A thick black cloud hangs precipitously over the future of public sector workers in many states of the country. Reports show that as many as 21 state governments are not remitting their workers’ pensions appropriately to their Retirement Savings Accounts. As suspected all along, the National Pension Commission has stated that the retirement accounts of this category of workers are not being funded on a monthly basis as mandated by the pension law. This is a detestable practice and has to be reversed in the best interest of the workers and the national economy.
In its latest update, PenCom has exposed the true extent of the mess these workers will contend with in the nearest future. Upon retirement, state workers in Ogun, Niger, Kano, Imo, Sokoto, Kogi, Bayelsa and Nasarawa will be exposed to an uncertain future because their state governments are not remitting their deductions into their RSAs. Not only them, PenCom says that public sector employees in Oyo, Katsina, Akwa Ibom, Cross River, Enugu, Abia, Ebonyi, Taraba, Bauchi, Borno and Plateau will suffer the same disastrous fate. For now, only the workers in Lagos, Edo and Kaduna states as well as the Federal Capital Territory stand to reap the full rewards of their labour in retirement. Rightly, the governments here have fully complied with workers’ remittances.
Before the Contribution Pension Scheme took off 15 years ago, retired workers suffered badly under the Defined Benefits Scheme. The DBS was plagued by corruption, inefficiency and opacity. This caused pains for pensioners. On countless occasions, many of them collapsed in queues. A tangible number died before they could receive their benefits. It was a notorious system, which the government neither funded nor handled well. Certainly, the enactment of the Pension Reform Act in 2004 brought hope. The PRA, amended in 2014, mandates workers to contribute eight per cent of their income, with their employers contributing 10 per cent. It is laudable to the extent of the fidelity of the employer.
For some of the defaulting states, it is easy to take refuge in the current poor state of the economy, which is a hollow excuse. During the buoyant years and long before the oil income nosedived in mid 2014, these state governments were not remitting the deductions they made into their workers’ RSAs. In Ogun State, for instance, this was a major talking point under two successive governors. The Nigeria Labour Congress chapter in the state pointed out earlier this year that their members’ deductions for 108 months had not been remitted. This is a huge burden for workers. PenCom states that Niger State stopped remitting in 2015. That was shortly after the last recession kicked in. In almost all the defaulting states, the arrears from the defunct DBS had not been funded. As of the third quarter of 2018, only 24 states had enacted laws to participate in the CPS; six states were at the bill stage. One has yet to commence any pension law, though five of them are working on their own independent pension laws.
This leaves the workers with the states that count themselves officially as remitting pension contributions, which include Jigawa, Kano, Zamfara, Anambra and Rivers. A note by PenCom shows that these states are remitting workers’ pensions inconsistently. Osun State remits “inconsistently, resulting in a backlog of pension contributions.” Ekiti stopped remittances in January 2019, PenCom stated. In the case of Rivers State, it has been half-compliant: only its employees’ portion is being remitted, while its unpaid portion has resulted in a huge backlog. Strikingly, while Imo State workers’ pension is not being remitted, the Imo State University has gone ahead to comply fully with the PRA. By law, an employer is under compulsion to remit deductions to its workers’ RSAs within 21 days.
Additionally, many states default in paying workers’ salaries. This is double jeopardy for such workers, especially as the Federal Government has just enacted a new minimum wage law. From N18,000, the new wage is now N30,000, an increase of N12,000. Undoubtedly, this puts real pressure on all tiers of government and the economy at large.
Experts state that an efficient pension system is a big boost, not only to workers, but also to the economy. In this area, the Nigerian economy is a laggard. At N8.63 trillion as of December 2018, Aisha Dahiru-Umar, PenCom’s Acting Director-General, states that Nigeria’s pension to GDP is a derisory five per cent.
Comparatively, the economies of the Netherlands, Canada, Australia, the United States and Switzerland rate the highest performers in terms of pension to GDP ratio, says London-based consultancy, Willis Towers Watson. From 126 per cent of GDP in 2007, the Netherlands moved up to 194 per cent in 2017. The United Kingdom’s pension assets jumped from 88 per cent of GDP to 121 per cent in the two decades to 2017. WTW said pension assets in 22 major retirement markets surged to $41.3 trillion in 2017, up 13 per cent from a year earlier. PenCom’s target is to attain 10 per cent in 2019.
To attain similar targets, PenCom has to be creative. Apart from the non-compliant states, all the private companies defaulting should be regularly sanctioned. Its recent directive to financial institutions to bar states not remitting pension funds from raising bonds is a step in the right direction. It must design new rules and laws to sanction defaulting states. The new micro pension scheme in the informal economy is also a good development, and should be deepened.
For the workers, it is time to redouble their advocacy through the Nigeria Labour Congress. Agitation for workers’ pension guarantee is a noble welfare cause. The NLC has been unusually quiet on this issue. It should not only agitate for better welfare for workers, but also go all out within the ambit of the law to fight for the remittance of pensions by these obdurate states.