As governments at the federal and state levels as well as the private sectors are failing in their obligations to funding the Retirement Savings Accounts (RSAs) of their workers, industry watchers see this as a challenge that is threatening the New Pension Scheme. ABDUL OLALEKAN writes.
The transition from the old pension scheme to the new pension scheme, specifically in 2004, marks a new era in the country’s pension industry, as it puts to an end, fund mismanagement, corruption, lack of transparency as well as funding issue that characterised the Defined Benefits under the old scheme.
It was a rebirth that grew the pension assets from a deficit to currently N5.7 trillion within the last 12 years. While the achievement is commendable, however, it seems there is the reincarnation of the funding challenge that was prevalent in the previous scheme.
The inability of Federal Government to honour the pension obligations of its workers as at when due and the inability of some states to pay salaries and pensions of their civil servants consistently has created several billions of Naira of pension arrears for the two tiers of governments, a defect that will take several years to address.
For instance, the National Pension Commission (PenCom) disclosed that there has been a decline in the budgetary provision for funding the Retirement Benefit Bonds Redemption Fund (RBBRF) account and the remittance of monthly contribution from 2014 till date.
The commission said the sum of N20.07 billion is required to pay all outstanding accrued benefits for deceased and mandatory retirees of the Federal Government between October to December 2015, even as N79.16 billion has been computed as the arrears of the 15 per cent pension increase owed to 79,961 FG retirees under the CPS as at December, 2014. The sad news here is that of the N91.91 billion projection to offset the pension arrears through RBBRF, only N50 billion was budgeted for in the 2016 national budget, leaving a shortfall of N41.71 billion.
The inability to fund the Retirement Savings Accounts (RSAs) of civil servants at the federal and states levels on a regular basis is a concern for the growth of the pension assets.
Mr. Ivor Takor, former board member, National Pension Commission (PenCom), while charging the Federal Government and States to prioritise funding of their respective workers’ RSAs, said FG was unable to remit pension contributions since October 2015, while state governments are defaulting in the payment of their workers pension contributions as well as salaries.
Takor, who is also a Director, Centre for Pension Right Advocacy, said most illiquid states have suspended pension budget for now, instead, paying salaries without remitting the employer’s monthly pension contributions into their workers RSAs.
He said the pension liabilities of some states is so huge, that even if situation improves, it’s going to be difficult to offset them, wondering why some states could owe two years pension arrears, even as the federal government accrued pension rights is also on the increase.
According to him, “We understood that the FG has not been able to remit pension contributions since October 2015 and this has to do with not only the employer’s contributions, but what then is happening to the contribution of the employees, because it has been deducted from their salaries and the law says the deduction should be paid into the RSAs of the employees, not later than seven days after salaries are paid.”
Government, he said, was not adequately funding the accrued rights at the federal level which is affecting the payment of pension as at when due.
“Then, the greatest problem lies with the states. PenCom said only 10 states have keyed into the CPS, but if you look critically, it is Lagos State that is somehow implementing the CPS. Yes, these states have commissions, bureaus and laws, but are they contributing as at when due? That is the situation. Then, majority of the states don’t have laws. This means the workers have no form of pensions,” he pointed out.
Stating that these are issues that need to be addressed holistically, he added that it’s unfortunate that some of these governors left office and made only some segmented pension laws that only cover them and their office holders, some of them drawing massively from the purse of the state in the name of pension to build houses and cars and did not make laws for the state workers. “This is very bad, it’s immoral and it should be addressed by current governors”, he advised.
The Director-General, Lagos Pension Commission (LASPEC), Mrs. Folashade Onanuga, said in spite of the challenges the states are passing through, their inability to prioritise pension was responsible for the pension backlog they owe. “Though there are a lot of things contending with state funds, I believe if there is a commitment towards pension, we will always find a way to pay it,” she stressed.
She implored the defaulting states to borrow a leaf from Lagos State, ranked as the first in pension implementation, by making the welfare of their staff either in or out of service, the utmost agenda, hence, paying their monthly pension as at when due.
While speaking on the need to amend the PRA 2014, Mr. Jaiyeola Olowosuko, Director-General, Ondo State Pension Commission, said the Group/Life Insurance that workers enjoy while in service can also be implemented after service to make the CPS more robust, by amending the pension scheme to include a medical and insurance covers, so that the insurance takes care of them in their old age at a premium already paid while in service.
Proffering solutions to the challenges of the CPS, Olowosuko called on the Pension Fund Administrators (PFAs) and PenCom and respective employees to ensure the perfection of documents which must start a year before retirement, while the necessary documentations with PenCom should equally be done on time so that upon retirement, there is no delay for any retiree to access his or her pension entitlement.
According to him, “The necessary clearance with various employee should be done a week before retirement. We have seen instances where a worker’s RSA is robust and yet 3 to 6 months after retiring, the money is not accessed. This is not good for life after service (working).”
Meanwhile, Mrs. Chinelo Anohu-Amazu, Director-General, PenCom, while speaking on this development said the lack of, or low funding was a serious concern, stating that the commission has embarked on a serious awareness and sensitisation campaign in some states of federation in a bid to ensure prompt compliance and full implementation of the CPS.
Some states that opt out of the new scheme initially, she pointed out, are now putting mercenaries in place to subscribe to the scheme, while states who had earlier complied but are not funding the RSAs of their workers, have been enjoined to remit as at when due.
Noting that the private sector has a better compliance rates than the government, she said the commission would leverage on the micro pension to bring in the informal sector into the pension scheme, believing this is the way out, considering the fact that states are not fully compliant.
She stated that the commission was still working on the micro pension framework and that when it comes on board, she said this would lead to rapid growth of the pension funds and becomes a way out to the funding challenge being confronted by majorly, state government.
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