Chiejina: Govt Must Sustain Pension Reforms

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Ezekiel Chiejina, a lawyer and former Director General of the Nigerian Insurance Association, spoke to Jonathan Eze on his new book on the pension industry and urged the government to sustain the principles of the Pension Reforms Act. Excerpts:

Please tell us about your career and background?
My name is Ezekiel Chiejina. I started in the village living a normal village life. Then I attended a modern school of those days in the western region and because I was not having anything, I struggled through school. I did some secretarial work, trained myself and while working, I kept on with my academics. After modern school, the other major fulltime school I attended was the Nigerian Law School including University of London. I worked with National Insurance Corporation of Nigeria, NICON where I spent 15 years. Before moving out, I headed two insurance companies as chief executive, one owned by the Cross River State and the other one by Oasis Insurance. When I left Oasis, I set up my own consulting firm. Later I was lured to IGI Insurance because the company was planning to buy into NICON and they wanted to fortify the Technical Management Team. After two years there, I was appointed as the Director General of the Nigerian Insurance Association (NIA). I served there for eight years. After that, I have been doing consultancy here and there. I am a fellow of the Chartered Insurance Institute by examination, both the associateship and fellowship. I am an associate of the Chartered Institute of Arbitrators. I am also a fellow of the Institute of Management Consultant. So when we talk about pension, it is something I have a passion for.

You just written a book ‘Pensions in Nigeria’. What informed the writing of this book?
Everything about pensions in Nigeria were scattered in various documents and there were misconceptions about pensions solely because of the way the whole pension scheme of public service was managed. So initially all Nigerians know that pension has to do with working for government and there’s need to inform the people about what pension is all about. That it is a pillar of social security and secondly, apart from the misconceptions, there were mismanagement too. So, I was inspired by the new law, the Pension Act Reform of 2004 to begin with because on behalf of the industry, I presented memo at the public hearing and we had meetings with those who were working with the president then, President Olusegun Obasanjo. We had contact with Fola Adeola, who conducted and formulated the scheme. She had followed up even during the passage of the bill so when it came out, as the head of an organisation, I embraced it. I remembered that I allowed five of them (PFAs) to talk to my staff and I interpreted the law as it is because the contribution is minimum so while the law is saying basic salary, housing and transport, I added loan subsidy in that of my staff as part of the contribution so that they’d get the possible maximum benefit out of the system

Apart from the provision of the PFA’s, what other aspect interests you in the Act?
What interests me mainly is the fact that the pension scheme is now privatised, which means you can have individual accounts. In 1993, I wrote an article saying that they should privatise pension. If you are leaving one employment or the other, you have your pension benefit with you. Nobody will say you have not served this number of years so you cannot benefit or you have not served 10 years. Some people when they are not doing well in an organisation, because of sentiments or sympathy, they wait until it becomes a pension. So but now, it’s mobile. You have it on your own. You become committed and the ultimate objective is that at the end of your working life, when you can no longer be as productive as the way you were when you were young, you have some stipends coming to you till the end of your days. So, you can retire with dignity. In the private sector then, only very few organisations have pensions mainly the multinationals and some of them were provident funds. When you retire, they give you all your money. Whether you are lucky to invest it well, that’s your business. If you mis-invest it, you are on your own. But it has been straightened out.

How trustworthy are the PFAs, especially the funds being deposited there?
I believe that the money the people are contributing is safe because they are very professional in their management and the National Pension Commission (PenCom)has regulations and supervision. And there are provisions in the law for sanctions in case of infringement or breach on the provision of the law. The other thing you can’t say for sure is how they are handling competition. But I strongly believe that the money is safe. The whole thing will last very long and that’s exactly one of the reasons why I wrote the book. Because a lot of people feel that if the government pension does not work, how can this one work. So I tell them the difference between the two. In the first place, the whole scheme was not funded. No money is being set aside. There’s just a promise that if you work 10years, you earn this amount, there’s a terminal salary. The pension scheme is guaranteed by the constitution of the Federal Republic of Nigeria. Unfortunately no money is set aside to make sure that when the time comes, there will be money to match the liabilities. So ordinarily, if you have what we call defined benefit, which means you know how much you are expecting but they are supposed to be valuation to say the money we are putting aside can it match the liabilities when the time comes? But in our own case pension was being paid only from annual budgetary allocations and most often there’s not enough money to back up the allocations. Secondly, money gained there is subject to abuse, fraud, theft and mismanagement. Some parastatals try to manage theirs their own way and at the end of the day, the fund asset will disappear. Nobody accounts for it, after 10-20 years there will be an investigation and nothing comes out of it. People do away with the money in the old scheme. So these are what this new scheme is correcting.

