Pension Reform Bill: Experts Warn Amendment Will Jeopardise CPS, Deplete N6.5tn Pension Assets


 By Chika Amanze-Nwachuku and Ebere Nwoji

As the dates for public hearing on one of the bill seeking the amendment of Pension Reform Act 2014 are being awaited, economic experts and other stakeholders have cautioned against upholding the bill, positing that it would endanger the Contributory Pension Scheme (CPS), which was introduced to arrest the huge pension debts in the country.

Currently, there are about seven bills before the national assembly, seeking the amendment of the 2004 Pension Reform Act, which was amended in 2014.

The most contentious of the bills is the one sponsored on May 16, this year by Honourable Oluwole Oke, a lawmaker representing Obokon/Oriade constituency in Osun State.

Specifically, the bill seeks to amend the Pension Reform Act 2014 in order to shut out some paramilitary organisations including the Nigerian Security and Civil Defence Corps (NSCDC), Nigeria Customs Service, the Nigeria Police, the Nigeria Prison Service, Nigeria Immigration Service and the Economic and Financial Crimes Commission (EFCC). It has already passed its second reading and is being treated by the relevant committee of the House of Representatives.

Another one is the bill sponsored by Senator Aliyu Wamako of Sokoto North Senatorial Zone seeking to “…further amend the Pension Reform Act 2014 to Provide for Definite Percentage a Retiree can withdraw from his RSA and for other matters thereto.”

This clause is recommending that retirees withdraw 75per cent of the total value of their Retirement Savings Account (RSA) while the remaining 25per cent remains to service their pension requirements.

The bill seeking to exempt the Nigeria Police, para-military institutions as well as the Economic and Financial Crimes Commission (EFCC) from the CPS, has continued to attract wide spread condemnations from various quarters, even as experts have cautioned that the enactment could endanger the huge pension assets, which currently stand at N6.5trillion with more than seven million contributors.

The CPS replaced the corrupt-ridden old Defined Benefit Pension Scheme adopted by the various tiers of government and some private sector establishments.

Before the advent of the CPS, corruption and crisis were predominate in Nigeria’s pension system as retirees died waiting for their pension. This was beside the huge pension liabilities in trillions of naira. These fundamental concerns have largely been addressed since the advent of the CPS, as retirees now draw their pensions, monthly, without complaints.

Some economic experts, who spoke with THISDAY over the weekend, alleged that the various bills before the national assembly are at the behest of some vested interests.

They noted that these recommendations negate the actuality of individual participation and contribution, those unique qualities that stand the CPS out.

“The beauty of the CPS is the freedom of the worker to choose his/her PFA. This freedom would further be accentuated by the portability that would come with the impending opening of the transfer window by the National Pension Commission (PenCom). Railroading a group of workers into one pension option is evidently retrogressive. Also, returning paramilitary establishments to the Defined Benefit Scheme is a giant step backwards into the dark era of dysfunctionality and corruption that characterised pension”, posited the experts.

President of Pension Operators Association of Nigeria (PenOp), Longe Eguarekhide noted that the bills, if passed, have dire consequences and is capable of truncating the achievements recorded in the Nigerian pension system.

He noted that upholding the ideas raised in the bills would place additional financial burden of making provision for the paramilitary pensions to government.

Eguarekhide said: “In the last 10 years, the number of FGN employees that retired under the CPS from the six paramilitary agencies sought to be exempted are 50,730 and the total accrued benefits of these personnel amounted to N208.22 billion, which had been redeemed by the federal government and paid into their respective Retirement Savings Accounts and consolidated with their monthly pension contributions to fund their retirement benefits.

“These retirees are currently receiving their retirement benefits promptly as at when due. Exempting them from the CPS, would imply that government would shoulder the huge financial obligation of payment of their pensions as well as that of future retirees through budgetary provisions with no guarantee of availability of funding and timeliness of payment.”

He reasoned further that the federal government is already overburdened with the payment of pensions as illustrated by the 2016 Appropriation Act, which made a provision under service wide vote for the use of N2.170billion as total pension and gratuities allocation, adding that the allocation is still insufficient to fund the pension liabilities of the federal government.

Citing the 2016 Pension Transitional Arrangement Directorate ( PTAD’s) budget proposal which indicated a total annual pension liability of the sum of N388,320,580,231.64, Eguarekhide said out of that amount, the sum of N255,896,017.38 constituted unfounded liability which  was inherited by PTAD mostly due to outstanding payments for 33 percent  pension arrears to pensioners under the Defined Benefit Scheme (DBS).

He observed that the federal government’s pension liability burden under the DBS is much higher than the PTAD proposals in view of the provisioning of about N74.53billion for the military Pension Board, N7.64 billion for the state’s security service and N3.71 billion for the National Intelligence Agency.

According to him, with this, it would be fiscally imprudent to increase the number of this category of retirees under that scheme and would render the retirees financially vulnerable and unsecured.

Eguarekhide said: “The proposed bill is faulty on so many levels due to the fact that it is based on a misunderstanding of the concept of pension payment under the CPS.”

Besides, he also said it would render retirees financially vulnerable and insecure, lead to sustainable allocation of funds to cater for the agencies being exempted due to large number of police personnel and result in dismantling of the systems, institutions and resources that government had put in place including the culture of national savings and efforts to eradicate structures that encouraged corruption in the pre pension reform era.

He added: “Indeed, it is the benefit of the CPS that are attracting  increasing number of state governments in Nigeria and other African countries to adopt and implement the scheme in favour of their respective employees. From the above listed negative impacts, it calls to question the motives of the sponsor of the bill and their supporters within the listed paramilitary organisations.”

Speaking recently on the bill seeking 75 percent lump sum withdrawal from contributors’  RSA, Managing Director IEI-Anchor Pensions Managers, Glory Etaduovie, said the proposal, if allowed, would  destroy the very essence of pension  which is to ensure  a steady income for retirees at retirement.

He said the agitation for 75 percent lump sum withdrawal at this initial stage,  looks exciting and interesting but would certainly not be good for the future of the retirees.

“This looks exciting on hearing same but not futuristic. Steady pension payment is to both re-settle a retiree into a new life without creating a radical difference, retaining income consistency and considering the length of time one may live, up to 30 years of life after retirement. Children are less dependable as insurance when unemployment and under employment is high.”