The Federal Government and other stakeholders in the pension industry present at the just concluded public hearing on the bill which seeks to exempt personnel of all the paramilitary agencies in the country from the Contributory Pension Scheme (CPS) have roundly rejected the bill.
Critical stakeholders who gathered in their hundreds including the regulators of key sectors of the economy as well as the Federal Government never mince words on the socio-economic and corruption related crises the bill would trigger if passed into law.
The CPS which is widely acclaimed to be a model in the African continent and comity of nations is under threat on the back of a bill which seeks to amend Section 5(a) of the Pension Reform Act, 2014.
Of course, the Speaker of the House of Representatives Yakubu Dogara did not shy away from the truth knowing fully well the legacy recorded by the Pension Reform Act, 2014.
Dogara who was represented by Ado Doguwa, Chief Whip of the House of Representatives urged the Committee and all stakeholders to examine the bills critically by ensuring that the “stable system built up since the introduction of the mandatory CPS in the 2004 and 2014 Pension Acts are not upset or undermined, by any new legislation or further exemptions under the scheme. We are conscious of the fact that the pension industry has become a crucial sector that is playing a formidable role towards the development of the economy in terms of availability of huge investment funds of about N6.4 trillion provided by the scheme that could be deployed both in the real sector as well as in the capital market sector. Furthermore, the role effective pension administration plays in the general well-being of the pensioners cannot be over-emphasised and we as a parliament will always ensure that the efforts of those that labored for the fatherland will always be appreciated through regular and timely payment of pensions and gratuities. Any bill therefore that can improve both ends of the sector, that is, the pensioners’ wellbeing as well as the administration of the funds will always be favourably considered by the House”.
All stakeholders unanimously agreed that the CPS as implemented so far has recorded no single corruption case as against the Defined Benefit Scheme (DBS), through which some huge frauds were perpetuated by some individual managers of the old pension scheme, including the Presidential Pension Reform Task Team, whose head has been declared wanted by the Interpol.
Likewise, representative of the Acting Secretary to the Government of the Federation (SGF), Roy Ogor, disclosed that the White Paper issued by the Federal Government prohibits all Ministries, Departments and Agencies (MDAs) as well as paramilitary agencies from pulling out of the CPS to DBS.
According to him, the proposed exemption bill sponsored by Oluwole Oke (PDP-Osun) contravenes Federal Government’s position considering the dwindling revenue from crude oil and other sources as well as the overwhelming burden being borne by employers in the private and public sector to pay wage and pension bills which runs into trillions of naira on monthly basis.
The National Pension Commission (PenCom) which regulates all pension matters in the country, in its memorandum disclosed that the pension assets had grown to N6.9 trillion as at July, 2017 with an average monthly contributions of N30 billion.
According to the Commission, pension assets were equivalent to about six percent of the Nigerian rebased GDP as at 31st December 2016. The pool of pension fund generated by the CPS has aided the deepening of Nigeria’s financial sector and provided a platform for attaining strategic programmes of government in the areas of infrastructure, housing and the development of the real sector of the economy.
So far, a total of 194,854 contributors from both public and private sectors have already retired and are receiving their monthly benefits as at when due. As at June 2017, a total of N458.91 billion has been paid as pension with an average monthly pension of N7.18 billion; total premium paid to insurance companies for monthly life annuity was N170.57 billion as at march 2017, thereby assisting the growth of insurance industry in Nigeria, which is a special focus area under the Federal Government’s Economic Recovery and Growth Plan (ERGP).
While noting that the Federal Government through a circular with reference no: SGF/59149/S.1/II/266 of 20th July, 2012 stated that the Nigeria Police Force should continue to be covered by the CPS, the Commission observed that the NPF Pension Fund Administrator which manages its pension fund, has registered 155,823 members with a total monthly contribution of N238.25 million and total assets worth N283.90 billion.
under the aegis of Nigerian Employers Consultative Association (NECA) Representating of employers of labour in the private sector though not disposed to the proposed exemption, however canvassed for introduction of ‘closed pension scheme’ for the personnel of paramilitary agencies rather than outright exemption which it noted is detrimental to the well-being of the workers.
The NECA also pointedly affirmed that the budgetary allocation of Defined Benefits Scheme (DBS) for any segment of workers at all levels is unsustainable.
