Barely 10 years after it came on stream, Nigeria’s current contributory pension scheme is already being bogged down in some sharp practices capable of causing its derailment. Available evidence shows that some employers are violating certain provisions of the Pension Reform Act 2004 by not remitting workers’ monthly deductions regularly. This trend, already acknowledged by the National Pension Commission, the regulatory agency, has the capacity to condemn the new pension scheme to the same fate as its discredited predecessors, if not promptly checked. Consequently, there should be hefty fines for those that fail to comply with the letter or the spirit of the pension law.
A recent report, citing PenCom’s records, indicates that over 130,000 registered workers’ contributions are not regularly remitted. While the number of Retirement Savings Accounts had risen to 5.55 million by mid-2014, it was discovered that only 5.42 million were being funded. At some stage, PenCom had to resort to the services of recovery agents to recover about N3.34bn of such funds that were deducted but not remitted by employers.
Similarly, staff members of the Nigerian National Petroleum Corporation called a nationwide strike recently over the failure of the in-house pension fund managers handling their contributions to meet up with the payment of a N134bn deficit. After PenCom had withdrawn its licence, the workers were directed to register with a registered Pension Fund Administrator. The regulatory body said, “NNPC has breached this condition (of properly funding the scheme) considering that the scheme has remained in deficits since 2006.”
Indeed, this is a very worrisome trend. Since the success of the new pension scheme depends largely on such remittances, it becomes imperative for the regulator to act so that retired workers may not end up suffering the same fate that befell others in the past.
For a system such as Nigeria’s, where scant regard is ever paid to the lot of the elderly, preparation for retirement can present a big challenge. Many an old pensioner, after years of productive and perhaps meritorious service in both the private and public sectors, has often ended up in long and endless queues, waiting for entitlements that will never come. For such people, death often came calling, from exhaustion or infirmities of old age, while waiting in the queue.
The main problem with the old scheme was that it was funded by the government; and, like all things under the supervision of the government, it was subject to massive corruption and abuse. While the elderly, who are supposed to enjoy their retirement in peace, are regularly summoned to distant places for the so-called identity verification, either by checking on their records or using the biometric system, some individuals are brazenly helping themselves to billions of naira in pension funds. Even when caught, they still manage to get away with a slap on the wrist.
It was perhaps to avoid such mess associated with public pension administration in Nigeria that the PRA was promulgated to ensure that every retired person, whether in public or private sector, is paid his or her entitlements. The new scheme is not only contributory and fully funded, it is also privately managed.
The new pension scheme, amended in 2014, requires that a minimum of 18 per cent of an employee’s monthly earnings, made up of eight per cent from the employee and 10 per cent from his employer, be set aside with a PFA, to be accessed by the worker upon retirement or loss of employment. The money shall be passed on to the next of kin if the person dies. It is a laudable scheme indeed.
Unfortunately, some organisations make the necessary deductions but fail to remit them to the workers’ RSAs. The law gives PenCom power, as the regulatory body, to make rules as well as to administer punishment in the event of the rules being flouted. This is why PenCom should move in and ensure that any government agency or private firm that fails to play by the rules is adequately punished.
Since this is something that affects the lives and survival of individuals at their old age, when they are no longer able to fend for themselves, PenCom must make sure that those who fail to remit workers’ deductions are made to face criminal prosecution. There must be strict enforcement of sanctions and penalties for non-compliance with the provisions of the law. Labour unions must closely monitor their members’ pensions. The PRA allows any employee to lodge complaint to PenCom.
Making an example of one culprit will surely serve as a deterrent to others. The employer’s legal obligations to the scheme remain a crucial element in protecting members’ benefits.
