At a time it ought to be setting the pace for the sub-national governments to follow, a shocking new report says the Federal Government is not complying fully with its remittances under the Contributory Pension Scheme. Instead of the 18 per cent stipulated by the Pension Reform Act 2014, the Federal Government has been remitting 15 per cent for the past six years. As expected, this has denied newly retired federal workers their pension benefits. Also affected are retirees in some federal parastatals. This is a gross violation of the CPS law, which has mitigated the devastating havoc wreaked on retirees under the defunct Defined Benefits System.
The default is outrageous more so as the chief initiator of the new pension scheme is now reckoned among the major culprits. From 2004, when the Federal Government enacted the PRA to public acclaim, it has been playing a leading role in the success story of the country’s pension reform. Through fresh amendments in 2014, some of the flaws in the original law were expunged, especially in jacking up the combined contribution by the employer and employee to 18 per cent. The increment addressed the then growing agitation that the original 15 per cent was inadequate for pensioners to survive on.
Disturbingly, the Federal Government is reneging on its part of the deal to give its workers a secure future. Conversely, its default is jeopardising the future of public sector workers that have been retiring lately. There are depressing implications of this. Not only that the pension payments of this category of workers are delayed, there will be limited return on their Retirement Savings Accounts with their administrators. With no other social benefits to fall back on, poverty in retirement, which the scheme aimed at squelching, beckons. These retired workers and the elderly, who have put in the best parts of their lives to public service, do not deserve such shabby treatment.
On a wider scale, the future of the pension fund could enter into murky waters. This will be dangerous, a return to the tragic chaos of the past when pensioners slumped in queues, waiting endlessly for their peanuts. Rightly, that prolonged mess provoked a new thinking in government. The outcome was a brand new pension law. It eradicated the endless verification queues, the need for periodic biometric data capturing, delayed payments and premature deaths. Pensioners hailed the new era in which retirees first received a lump sum and monthly benefits promptly.
Inexplicably, the Federal Government, which has also borrowed up to 70 per cent of the pension fund through bonds and other instruments, is about to return the system to the better-forgotten past. The labour unions and all workers should jealously guard their retirement savings so that they would enjoy their pension ultimately.
Just like the Federal Government, many of the 36 states are making a mockery of the noble intentions behind the CPS. As of May, workers from only Lagos, Delta, Kaduna and Osun states as well as the Federal Capital Territory were being paid under the CPS. Although 25 states have enacted their own versions of the PRA, only nine of them are remitting, the regulator, the National Pensions Commission, says. Sixteen years after the scheme took off for federal and private sector employees, seven states are still in the process of enacting their pension laws. PenCom says that five states have their own pension schemes. In some states participating in the CPS, there are gnawing flaws. In 2018, Ogun State workers protested to the then Governor Ibikunle Amosun that their pension deductions had not been remitted for 106 months. Under the Rauf Aregbesola administration in Osun State, remittances were haphazardly done since modulated salary was the prevailing order.
Pension funds provide a huge pool of long-term funds available for investments, leading to national economic development. For pension assets, the larger the better, but Nigeria fares poorly by this reckoning. In spite of its N10.22 trillion size in January, Nigeria’s pension assets lag far behind in global competitiveness rankings. A study by Allianz Group, Germany’s integrated financial services provider, entitled, “Global Pension Report 2020: Ready or not,” rated Nigeria’s scheme 64th out of 70 countries. The fund is 6.4 per cent of GDP and is No. 56 out of 74 jurisdictions, according to the latest tabulations by the Organisation for Economic Co-operation and Development. This demands more pragmatic reform not defaults by the Federal Government.
In contrast, the OECD lists the United States as recording the largest pension assets globally at $16.2 trillion, followed by the United Kingdom’s $2.9 trillion, Australia’s $1.7 trillion, the Netherlands’ $1.6 trillion and Canada’s $1.4 trillion. Pension fund assets had similarly exceeded $1 trillion in Japan and Switzerland as of 2017. Apart from the budgetary allocations of over N10 billion per annum promised by the Ministry of Finance to cover the accrued rights, these figures impose a bounden duty on the Federal Government to devise new strategies to pay up the six years arrears. It should pay the arrears and ensure that the default does not go beyond these six years.