, who had compiled and fine- tuned the procedures for a hitch-free commencement of the scheme.

    He urged the PFAs allotted to the Ministries, Departments and Agencies (MDAs) to see the task as a challenge to which they must apply diligence and sense of duty.

    He added that any lapse on their part would only erode the credibility of the scheme.

    Enjoining those who have not made the requisite details about their employment status available to the fund administrators to do so, Ojo appealed to workers not to see the new scheme as a way of cheating but the best way to eliminate the age- long bottlenecks identified with the old pension process.

    Said he: “Any employee with more than five years in service with effect from January 21, 2011 comes under the new scheme, even if he/she wants to leave the service before the date he/she is due.

    “The CPS cannot go moribund because it is encoded in a law of the parliament to ensure its continuity. The roles of the actors are spelt out. The scheme has in-built checks and balances.”

  • Six states comply with Contributory Pension Scheme

    Six states comply with Contributory Pension Scheme

    Six states – Lagos, Ogun, Delta, Kaduna, Niger and Jigawa- have fully complied with the Contributory Pension Scheme (CPS).

    This means that they have maintained life insurance in favour of their employees for a minimum of three times their yearly total emolument as contained in section 9 (3) of the Pension Reform Act, 2004.

    While six other states have their own pension arrangements for their employees, 24 states are yet to have any pension arrangement for their workers.

    President of Pension Fund Operators Association of Nigeria (PENOP), Dave Uduanu, who made this known at a media parley in Lagos, said the National Pension Commission (PenCom) and the association are worried by this trend and have devised measures to enlighten the non-compliant states to key into the scheme.

    He, however, said operators were sensitive about the management of the fund.

    According to him, the scheme is young but growing, making its safety critical in meeting its key objectives, which is to ensure that workers (contributors) have access to their funds at retirement.

    Uduanu said this was why operators were wary of where to invest, despite pressures from all corners, that pension funds should be used to develop projects such as infrastructure.

    He said: “We have quite a lot of investment windows approved for us by our regulator, but still, we are buyers of securities, we are buyers of investment instruments and not a charity organisation that would repair roads and electricity.

    “If roads are to be built for tolls, or other liquid investments, where we are sure that retirees’ funds are safe we can be part of it.”

    Chief Executive officer, Stanbic IBTC Pension Managers Limited, Demola Sogunle, while speaking on regulation of the industry disabused the minds of many who continue to say that the industry is over regulated.

    He said: “We cannot be talking about over-regulation in a young industry that has to do with contributors’ emotions, an industry that is about retirees’ vulnerability.

    “It is important that the industry is properly established for safety of the funds.”

    He added that there would be guidelines from time to time, to define codes, ethics and conduct of the operators.

    Managing Director, Legacy Pension Managers Limited, Misbahu Yola, said the accounts of PFAs are International Financial Reporting Standard (IFRS) compliant in line with the deadline set by PenCom.

    He said: “On International Financial Reporting Standard (IFRS), the compliance deadline for all operators was December 31, 2012. A number of our results are already out, which are in compliance with the IFRS. We have all complied.”

    The Federal Government had informed operators in the economy that IFRS will be the new basis of financial reporting with effect from January last year.

    The adoption of IFRS would likely result in high quality, transparent and comparable financial statements based on internationally accepted modern accounting principles and concepts.

    IFRS are principles-based standards, interpretations and framework adopted by the International Accounting Standards Board (IASB). Its overall objective is to create a sound foundation for future accounting standards that are principles-based, internally consistent and internationally converged.