In the event that the PFAs fails, what is likely to happen?
There is a lot of provision to see they are not failing because the supervision is so regular. There is statutory auditors’ report to PenCom to let them know what is going on in an organisation. Then when PFA, for example is failing it does not prejudice the contribution of the employee because PenCom will supervise the transfer of the fund to an on-going PFA. Like other institutions they know the strength of these institutions and the management, that’s the board and the principal managers are subjected to rules of ethics so they are very closely monitored and one of the major reasons why companies fail is indifferent attitude to corporate governance practices so PenCom has a code of corporate governance for all the pension institutions which they have to follow because there is evidence here and there that when corporate governance is good, it has positive impact on the performance of the institutions. The world does not take corporate governance seriously until the crash of Enron
Enron was a numerical company even all the rating agencies fortune 500, everybody rated it as the best and biggest organisation in the world but nobody knew what they were doing until the whole thing crashed. In fact they used the pension money to invest in their business so when the business crashed, the bubble had to burst

What are the duties and rights of workers under the new pension scheme?
Yes, a worker given employment letter the day he resumes, the employer is supposed to tell him about the pension reform so the first duty is to pick his PFA and supply his personal data and the employer will tell him this is your salary, this is how much will be deducted from your salary and this is what your employer will be paying. From there, the employee tells his age and though he is the original beneficial owner of the Retirement Savings Account(RSA), he doesn’t have access to it. He can only have information that maybe on quarterly basis, this is the balance. Just like the balance in your account and if you are not satisfied with what is going on, he can change his PFA once a year without giving reason to anybody why he’s changing. Then if he’s not satisfied, he can complain to PenCom that this is what is happening. He can also complain about the employer who is deducting but not remitting. He has the right to make that complain. And when he is not satisfied even with the decision of PenCom, he has access to arbitration. The arbitration ruling is recognised by the court and it is enforceable by the courts of law in the country but he doesn’t have access to the money until he is 50 years old or when he actually retires. However, if the person becomes disabled mentally or physically, he may be given special consideration. The law provides for paying him before age 50. The same thing happens if he loses employment. After four months of not getting a job, he can access his funding in the RSA. He should know that the employer does not have access to the money. What the employer does is; the law compels the employer to help you contribute into it like adding to your salary. And when he retires he has a choice, the benefits and entitlements are mainly two, first, he is entitled to a lump sum. I understand its 25 per cent of the balance in the RSA. He can also decide whether he wants a program withdrawal which is provided by the RSA or you want the money to be used to buy annuity from an insurance company. It is actually his to decide and the PFA will explain to you what is available.

How sustainable is the pension fund scheme that is provided for under the new pension Act?
Yes, the sustainability is an important factor. It will be sustained if the contributions remain consistent. If the economy is doing well, and there is employment and the employers in particular are compliant all along, It will be. But if the economy is bad like recession or depression, when there is no employment or retrenchment. First of all, if there is no employment you won’t be getting more contribution. Then, if people are being retrenched they become entitled to their benefits and it will be affecting the funds so, those are the likely issues I can say are fundamental risks – depression, recession, it affects employment or when the government claims that there’s limit because government is a big employer of labour. If they claim that there is no money and they are delaying or not meeting their obligations under the scheme then it is likely to affect the system. What the House of Representatives was proposing is likely to jeopardise the scheme. They are saying they should withdraw the paramilitaries, the Police, EFCC from the scheme. Incidentally, the Police said no, they are not withdrawing. But the others have said they want to go back to the old system which the federal government has said they cannot afford. They are saying that instead of collecting 25 per cent at retirement, the person should collect 75 per cent. The danger in taking 75 per cent is not injurious to the scheme itself but to the individual. If you retire today and collect it, it is like taking all your savings at the same time. So your purpose of entering the pension scheme is defeated because if you collect your money at age 50, good luck to you. There are chances that you might manage it well and other chances that you might not. Whereas the idea was that if you enter this scheme, if you retire you continue to receive money until the person dies. That’s the idea of life pension.

We have discovered that a lot of people after retirement, especially public servants find it difficult to access their funds. Does it mean that states have not keyed into these new acts?
Well, the issue of states is a peculiar problem. The political will is not there and the kind of administration we are running is not giving states enough money. So the states are getting hand-outs from federal government. Most of them owe salaries. So they have not even finished offsetting their salary arrears and pension arrears. The issue of them paying pension,most of them have made their own law as regards pension. Some have set up the institutions to manage it but the money is not there. It is only Lagos State that has actually properly keyed into it. They even keyed into it since the 2004 act. They didn’t wait for the 2014 and they are there. Although I understand that they still experience some delay but they are already up there. But Jigawa reformed their pension scheme before the 2004 act. They introduced contributory pension scheme even for government workers in 2002 and carried their actuarial valuation and their own is even a high breed because they are still paying benefits and make the employee to contribute out of it.
People say it maybe because their public service is not that huge but the main thing that motivated them is that their executive governor is an insurance guy. He actually know much about insurance issues so he used that idea. So after Lagos, Jigawa . Maybe the rest are still coming.

What role can the National Assembly play in ensuring the sustainability of the new reform act and what is your advice to government?
My advice to government is that they should not use politics to destroy PenCom. Pension, like you know is a very long term thing. They need stability of institutions especially the regulatory authorities. The law made it a bit strong, autonomous and reporting directly to the president and to an extent, the National Assembly.

Finally, what delights you in this new book that will be launched next week?
I have been ill since 2006, so when I came back from India, I was not earning or doing anything, I said this will be an opportunity to work on the areas that I have interest in and what delights me is that the objectives have been about the rights of the workers. As part of the worker’s right, there is also a provision for workers that they may access part of their benefit as a loan. The insurance says your pension is guaranteed for 10years but if you survive to 90/100, you continue to enjoy. So if your money is N10 million and you happen to live so long, you might end up earning up to N50 million or even N100 million.