Pension Fund Operators Association of Nigeria (PENOP), warned that “there is need for us to be properly guided on the issues at stake in order not to allow agitations in certain quarters to railroad valuable legislative efforts into a dead end. It would appear that there is clearly a communication gap that needs to be bridged in the interest of the pension industry and its enormous potential for the Nigerian economy.” The association represented by its president Eguarekhide Longe noted that the intent of the proposed amendment will defeat one of the cardinal objectives of CPS, which seeks to ensure that workers save to cater for their old age.
“Retirees, experience has shown, are more likely than not to spend the money quickly and return to dependency and insecurity. Indeed, it will return retirees to active life rather than retirement, thereby reducing their life expectancy,” Longe stressed.
Also in its submission to the Committee, National Insurance Commission (NAICOM) which serves as adviser to the Federal Government on insurance matters noted that the CPS has paid N180 billion annuities as at March 2017, and deepen the development of insurance in the country.
Ose Igunkorode, chairman, Board of Certified Pension Institute of Nigeria (CPIN), who noted that the paramilitary personnel who represent 5% of the entire contributors into the pension population, noted that government cannot afford the burden considering the dwindling country’s revenue.
Anastasia Braimoh, head legal department of Securities and Exchange Commission noted that the contribution into the CPS fund by the 7.5 million contributors amounted to over N6 trillion, adding that this was laudable.
She noted that the fund could be invested in critical sectors of the economy especially projects such as roads, railway, power, housing among others, just as she warned that pulling out any segment of the Nigerian workers could be detrimental to the economic development of the country.
“The Commission observes that the idea of excluding the Nigeria Police Force and other security agencies from the CPS had been mooted in the recent past, especially after the passage of an amendment to the then PRA 2004 to exempt the military and intelligence agencies from the scheme. It is noteworthy that without prejudice to the various reasons advanced for the exemption proposal, such attempts were declined by past sessions of the National Assembly. In this regard, the consensus at the time was that there were other viable measures which could be taken to address perceived challenges in the application of the CPS to the affected security agencies without excluding them completely from the scheme.”, she said.
According to her, CPS has eliminated the challenge of pensioners queuing for screening as pensioners do not need to travel long distances to get their pension entitlements neither do they have to present themselves for periodic payments since payments are made through their respective banks directly into retirees’ accounts of their choice on monthly basis.
With respect to the proposed amendment to section 7(2) of the PRA 2014, SEC noted that to increase the maximum percentage of withdrawal from 25 percent to 50 percent by voluntarily retiree or disengaged employee from their retirement savings account before the stipulated age negates the intendment of the CPS.
According to Braimah, “given the essence of the PRA 2014, is to ensure that contributors enjoy a regular monthly flow of income to cater for necessary living expenses even up till old age, it is without doubt that this amendment would erode the size of contributors’ savings at a time when such contributors are relatively young, thereby creating a scenario where pension contributions could be exhausted long before the life-expectancy projections. The proposed amendment is therefore capable of putting the pension regime in jeopardy and the commission submits that it should be declined.”
The President of Nigeria Labour Congress (NLC), Ayuba Wabba who presented the position of the two labour centres (NLC) and Trade Union Congress (TUC) explained that the DBS was jettisoned because of the myriads of problems arising from huge pension liabilities and lack of adequate and timely budgetary provisions.
According to him, “as at the time the CPS was introduced in 2001, Federal Government had in excess N1.6 trillion pension liabilities under the DBS. It is on record that the new scheme has grown to N6.42 trillion in assets as at the end of March 2017. In addition, the present monthly contributions are flourishing and heart-warming because Nigeria’s average monthly pension contributions stand at N30 billion, above average monthly pension payment of N6.7 billion, an indication that the pension sector is futuristically healthy. A total of 7.4 million workers are currently enrolled on the scheme with about 200,000 private sector employers of labour implementing the scheme.”
He added that the economy is hugely benefiting from the pension reform as contributions are recycled into the economy towards facilitation of the development of the corporate bond market.
Oluwole Oke, Chairman, House Committee on Public Procurement who sponsored the exemption bill, explained that the Federal Government is to take responsibility for the payment of 100 percent pension for personnel of Nigeria Police Force; Security & Civil Defence Corps; the Nigeria Customs Service; Nigeria Prisons Service; Nigeria Immigration Service; Economic & Financial Crimes Commission; Independent Corrupt Practices Commission; Nigeria Drug Law Enforcement Agency if the amendment scaled through.
However, a handful of the stakeholders canvassed for transfer of their pension benefits from CPS to DBS.