The Pension Reform Act, which birthed the Contributory Pension Scheme in 2004, was meant to tackle the age-long problem of payment defaults by employers. Sadly, 19 years after, NIKE POPOOLA reports that widespread payment defaults by employers have crept into the CPS, among other challenges
The Vice Chairman of Concerned Federal Pensioners, Mr Akinyele Oludimu, is overwhelmed with regular complaints from members of the association over different challenges with their pensions.
He laments hardships faced by federal pensioners under the Defined Benefits Scheme.
The DBS is one of the two pension schemes currently operating in Nigeria.
Oludimu says, “Everyday, our members continue to call me because they have pension challenges; some of them have not been on payroll for more than 10 years.
“The government has been terrible with our members, we senior citizens of this country, they are just treating us anyhow and it is so bad. We are not happy at all with the government.”
He identifies other challenges facing the pensioners in the DBS to include lack of harmonisation, which should enable them to earn the required wage, and unpaid pension arrears.
Oludimu laments, “These are people that worked meritoriously and retired from the civil service and are not placed on payroll. Even those of us earning pensions, it is not enough, talk less of those not on payroll. We just pray that God should come to our aid.”
He worries that some of the pensioners are earning as low as N10,000 monthly stipend.
Despite several complaints to the pension regulator, he worries that these are not addressed.
Speaking further, he says, “How can they survive with that amount with the current inflation rate? The take home pay does not take us to the bus stop.”
The DBS is the pension scheme that was in effect in Nigeria, prior to the enactment of the Pension Reform Act 2004.
The Federal Government did not make regular funds available for its workers as of the time they retired, which made retirees under the DBS to retire without getting their pensions. There was huge pension arrears for the federal retirees which was in trillions of naira.
In the private sector, many employees were not covered by the pension schemes put in place by their employers, and many of these schemes were not funded.
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.
Nigeria’s pensioners retired into penury, a reason that made a former President, Olusegun Obasanjo, to reform the pension industry, which led to the enactment of the Pension Reform Act 2004.
The PRA 2004 aimed to address the challenges in the old pension scheme, the DBS, by establishing the new Contributory Pension Scheme to operate alongside.
Under the CPS, both the employer and employee contribute into a Retirement Savings Accounts domiciled with their Pension Fund Administrators; the balance is used for their pensions in retirement.
The workers contribute eight per cent, while the employers contribute 10 per cent, making a total of 18 per cent.
Federal retirees who had not more than three years after the PRA was enacted in June 2004 to retire, were retained under the DBS; while those who had more than three years to retire from that date, as well as new workers in the public and private sector were transited to the CPS.
Transition
The Chairman, Contributory Pensioners Union of Nigeria, Eleyele Branch, Ibadan, Matthew Shittu, is one of the workers who had more than three years to retire as of the time the PRA was enacted on June 1, 2004.
He had served for almost 23 years, and had about 11 more years to retire as of that time, so he retired into the CPS in 2015.
Speaking with The PUNCH on his experience after spending years as a retiree under CPS, he says, “The implementation of the CPS is so bad. Those who retire have to wait for at least a year to start collecting monthly pensions. Before I started collecting pensions, it was almost two years after I retired but the PRA Act states that within three months, you will collect your money.
“Because of the challenges in the DBS, they introduced the CPS. They should have left us in the old DBS. Initially, they settled new retirees within three months, but now, the pension companies will say the government has not released funds for accrued benefits, and because of that, they delay pension payment.”
Speaking further on his resentment for the CPS, he says, there are some benefits embedded in the DBS that are not provided for in the CPS.
According to him, the DBS makes provision for periodic review of monthly stipends, but this is not reflected in the CPS, especially for annuity retirees.
Shittu says, “I was 23 years in service by 2004, remaining 11 years for me to retire; I retired under the CPS in 2015. The DBS retirees enjoy pension increase but CPS retires getting annuity don’t.
“We did not enjoy 15 per cent pension rise announced by President Olusegun Obasanjo in 2007 for federal retirees, we did not get 33 per cent increase in 2010. They agree they owe us, but when are they going to release this money?”
“Many have died, but those of us alive now, there are things we can use the monies for. We are also Nigerians, not foreigners. Some people cannot buy drugs and are in terrible situations. Why can’t they give us minimum wage, even if it is N30,000, it is going to be our joy. One naira has not climbed my pension since 2015.”
He adds that, “The Federal Government through the Central Bank of Nigeria and National Pension Commission still owe all categories of CPS from inception of 2004, accrued interest on their entitlements as of July 2004 which was deposited with the CBN as bonds.
“Therefore, we are demanding the calculation of all accrued interests (On all monetised amounts) as of July 2004 at the government’s official interest rate as at the time to be paid to our members.”
