The National Pension Commission (PenCom), has urged the Senate Committee on Establishment and Public Service to disregard a private sponsored bill before it, seeking an amendment of the Pension Reform Act 2014. Specifically, the bill seeks to provide for definite percentage a retiree can withdraw from his RSA and for other matters related there unto.
According to PenCom, the proposed bill, among other things, appears to undermine the essence of pensions as enshrined in the constitution of Nigeria 1999 (as amended).
The Commission also noted that the proposed bill would deny the retirees an adequate periodic income in retirement.
PenCom, in a memorandum to this effect, signed by its acting Director General Mrs. Aisha Dahir-Umar, took a critical look at the various sections of the 2004, 2014 Pension Reform Act and the Nation’s constitution vis a-vis the submissions of the sponsors of the bill and prayed the senators to dismiss it instead, seek for the implementation of the provision of Section 4(4)(a) of the PRA 2014 on the payment of additional benefits by the employer as well as the institution of the Zero Pillar pension in Nigeria.
To buttress its points in this regard, the commission stated: “We observed that the bill makes reference to the Pension Reform Act 2004 which has been repealed and replaced by the Pension Reform Act 2014 (PRA 2014). However, a review of the proposed sections sought to be amended in the bill reveals that the numbering of the sections and the provisions sought to be amended are as provided in the PRA 2014. Accordingly, we submit that reference to the PRA 2004 is erroneous as the PRA 2004 is now defunct.”
According to the acting PenCom Director General, review of the title of the bill reveals that it seeks to amend the PRA 2004 “to provide for definite percentage that a retiree can withdraw from the Retirement Savings Account”.
This, she said is “at variance with the explanatory memorandum to the bill which provides that “the bill seeks to provide succor to retirees in the delay and other difficulties they are encountering in withdrawing their savings from the Retirement Savings Account”.
“This indicates an apparent disconnect between the intention of the bill and what its sections actually provide”, she added.
The PenCom acting DG said the Commission, on annual basis, undertakes the verification and enrolment of FGN employees due for retirement in the coming year as well as determining the quantum of money required to pay their accrued benefits.
She explained that the benefits accrued under the old Defined Benefits Scheme, for services rendered by the employees before and up to June 2004 are computed, and the Budget Office of the Federation notified of the number and grades of the prospective retirees and the total accrued benefits due to them. This, she said allows the Budget Office to make adequate arrangements to pay these benefits as they mature in the coming year on monthly basis.
Dahir-Umar said: “Payment of these accrued benefits is made directly into the Retirement Savings Accounts (RSAs) of the beneficiaries from a dedicated account, the Retirement Benefits Bond Redemption Fund Account (RBBRFA), being managed by the Central Bank of Nigeria (CBN). In 2014, the required monthly inflow into the RBBRFA was N5.9 billion, but the FGN gave only N2.5 billion. This left a gap that resulted in huge arrears that is still not fully redeemed by the FGN”.
On the much argued 75 percent lump sum pay to retirees, the Acting PenCom boss stated “rather than canvass for payment of 75 percent lump sum, we believe that the remedy lies in the implementation of the provision of Section 4(4)(a) of the PRA, 2014 dealing with payment of additional benefits upon retirement. It provides that “notwithstanding any of the provisions of this Act, an employer may elect agree on payment of additional benefits to the employee upon retirement”. This would enhance the amount that employees may receive as lump sum upon their retirement.
She however observed that about 99 percent of the retirees who collected huge lump sums from their RSAs squandered the money quickly after retirement and left with meagre amounts as pensions.
According to her, this category of pensioners are currently bitterly complaining against their low pensions and advancing this situation as justification to call for exemption from the CPS.
“We therefore believe that it is not in the overall interest of the retiree to saddle him with the responsibility of managing 75 percent of his total benefits after retirement, when he should have been resting and enjoying the fruits of his long years of labour”.