The Pension Reform Act 2014 mandates all employers under the Contributory Pension Scheme to raise the contribution of their workers’ pensions from 15 per cent of total monthly emoluments to 18 per cent.
The law was amended to address complaints of workers who were retiring but getting ridiculously low monthly stipends because of low balances in their Retirement Savings Accounts.
According to the PRA, eight per cent of the workers’ monthly emolument should be deducted and augmented with another 10 per cent contribution from the employer to be regularly remitted into the workers’ RSA.
The contributions, which are kept by the Pension Fund Custodians, are administered and invested by the PFAs.
Provisions were made in the PRA for the PFAs to continually invest the funds on behalf of the workers to ensure that the funds continue to increase until the workers retired, which will further translate into higher returns on investments and give retirees higher monthly stipends.
But while many private sector employers have complied, the Federal Government has continued to remit the old amount of 15 per cent into the workers’ RSAs six years after the enactment of the PRA 2014.
Findings also revealed that the Federal Government owed remittances of some parastatals for many months.
The implication of this, according to experts, is that many workers will still retiree with low savings or retire into penury.
One of the operators who spoke to our correspondent on condition of anonymity said due to insufficient funding of accrued rights, federal workers who had been retiring since April 2019 had not been able to get paid.
He said, “The workers who retired since April 2019 have not been paid their pension benefits because the Federal Government has not yet paid their accrued pension rights.
“The Federal Government only paid three months of January to March 2019 accrued rights of the retirees. So it is only those who retired latest in March 2019 that are on pension payroll.
“For the present workers, the Federal Government is still remitting 15 per cent into their RSA instead of 18 per cent.”
A former President, Trade Union Congress, Peter Esele, said those in authority should be a standard for the respect of the country’s laws, and the labour unions should mount pressure on the government to do what is right.
He said, “Since 2014 and you are paying three per cent less every month. What that means is that you are paying about 36 per cent less of what you are supposed to pay.
“For 2014 till now is six years, and you can imagine the total number of people that have retired since then. So there is huge backlog that the government is supposed to pay.”
Experts have said that the non-remittance of the monthly deductions into the workers’ RSAs for many months, together with the shortfall in remittances, will further deprive the workers the opportunity of earning returns on the monies that would have been invested by their PFAs.
The President, United Labour Congress, Joseph Ajaero, said the PRA 2014, was widely abused by the contributors, especially the government and various employers.
In most instances, he noted, the employers were not even remitting at all and government in some areas was under remitting.
He said, “When the regulator is the one abusing the process, then you don’t know where to run to.
“Ordinarily, it would have been an independent body that would be in charge of regulating the agency.”
According to him, there is a need to renew the law regularly to show the reality of time.
He said, “The idea of even the government being the employer and a regulator makes things difficult.
“I think the fund is highly abused and the future of workers equally in danger.
“Under the law, it is criminal for you to deduct from workers and not remit.”
At the last retreat of the pension operators with the Senate Committee on Establishment and Public Service, the acting Director-General, PenCom, Mrs Aisha Dahir-Umar, observed that while the CPS had recorded major groth, it was not without its challenges.
She said, “The primary ones being inadequate funding of the retirement bond redemption fund (for payment of accrued rights of retiring Federal Government employees) and agitations by some agencies of government to pull out of the CPS.”
Former Director-General, PenCom, Muhammad Ahmad, addressing lawmakers, had said deductions of monthly pensions were made in some instances by employers but not in compliance with the law.
He said, “Employers are using the old rate of 15 per cent under the 2004 Act as opposed to the new rate of 18 per cent as stipulated under the 2014 amended Act.
“Essentially, we need to ensure compliance, both in respect of payments for those who do not pay at all and for the correct percentage to be paid by those who still use the previous rate.
“In addition, we need to stipulate consequences for non-compliance and look for ways to incentivise those that are compliant.”
The global Allianz Group in its recent report on, “Global pension report 2020: Ready or not,” ranked Nigeria 64th position in global rankings of pension development, reflecting the need for further pension reforms.
The report analysed different countries’ pension systems with its proprietary pension indicator, the Allianz Pension Indicator.
The API examined the pension systems in terms of sustainability and adequacy of 70 countries to provide a comprehensive view of the respective pension systems.
Part of the report read, “Nigeria ranks on the 64th place, especially because of the insufficient adequacy of its pension system.
“The coverage of the pension system is still very low and limited access to financial services hampers the build-up of sufficient private old-age savings to cushion the lack of the public pension pillar.”
The Allianz report stated that harmonisation of the retirement ages of the various professions and adjusting the retirement age in line with future gains in life expectancy would improve the long-term sustainability of the pension system further.”
It added, “Thus, there is a need for the introduction of a pension system with a broad coverage and for further improvement of the access to financial services.”
According to the report, over the next decades, the number of people in retirement age would increase markedly and put social security systems under severe stress.
The report ranked Sweden, Belgium, Denmark, New Zealand and United States as the top five, followed by Australia, Netherlands, Norway, Bulgaria and Canada.
In most other countries, it added, pension systems would struggle, affected with high public deficits and an uneven balance between sustainability and adequacy, tilted in most cases in favour for the latter.