DBS
The retirees under the DBS are workers who retired not later than June, 30, 2007. The DBS is regulated by the Pension Transitional Arrangement Directorate; PTAD, also is supervised by PenCom.
According to the PRA Act, regulation of the DBS will continue until the last retiree under it dies, then only the CPS should remain.
Some retirees under the DBS are worried that their sufferings are unabated after several years.
Two members of the Concerned Federal Pensioners, Mrs Roseline Oguntimein, and Mrs DorothyAsherifa, have not been placed on payroll, despite several complaints.
They both retired before 2007 under the DBS, and are still pleading to the Federal Government to pay their entitlements.
Speaking for a group of pensioners under the Lagos Chapter of the Association of Retired Federal Senior Public Officers of Nigeria, the Chairman, Mr Olufemi Odewabi, laments that most of the promises given to pensioners by the Federal Government through PTAD have remained unfulfilled till date.
The chairman of ARFESPON Lagos Chapter says, “There is also delay in payment of some of our members’ retirement entitlement. They only pay the monthly entitlements but delay the payment of the lump sum entitlements of some of our members.
“For instance, one of our members had his lump sum entitlement paid 20 years after his death.”
PTAD
The Pension Transitional Arrangement Directorate, empowered by the PRA Act, took over the management of the DBS in August 2013, to address the lingering problems in the scheme.
PTAD took over the management of the old pension offices consisting of the Civil Service Pension Office under the Head of the Civil Service of the Federation; the Police Pension Office; the Customs, Immigration and Prisons Pension Office; as well as the pensions of over 200 treasury funded parastatals.
These are the categories of pensioners who served the Federal Government and retired on or before 30th of June 2007, and who did not transit to the CPS.
The Executive Secretary, PTAD, Dr Chioma Ejikeme, says it has been addressing pensioners’ challenges.
Speaking on some of the efforts, she says, “The implementation of the Parastatals Pension Department back end computation project across the 270 agencies under the department was to correct pension payment anomalies like overpayment and underpayment.
She explains that, “The pension payroll with 10,155 pensioners inherited by PTAD in 2015 showed 42 per cent were underpaid while 56 per cent were overpaid using non-pensionable components. With the implementation, equity has been restored and complaints reduced.”
Ejikeme notes that the back-end computation exercise was necessitated by the need to ensure that each pensioner earns their rightful pension for fairness, equity and justice, in line with the directorate’s mandate.
CPS
Nineteen years after the CPS emerged from the PRA Act, it has recorded both commendations and condemnations.
According to the operators, N7.98tn has been recorded as return on investment on the pension funds under the CPS.
A report obtained by The PUNCH from the Pension Fund Operators Association of Nigeria, shows total funds under the CPS stood at N17.37tn as of the end of second quarter of 2023.
Contributions made by the workers from both private and public sectors stood at N9.37tn in the period under review.
The report titled, ‘At the dawn of 20 years of pension reform, what are the gains?’ and released by PenCom, shows that workers’ contributions accounted for 54 per cent, while the return on investment accounted for 46 per cent of the entire pension funds as of the end of June 2023 from the beginning of the CPS in 2004.
The pension operators disclosed that workers’ contributions are judiciously invested, and the returns are added to the workers’ pension savings to reduce the effect of inflation on the funds.
Further figures show that as of the end of the third quarter of 2023, the PFAs have recovered N24.8bn from defaulting employers.
PenOp reveals in the report that in Q2, 2023, N665.13bn has been paid as a lump sum to annuity retirees; and N964.24bn to programmed withdrawal retirees, making a total of N1.64tn to 442,000 retirees.
It adds that N208.86bn was paid to 475,235 workers who lost their jobs before getting to the official retirement age and were unable to get another job after four months.
Total death benefits paid to 91,214 beneficiaries amounted to N356.32bn in the second quarter of 2023.
The report shows that 649 contributors got approval to access N7.89bn from their RSAs for residential mortgages.
Between 2007 and July 2023, it adds, the contributors under the CPS rose from 2,543,178 to 10,023,314.
New problems
The non-payment virus that marred the DSB, unfortunately, crept into the CPS and defeated the essence of the Pension Reform Act introduced in 2004.
Speaking on the CPS, the Executive Director, Centre for Pension Right Advocacy, Ivor Takor, says, “The challenge of the scheme is in the public sector (federal and states), where workers for some years now are not being paid as and when they retired. The crisis facing Federal Government retirees, emanate from the fact that the Federal Government has not been funding the Retirement Benefits Bond Redemption Fund Account in the Central Bank of Nigeria as it ought to.”
Some of the challenges in the CPS, according to findings, include ridiculously low pensions paid to retires, while some pensioners are not even entitled to pensions at retirement among others.
