Government should prioritise the issue of pension in the country
The advent of the Contributory Pension Scheme (CPS) activated with the promulgation of the Pension Reform Act 2004, has added some measure of dynamism and effectiveness to pension administration in Nigeria. Now repealed and replaced with the Pension Reform Act 2014, this law effectively unbundled pension administration, transferring ownership of retirement savings accounts (RSAs) to workers under private sector-driven administration regulated by the National Pension Commission (PenCom). While the new scheme is contributory, the old defined benefit scheme (DBS) entailed wholesale budgetary provision for pension.
However, effective as the CPS appears, the debilitating issue of payment of accrued pension rights accumulated by public sector workers in both federal and state government establishments constitutes a real threat to its smooth running. Many retirees from government establishments are facing severe hardship because of the lateness of the payment of accrued rights. This is because Pension Fund Administrators (PFAs) cannot pay retireesâ€™ entitlements unless their accrued rights are paid into their retirement savings accounts.
It is important to note that before the commencement of the CPS, the federal government (as well as some state governments), recognised and acknowledged that there were outstanding pension liabilities to workers who had subsisted under the old defined benefit pension arrangement, but who now upon the institution of the law establishing the CPS, had to convert to the new pension scheme. These pension liabilities were professionally estimated and merged with retirement bonds recognised by the governments as being owed to the workers whose records were fully verified.
This arrangement worked effectively up until the end of 2014 when the first shocks in the collapse of global crude oil prices began to take their toll on the public finance system in Nigeria. Like any household that experiences severe financial dislocation, for various reasons, a scale back and a reprioritisation of spending is undertaken such that available funds are devoted to what is considered an existential need. But quotidian realities in the country do not warrant pension not being prioritised. Delay in the payment of entitlements is an unkind cut on retiring workers. Some of these retirees have been dying in their numbers.
It should be stated clearly that lateness in the payment of government workersâ€™ entitlement is occasioned by the delays in payments into the retirement benefit bond redemption fund (RBBRF) by government such that public sector workers no longer experience a seamless experience in the withdrawal of their benefits because of the delay in the payment of their accrued rights. This is threatening to erode the gains of the new CPS and giving it a bad name in the court of public opinion.
So we dare ask: Why is the payment of pension liabilities by government not considered a top priority? Is it because of the relatively weak or diffused power of those who are entitled to these payments? Why are accrued rights obligations by government not so treated? Is it because the workers have acquiesced to feeling that they are mercifully treated when one day government finally decides to offset a part of this obligation?
There is no doubt that if these liabilities attracted interest penalties, and they should, the accrued rights obligation of government will be treated with greater urgency and diligence. This way, the workers will not experience the double jeopardy of delay in their payments and the erosion of value based on the time value of money. It is high time government effectively prioritised the issue of pension in Nigeria. It is one thing to make laws, yet it is another to see to their full implementation. If anything, another law has become extremely necessary to ensure stringent penalties for the various tiers of government and private sector employers who have deliberately been defaulting in their obligations to workers and retirees.