After futile efforts to run a successful pension scheme in Nigeria under the Defined Benefits Scheme (DBS), government in 2004 took the bull by the horns to effect a change in the hitherto bastardized pension system where workers who have spent their hay days serving the nation end up in frustration, some giving up the ghost in the process of endlessly waiting to get what rightly belonged to them at retirement. In many cases, even where budgetary provisions were made, inadequate and untimely release of funds resulted in delays and accumulation of arrears of payment of pension rights. It was obvious therefore that the Defined Benefits Scheme could not be sustained. In the private sector on the other hand, many employees were not covered by the pension schemes put in place by their employers and many of these schemes were not funded. Besides, where the schemes were funded, the management of the pension funds was full of malpractices between the fund managers and the Trustees of the pension funds.
But thanks to the emergence of the Contributory Pension Scheme (CPS) powered by the Pension Reform Act 2004 facilitated by the regime of President Olusegun Obasanjo which to a very large extent has brought sanity into the hitherto corruption ridden industry.
Today, a worker either in the public or private sector who is happy being part of the process that will determine how well he/she will live after retirement from active service, readily monitors the growth of his/her pension contributions through his/her chosen Pension Fund Administrator (PFA).
It is gladdening to know that in just nine years or there-about, the Contributory Pension Scheme (CPS) has garnered over three trillion naira (N3trillion) as contributions from few workers in the public and private sectors whose organizations have embraced the scheme.
The huge success story notwithstanding, the body whose duty is to regulate activities of the various players in the pension industry known as the National Pension Commission (PENCOM) says it has committed itself to seeking better ways to take the industry to a greater height. To achieve its goal, the PENCOM has sent its prayers to the representatives of the people of Nigeria at the National Assembly to help repeal the Pension Reform Act 2004 and enact the Pension Reform Act 2013 to make provision for the Contributory Pension Scheme and for connected matters. The passage of the Bill which is right before the National Assembly according to the Commission will help it address the challenges that it is being confronted with in the process of implementing the PRA 2004.
The principal thrusts of the Pension Reform Act (PRA) 2013 Bill, according to the Commission are to enhance the powers of the Commission in its regulatory and enforcement activities, enhance the protection of pension fund assets, unlock the opportunities for the deployment of pension assets for national development, review the sanctions regime to reflect current realities, provide for the participation of the Informal Sector and also provide the framework for the adoption of the Contributory Pension Scheme (CPS) by States and Local Governments.
Furthermore, the PRA 2013 Bill seeks to enhance the regulatory authority and efficiency of the Commission to provide greater oversight on, and reposition the Pension Transition Arrangement Departments (PTADs) for greater efficiency and accountability in the administration and payment of pensions under the Defined Benefits Scheme. This move by PENCOM is consistent with the desire of the National Assembly to tackle gross impunity and wide-spread corruption in the various Pension Departments in the country. For instance, the PRA 2013 Bill if made into law will allow for a wider decree of transparency in the pension industry as the regulatory commission will be able to exercise more powers to discharge its regulatory functions.
Part of the things PENCOM seeks to achieve with the Bill is to be able to reposition the Pension Transition Arrangement Directorates (PTADs) to ensure greater efficiency and accountability in the administration of the Defined Benefits Scheme (DBS).
Perhaps the aspect which will most delight workers under the Defined Benefits Scheme is the proposal by PENCOM that payment of pensions would be made by the Accountant General of the Federation (AGF) directly into beneficiaries (pensioners’) bank accounts rather than go through the usual long processes during which the monies disappears in transit. Besides pushing to expunge corruption and introduce transparency in the administration of the pension industry in Nigeria, PENCOM is of the view that not only workers in both the public and private sectors should be catered for by government. The Commission is equally pushing through the PRA 2013 Bill that people in the informal sector of the economy be accorded equal right to save for their old age.
To capture a wider number of employees in the informal sector which unarguably constitute the greater chunk of the country’s economy, PENCOM is asking through the PRA 2013 Bill that the minimum requirement of five employees for organizations to participate in the scheme be reduced to three to allow small businesses, especially the Small and Medium Scale Enterprises (SMEs) to partake in the scheme.
According to the Commission, compiled data supplied by the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) show that over 12million organizations which include Partnerships and Micro Enterprises that normally have less than five employees are registered in Nigeria.
Beyond helping Nigerian workers secure their future, PENCOM ultimately is seeking through the Bill to help government fast track the process of achieving its various transformation agenda by making available the required fund, hence the provisions in the Bill to expand the sphere of permissible investment instruments to accommodate initiatives for national development which include among others investment of the pension funds in the real sector. This according to the Commission will focus on infrastructure and housing development while at the same time not unnecessarily endangering the pension fund assets.
The PENCOM also being a listening regulatory body is seeking through the PRA20I3 Bill to address the request from mainly the labour union that their waiting period for accessing benefits in the event of loss of job from six (6) months be reduced to four (4) months. Besides, to ensure strict operational discipline by operators in the pension industry, the PENCOM is seeking through the Bill to create new offences and provide for stiffer penalties that will serve as deterrence against mismanagement or diversion of pension funds assets under any guise, as well as other infractions of the provisions of the Act.
This becomes very expedient as the Commission has observed that sanctions currently provided under the PRA 2004 are longer sufficient deterrents against infractions that operators currently commit under the PRA 2004 Act. Another major issue among the 23 identified with the PRA 2004 which the Commission seeks to address through the PRA 2013 Bill is that the fund set aside by the Government to pay the accrued rights for past service under the ContributoryPension System is hardly sufficient.
…By Joshua Nse…