For instance, some pensioners under the CPS collecting Programmed Withdrawal, stopped earning monthly stipends some years after they retired because they exhausted the money in their Retirement Savings Accounts.
The industry regulator had to intervene by instructing the pension companies to continue paying pensions to the affected retirees from the provision made for Pension Protection Levy, pending the implementation of the Minimum Pension Guarantee.
Penury
Many retirees are unable to save enough money for their pensions before they retired under the CPS, findings have revealed. No fewer than 149,372 workers who retired under the CPS and could not earn up to N10,000 monthly stipends withdrew N41.25bn funds in their Retirement Savings Accounts with their respective Pension Fund Administrators.
This is according to figures obtained by The PUNCH on the National Pension Commission’s quarterly report on enbloc payments to the retirees from inception of the CPS till second quarter of 2023; they exited the CPS and were not placed on monthly pensions.
Default
Many employers under the CPS have also not been remitting pensions of their workers, making many workers to retire into penury.
However, PenCom employs recovery agents to recover some of these funds.
From the commencement of the recovery exercise in June 2012 to 30 June 2023, N24.8bn comprising of principal contributions (N12.52bn) and penalties (N12.28bn) was recovered from defaulting employers, as of the end of June, 2023, according to PenCom’s report on ‘Recovery of outstanding pension contributions penalties from defaulting employers’.
States
According to PenCom’s report on ‘Status of implementation of the CPS and other schemes’, only six states and the FCT, are fully implementing the CPS; they are Lagos, Osun, Kaduna, Ekiti, Edo and Ondo.
Many of the states have backlog of remittances, making more workers to retire without pensions.
Pullout
Few hours before former President, Muhammadu Buhari left office, he assented to the National Assembly Service Pensions Board bill.
The bill which became an Act, excluded National Assembly workers, and some others from the CPS.
The NASS workers got a juicy pension package for themselves, which were not available under the CPS.
However, industry experts are saying that with the Federal Government’s consistent records of fiscal deficit, it will not be able to fund this huge pension package.
The NASS workers followed some others who had earlier exited the CPS.
Military personnel and State Security Agencies were exempted from the CPS in 2011, and PenCom has been refunding their contributions since then.
A major complaint is that the monthly stipend paid is low, and pensioners under the CPS are lacking in many other benefits.
In the CPS, a retiree is only entitled to what he is able to save from his monthly stipends into the Retirement Savings Accounts with the Pension Fund Administrators while in active service, as well as accrued rights were application.
With this move, there are fears that more sectors may threaten pullout from the CPS.
Complaints
Shareholder Activist & Cofounder, Nigerian Shareholders Solidarity Association, Gbadebo Olatokunbo, says the suffering of the CPS pensioners is due to the fact that when the scheme was introduced, “The Federal Government failed to include many benefits enjoyed in the old pension scheme under the DBS into the CPS.”
According to him, the issue of progression in the benefits of pensioners that pensions should be reviewed every five years as stated in the PRA Act has only been enjoyed by the DBS retirees, while the CPS retirees are left out.
“There are several anomalies in the CPS that cannot be left with PenCom without the necessary acts of NASS to make it workable in the interest of the vulnerable contributory pensioners,” he says.
PenOp
The Pension Fund Operators Association of Nigeria has continued to defend the CPS.
The Chief Executive Officer, PenOp, Mr Oguche Agudah, faults the pulling out of the CPS by the NASS workers.
During the Obasanjo’s era, prior to the Pension Reform Act in 2004, he says, there were several committees to determine the best pension model for Nigeria.
Many countries were studied, cross cutting committees including labour, employers of labour, civil society groups, investment professionals and regulators were consulted to come up with the current system that the country has now, according to him.
He adds that, “Because of the foresight and the boldness of the reforms then, the pension industry in Nigeria grew from a negative position of about N2tn to where we are now.
“We can boast of pension assets of N17.6tn spread across more than nine million Retirement Savings Accounts. These are monies that are funded and are in people’s retirement accounts.
“One would have thought that lawmakers would build upon this and see how the funds could be used to accelerate the development of the economy rather than pulling down years of reform as a form of last-minute gift for themselves. Lawmakers are meant to make laws in the interest of the general populace and not just themselves or narrow interests.”
PenCom
The Director-General, National Pension Commission, Aisha Dahir-Umar, says PenCom has continued to ensure the growth of the CPS and safety of workers pensions.
For the benefits of the retirees, she says, there was pension enhancement for existing retirees under Programmed Withdrawal who accumulated significant growth in their Retirement Savings Accounts.
According to her, the CPS has provisions that can address the challenges of Nigerian workers.
