Many welcomed the news recently that the main anti-corruption agency is set to beam its searchlight on employers and managers that fail to remit pension funds to the custodian banks. In an environment of economic adversity, large-scale theft of public funds and financial crimes, the government should adopt very strong measures to protect the only buffer available to Nigerian workers.
Having grown the contributory pension funds to N5.8 trillion, we strongly recommend that stiffer penalties should be enshrined in the law and restate our stout opposition to any move to relax the regulations for accessing the fund in any way that would endanger its safety.
The move to prosecute offenders is long overdue. According to Ehimeme Ohioma, its Head of Investment and Supervision, the National Pension Commission is currently working out modalities with the Economic and Financial Crimes Commission to prosecute individuals and companies that fail to remit the pension contributions of their employees that they had deducted at source. The surprise is that it has taken this long for the regulator to opt for criminal prosecution of offenders. It has been long established by the agency and labour unions that many corporate organisations had been deducting from their employees’ salaries under the Contributory Pension Scheme but had not been remitting same to their Retirement Savings Accounts as required by law. This is clear criminal behaviour.
The Nigeria Labour Congress alleged in January this year that 29 states had not been remitting to the pension fund. NLC factional president, Aliyu Wabba, followed up recently with the alarming news that even federal ministries, departments and agencies had not been remitting contributions.
The pension fund and its administration need to be closely monitored. Until recently, the NLC appeared totally unconcerned about it even as the fund grew exponentially and public officials repeatedly clamoured to lay their hands on it. Now that the immediate past government has run down all fiscal buffers and the incumbent becomes more desperate to plug the inevitable deficits, labour unions must guard it jealously, while the regulators should resist the mounting pressure to relax the rules for infrastructure bonds.
PenCom says it is now willing to provide up to 40 per cent of the fund for infrastructure by 2019 although subsisting rules say not more than 20 per cent can be accessed for infrastructure bonds.
We expect, first, to see in the coming weeks determined efforts to recover funds and aggressive prosecution of those who withhold contributions for no justifiable reason. The Pension Reform Act 2014, which replaced the 2004 law, directs an employer to deduct eight per cent from each employee’s monthly salary, contribute a minimum of 10 per cent of that salary, and remit to the Pension Fund Custodian specified by the Pension Fund Administrator not later than seven days from the payment of the employee’s salary. The fine specified – not less than two per cent of the total unpaid contribution – is too mild and requires an amendment laying out harsher sanctions to deter offenders.
PenCom had to hire debt recovery agents and could only recover N9.5 billion so far from a huge unpaid sum that is several times this amount. We urge the regulator and the Minister of Finance to urgently work closely with the Ministry of Justice and the National Assembly to come up with amendments to impose stronger punitive action against defaulting companies.
Sadly, federal and state governments also fail to remit workers’ contributions. In an era when many state governments owe salaries, this is a particularly troubling scenario: not only are the affected public sector workers presented with a miserable present, their future is also in jeopardy as they may not have a fallback on retirement. We suggest a radical solution by the Federal Government. A report by the Pension Fund Operators of Nigeria in July alleged that not only had the Federal Government not been remitting its employees’ RSAs since October 2015, it had not raised its contribution per worker from 7.5 per cent to 10 per cent and from 7.5 per cent to eight per cent for the worker as amended by the 2014 Act. Worse, it found that many state and local governments had not been remitting contributions for two years! This is totally unfair.
Serious and responsive governments don’t joke with pensions. United States federal laws prescribe up to five years imprisonment with an option of heavy fines for anyone who withholds, converts to his own use or embezzles pension assets. The EFCC should in addition apply extant laws on financial crimes on individuals and corporate bodies that flout the rules even while amendments to the PRA are being awaited. There are other existing statutes under which errant corporate bodies and individuals can be prosecuted. The United Kingdom’s Pension Regulator in August slammed 22 million pounds fines on many small business owners and families for failing to set up pensions for their workers, including nannies.
Ironically, it is our same defaulting federal and state government officials that are clamouring to access the pension fund for “infrastructure investment.” PenCom should not bend to undue pressure. While we acknowledge that pension funds are ideal for long term investment funding, the extant well-thought-out regulations have spelt out how infrastructure bonds can be raised with the safety of the funds paramount. It is a function of the fiscal incompetence of our governments that less than five per cent of the 20 per cent of the fund set aside for this window has been accessed. Lacking in discipline, accountability and consistency, successive federal administrations have cast covetous eyes on the surprisingly well-managed pension fund. They should do their homework properly.
Labour unions and workers should continue to monitor the fund and resist any move to lower the bar. The EFCC should in the meantime go to work on the defaulters.
