By AMECHI Ogbonna
THE dream of every worker is to retire gracefully after many years of meritorious service to an organisation or employer. But for a country like Nigeria where very little basic infrastructure and any form of social security exist, life in retirement can be very challenging if the retiree fails to save enough to see him through the years left for him on earth before death comes.
Indeed, the reality of our environment is such that for many, old age could come with a number ailments that need constant care, besides having to deal with several other family obligations that can even wipe off ones savings in a little while. Beyond this, experience has also shown that how well a retirees’ savings are managed through retirement would often be very crucial to his ability to enjoy the basic comfort of life outside formal employment such that he would not become a burden to the children, relatives and even the community.
It was perhaps against this backdrop that stakeholders in the nation’s pension industry celebrated the 2004 Pension Reform Act as amended in 2014, which lunched the Contributory Pension Scheme as against the defined benefit model already blighted by corruption and lack of transparency. Under this scheme, an employee monitors his savings, which is managed by a licensed Pension Fund Administrator (PFA). He is therefore free to raise any question with PFA where he feels that things are not done the right way.
In its 13-year lifespan, the Pension Reform Act of 2004 has registered very serious impressions in the minds of most stakeholders that altering its provisions without empirical evidence would only water down the successes already recorded. Within this period also, the scheme has been able to build strong institutions, including 21 Pension Fund Administrators, four Pension Fund Custodians, seven Close-ended Pension Fund Administrators as well as an efficient implementation mechanism for the Contributory Pension Scheme that can compete with any other scheme elsewhere in the world.
It is perhaps against this background that the Nigerian pension scheme has become a model for the African continent considering that several other countries, including Ghana, Tanzania, Malawi and Uganda are now adopting the Nigerian PRA 2004 to configure their pension code in their various jurisdictions.
One other reason the National Assembly should let the present pension law to remain is the fact that it has been able to control the wastefulness and corruption associated with the defined benefit scheme where public officers with the responsibility of managing the collective wealth of the workers suddenly turned them into their ATMs where they could withdraw money at will.
As an indication of how the scheme has performed so far, available records show that the nation’s total pension assets has grown from a very meager amount at inception in 2004 to over N6.42trillion as at March 2017with an average monthly contribution of N30billion. The current total pension asset also represents about 6 percent of the nation’s rebased GDP even as the pool of asset has helped to deepen the nation’s financial market while helping government support critical infrastructure financing, including housing development.There is also no gainsaying that the contributory pension scheme has equally simplified the process of payment of retirement benefits through the issuance of effective regulations and guidelines for accessing such benefits
As at March 2017, an estimated 184,979 workers have retired under the scheme and are now receiving pension as and when do with average monthly pension payment of N6.7billion.
Because of the efficiency that has been enthroned in the nation’s pension administration machinery, even the private sector that was initially apprehensive of the scheme has since embraced the project, resulting in the enrollment of over 200,000 private sector employers of labour who currently account for over 60 per cent of the industry’s total assets.
Today, Nigerian practitioners can see a significant measure of transparency with about 26 states joining the contributory pension scheme with the remaining 10 making preparations to enlist.
It is based on this that pension stakeholders have taken the National Assembly to task regarding its bid to amend certain sections of the contributory pension scheme law. Pension Fund Operators of Nigeria (PenOp) in an apparent reaction to this impending review called for caution with respect to ongoing consideration of a bill currently at the National Assembly seeking to peg 75 per cent as pension lump sum for retirees.
PenOp had since warned that the law if passed, would significantly distort the basic aim for which the new pension scheme was set up in the first instance. The umbrella body of pension operators argued that taking such huge lump sum away from the scheme would rob retirees the opportunity of keeping more money in their Retirement Saving Accounts (RSA) in anticipation of the rainy day. Despite passing its second reading in the Senate, stakeholders still believe that the hallowed chamber still have a lot to do towards sustaining the objectives of the pension scheme in the country.
This issue, which was strongly put forward by the Chief Marketing Officer, Premium Pension, Kabiru Tijjani, who warned that the proposed amendment would not be in the interest of the contributors if eventually passed into law. But from all indications, the bill sponsored by Senator Aliyu Magatakada Wamako about three months ago, among other things, seeks adjustment of some sections of the Pension Reform Act, to accommodate new provisions that could provide leverage to retirees given the delays and other difficulties they are encountering in withdrawing their savings from retirement accounts.
One of the many contentious issues contained in the amendment is the issue of lump sum that a retiree is entitled upon exit from formal employment. Whereas the 2004 Pension Act and the 2014 Amendment are in agreement that 25 percent should be paid to retirees, while he gets a monthly mandatory payment from the balance, throughout his life; the new amendment, which has now passed the second reading in the National Assembly, is seeking the payment of a 75 percent lump sum to a retiree.
Ogbonna writes from Lagos.
This from all intents and purposes smacks of a disaster for the contributors. Granted that such contributions are genuinely his, managing the money could be a challenge, especially where there is no existing business where the capital can be invested. The industry was unsettled recently when a private member bill was sponsored in the House of Representatives seeking to amend the PRA 2014 in order to exempt the Nigeria Police, Nigeria Security and Civil Defense Corps, the Nigeria Customs, Nigeria Prisons, the Nigeria Immigration Service and the Economic and Financial Crimes Commission from Contributory Pension Scheme.
According to Pencom officials, this exemption would impose additional debt burden to the federal government. This is because over 50,730 employees from the agencies, which the bill seeks to exempt from the CPS, would have an accrued benefits amounting to over N208.2billion and the government’s deplorable finances cannot sustain it.