The National Pension Commission (PenCom)has barred pension fund administrators from investing in the bonds of nine states that have yet to amend their state pension laws and join the Contributory Pension Scheme.
Findings also revealed that this restriction might be extended to 15 other states that had joined the CPS, but were not showing full commitment to funding the Retirement Savings Accounts of their workers.
Latest figures from the commission showed that as of March 2019, the number of states that had enacted laws on the CPS stood at 27.
Yobe State is still operating the old Defined Benefits Scheme and has taken no action towards adopting the CPS.
Six states, Katsina, Bauchi, Borno, Benue, Kwara and Pateau have drafted bills, while in Akwa Ibom and Cross River, the bills are still in the houses of assembly.
The commission stated that the states that had commenced remittance of pensions to workers’ Retirement Savings Accounts and were funding their accrued rights were Lagos, Ogun, Kaduna, Niger, Delta, Osun and Rivers.
The CPS was established under the Pension Reform Act to replace the DBS.
This was because the DBS had huge liabilities, which were not being funded, leading to situations where retirees endured long waits to get their entitlements, while many of them died without being paid.
Unfortunately, the same scenario, which was prevalent in states operating the DBS, is now happening in the states operating the CPS due to poor funding of the scheme.
The Head, Corporate Communications, PenCom, Peter Aghahowa, said the commission could not impose the CPS on the states, but could only use moral suasion.
He said, “The states have to enact the laws to do the CPS because they are going to operate based on the provisions of the laws. We can only encourage them because of the benefits in the scheme.”
According to him, if any state plans to raise funds through pension bonds, it must have met the CPS criteria before it could have access to such.
For now, he said, those that had not enacted the laws were being encouraged to do so.
He said “We don’t invest in bonds of states that have not enacted their laws. We have some that are not complying properly, some are complying partially. I believe we will review some of those things again. But for now, if you have not even enacted any law, don’t think we will start investing in your bonds.”
