All employers of labour should pay more attention to issues of pension and retirees’ benefits
A recent report by the National Pension Commission (PenCom) that no fewer than 20 states are yet to commence the payment of pensions to retirees after opting to join the Contributory Pension Scheme (CPS) calls for concern. Titled, ‘Level of Implementation of the Contributory Pension Scheme by states as of June 2021’, the report revealed that 24 states and the Federal Capital Territory (FCT) had enacted laws to join the scheme. Only four states – Lagos, Osun, Kaduna, Delta and the FCT are paying pensions to retirees under the CPS and funding the accrued rights (benefits under the old pension scheme that the retirees are also entitled to). Anambra, Abia, Taraba, Imo, Sokoto, Adamawa, Ebonyi, Nasarawa, Enugu and Oyo States are yet to establish pension bureau, a prerequisite to commence the scheme, despite enacting their CPS laws. Seven states, including Kwara, Plateau, Cross River, Borno, Akwa Ibom, Bauchi and Katsina are at the bill formation stage to enable them to migrate from the old scheme to the CPS. Jigawa, Kano, Yobe, Gombe and Zamfara have opted for other pension schemes.
The CPS was established under the Pension Reform Act of 2004, later repealed and replaced in 2014 to provide a sustainable system of pension payment and correct abnormalities in the pay-as-you-go Defined Pension Scheme under which retirees were subjected to untold hardship, with many dying without getting their entitlements. One of the objectives of the Pension Reform Act (PRA) 2014 is to “ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory, States, and Local Governments or the Private Sector receives his retirement benefits as and when due.”
However, with the low coverage of the CPS in the public sector bolstered by lack of political will, especially by state governments, it is clear that this objective is far from being realised.
Although remarkable growth and achievements have been recorded in the pension industry, it is still fraught with many challenges. It beggars belief that almost 20 years after the reform, only Lagos and the FCT have fully complied with its spirit and letters while only four states, and the FCT are paying pensions to retirees under the CPS and funding the accrued rights. Yet, despite the failure of most states to make the interest of pensioners in their states a priority, the 36 states have been making frantic efforts to borrow about N2 trillion from a pool of N13 trillion pension assets in the country.
While the governors’ move to draw from the pension assets has been roundly condemned from many quarters, the current economic downturn does not in any way provide a plausible alibi for the failure of most states to comply with the Pension Reform Act. The federal government is also complicit in the current challenges facing the CPS. It has been accused of inadequate funding of the Redemption Fund against the annual projected pension liability, arising from voluntary and mandatory retirements, death of employees in service and the right of pensioners to pension review in line with Section 173(3) of the 1999 Constitution (as amended).
Indeed, since the advent of the CPS scheme, the failure of the federal and some state governments that have keyed into the scheme to transfer to PenCom the accrued rights of government workers for onward transfer to the various Pension Fund Administrators (PFAs) has contributed to delays in the prompt payment of workers’ lump sum benefits. It is therefore high time the federal and state governments, and indeed all employers of labour in the public and private sectors took the issue of pension and retirees’ benefits more seriously.
