By Ebere NwojiÂ
The Centre for Pension Right Advocacy, has condemned the proposed amendment of the Pension Reform Act 2014Â (PRA), insisting it willÂ result in the depletion of the Retirement Savings Account (RSA)Â of retirees, impoverishing them and opening them to old age poverty.
The centre, also said the proposed amendment, would defeat the entireÂ objective of the Contributory Pension Scheme (CPS).
Director of the centre, Ivor Takor, inÂ a position paper titled ‘Move byÂ Senate to Amend the Pension Act 2014â€™, faulted the federal government for the proposed amendment, which primarily seeks toÂ enable retirees withdraw up to 75 percent of their pension savings. He argued that in view of the fact that one of the objectives of the CPS, established under PRA 2014,is to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age, it is doubtful if the 25 percentÂ balance in a retireeâ€™s RSA, after deduction of 75 percent lump sum, would if spread through the retireeâ€™s expected life span, be adequate to reasonably cater for their livelihood during old age.
“The bill seeks to amend Section 7(1) of the Act as follows: To exclude persons who retire before the age of 50 years in accordance with the terms and conditions of their employment from accessing their RSA balance in line with Section 7(1) of the Pension Reform Act (PRA) 2014. Our position is corroborated by the proposed amendment in Section 2(c) of the Bill. This amendment seeks to ensure that persons who retire before the age of 50 years in accordance with the terms and conditions of their employment Section 16 (2) (c) of PRA 2014 access the RSA in line with the mode stipulated for employees who disengage or are disengaged from employment before the age of 50 years and are unable to secure another employment within four months Section 16(5). We note that such persons are only allowed to withdraw an amount of money not exceeding 25 percent of the total amount in the RSA Section 16(5)”, Takor stated.
He argued that those who retire under Section 16 (2) Â© have permanently left the service, while those who disengage or are disengaged under Section 16(5) are under frictional (temporal) unemployment and can still get another job and continue with the scheme,. He posited that the proposed amendment would be unfair on an employee who duly retired in accordance with the terms and conditions of his employment and should not be allowed.
Takor, further noted that the bill, also seeks to amend Section 7 (1) of the PRA 2014 by inserting the words â€œof up to 75 percentâ€ immediately after the words â€œa lump sumâ€.
He said the import of the proposed amendment, in line with the foregoing, was to allow some category of employees to rather than withdraw a lump sum based on a computation that allowed the balance in the RSA to be sufficient to procure a programmed withdrawal or annuity for life, can withdraw up to 75percent as lump sum, irrespective of whether or not the balance would be sufficient to procure a programmed fund withdrawals or annuity for life:
These category of employee according to him include those who duly retire or attain the age of 50 years; employees who retire before attaining the age of 50 years either on the advice of a suitably qualified physician or a properly constituted medical board certifying that the employee is no longer mentally or physically capable of carrying out the functions of his office; employees who retire before attaining the age of 50 years due to total or permanent disability either of mind or body.
He argued that the promoters of theÂ amendment failed to note that the Pension Reform Act 2014 established a CPS and not a Provident Fund Scheme.
He referred to Section 7(1) and Section 2 of Pension Reform Act 2014, saying it will attest to this.
“The International Labour Organisation (ILO), defines pension as old age protection, which covers if not all the population, at least a section of it, adding that in the case of Nigeria, workers, the difference between pension funds and provident funds is that members of pension funds are able to take out a small portion of their retirement benefits â€“ typically one-third or one forth-in a lump up-front sum, while theÂ remaining benefits are distributed in monthly payouts whereasÂ members of provident funds can take out as much of their benefits as they would like in a lump sum.
“The National Provident Fund (NPF) was established in Nigeria in 1961 for non-pensionable private sector employees. It was largely a saving scheme and was replace by the National Social Insurance Trust Fund (NSITF) in 1993.
“That the Senate is contemplating a back door re-introduction of a Provident Fund which was jettison 24 years ago in 2017 through the proposed amendment is unthinkable and at best, retrogressive. In a country lacking minimum standards of social security for her senior citizens, such as medical care, sickness benefit and old age benefit as provided for in ILO Social Security (Minimum Standards) Convention, 1952 (No.102) one is at a loss as to what the Senate expects the life of retired workers would be, after collecting 75 percent of their retirement benefits as Lump Sum as being proposed in the amendment”, Takor argued.
He said one is not unmindful of the fact that the proposed amendment may be popular with some workers, because collecting a huge lump sum from one’s RSAÂ immediately after retirement is very attractive, but saving for the rainy day could be a difficult pill to swallow for most middle class and low income earners.