More government agencies and other stakeholders in pension system have expressed their disapproval of the planned amendment of Pension Reform Act 2014.
The National Pension Commission ( PenCom) in a position paper, highlighted the reasons why picked holes in exemption of some government agencies from the Contributory Pension Scheme(CPS) as demanded by the sponsors of the bill, insisting it would lead to divestment from federal government securities before maturity. This, PenCom said, would have ripple negative effects on not only the finances of government, but on the entire financial system.
The commission said another negative impact of exempting the agencies is the erosion of the pool of long term investible funds accumulated under the CPS, which is suitable for economic development of any nation as illustrated in other jurisdictions including developed economies.
Acting Director General, PenCom, Mrs. Aisha Dahir-Umar, in the commission’s position paper on this, said the bill if passed, would undermine the attainment of development initiatives in the infrastructure, housing and real sectors of the economy, which are largely hinged on the utilisation of a portion of the pool of pension fund assets.
“Indeed, the pension industry had actively participated in the establishment of the Nigeria Mortgage Refinancing Company and had already invested the sum of N83.36 billion in its securities and other mortgage refinancing initiatives of the federal government”, she said.
She further stated that exemption of some agencies of government would also result in loss of confidence in the pension reform and other reform initiatives of government.
“The growing culture of national savings built within the last decade would be destroyed. It is pertinent to note that due to the successful implementation of the pension reform, the discipline with which the industry players have been discharging their responsibilities and the resultant impact on the Nigerian economy, foreign investors have invested heavily in some major Pension Fund Administrators.
She argued that there are still some expressions of interest by foreign investors to obtain stakes in the pension administration business in Nigeria. Indeed, the private sector, including these foreign investors in the Nigerian financial sector and the Nigerian economy, would question the commitment of government to the pension and other reforms due to such policy reversals,” she stated”.
she recalled that the pension reform was necessitated by the many problems bedeviling the public and private sectors’ pension schemes in Nigeria, adding that in the public sector, the Defined Benefits Scheme, was faced with the problem of huge pension liabilities arising from lack of adequate and timely budgetary provisions as well as increases in salaries and pensions.
Also in its submission, Centre for Pension Rights Advocacy (CPRA) said the bill, which seeks to amend Section 5(1)(a) of the Pension Reform Act 2014 to exclude members of the Nigeria Police, the Nigeria Security and Civil Defence Corps, Nigeria Customs Services, Nigeria Prisons Services, Nigeria Immigration Services and Economic and Financial Crimes Commission from the application of the CPS and other related Matters “should have been allowed to die natural death.”
CPRA said: “If there is institutional memory at the National Assembly, the above bill would not have reached its current stage because the position of the National Assembly on a similar private member bill sponsored during the 6th National Assembly seeking to exempt members of the Police and Paramilitary Agencies from the Contributory Pension Scheme is still clear.”
According to the CPRA Executive Director, Ivor Takor, the bill serves no useful purpose and as such, should not be passed into law.
On the bill seeking to alter the provisions of the Pension Reform Act to increase the contributions from 10 percent to 12 percent, Takor, said increases in the rates of contributions by employers and employees will lead to higher retirement benefits.
He however said the current increase sort to be effected through the bill, will cause some distortions in that the increase for employers contribution from 7.5 percent to 10 percent that came with the enactment of PRA 2014 has not been fully complied with by many employers including the federal government.
He concluded: Our position therefore is that this particular amendment should be put on hold. However, any employer’s increase in contribution arising either voluntarily or through collective bargaining, can be done through the provision of Section 4(1)(a)because the rate stated there is the minimum.”