Lagos is the Most Pension Compliant in Nigeria — Says Commissioner

Lagos is the Most Pension Compliant in Nigeria — Says Commissioner

In this brief interview session with newsmen in the Ikoyi area of Lagos state, the state Commissioner for Ministry of Establishments, Training and Pension, Mrs Ajibola Ponnle sheds more light on the current position of the Contributory Pension Scheme, CPS, as she described Lagos state as the most pension compliant in the federation under the administration of the Governor, Babajide Sanwo-Olu.

How effective is the Contributory Pension Scheme (CPS) compared to the Defined Benefit Scheme?

The contributory pension scheme came into being as a reform for the pension administration in the public service, generally for pension administration. The major issue that was occurring then was the fact that the beautifying benefit was unfunded. So, you have a lot of retirees retiring and many parastatals state governments, even federal, were unable to fund the pensions of these beneficiaries.

When the Contributory Pension Scheme was enacted it was supposed to sanitise the administration of pensions and also to ensure that the scheme is funded. That means when people retire, they have access to their retirement savings over time. The Way CPS works is that the employee pays a certain amount monthly. The employer, being the state government, also pays a particular percentage.

When this administration started, it started with 7.5 per cent of both employees and employers. Mr Governor increased the contribution monthly from 7.5/7.5 per cent to 8 per cent by the employee and to 10 per cent by the government. It is done monthly and remitted to the pension fund administrators.

CPS is extremely effective. I think it’s one of the best pension administrations globally. I’m proud to say that Lagos state is the most pension compliant in the federation.

Who is eligible to participate in the state’s CPS?

Everyone is eligible – local government, staff, LCDAs, and civil service. Everybody is eligible. What happens is that you will select your PFA. And monthly, the employee will contribute 8 per cent for their pension benefit. And Lagos state government will contribute 10 per cent monthly.

You know it’s deductible in the ministry. It is one thing to deduct from the employees, there is another thing to remit to the PFAs. As we are paying salaries in Lagos State, we are deducting and remitting to the PFAs. What happens when the staff retires is that there are two parts to retirement. Once they have done all the documentation, there is the accrued rights part of it which is the benefits accrued to them before the CPS started. That is calculated by the staff of LASPEC and it’s joined with the retirement savings account and the PFA manages it and distributes or gives them their monthly pensions as the case may be depending on which options the employer or the retiree chooses. It’s a seamless process.

We also have our defined benefit pensioners in Lagos. Those are the people who retired before the new contributory pension scheme started in Lagos. We have about 6,000 in mainstream public service. The ones in local government and others are paid monthly without failing the defined benefit pensioners are paid. No issues at all and no complaints from that sector.

The Contributory Pension for retirees is fully managed by the PFAs. The beauty of the contributory pension scheme is that you’re saving monthly. Those PFAs also invest your savings so that at the end of the day apart from the savings, you also have the investment accrued for the number of years that you have worked in the service and that’s a pay to you every month as a pension.

We are also aware that some staff from the state who retired four years ago have not been paid their pension. What’s your take on this?

That’s the reason we need to dimension the different retirees we have in Lagos State. I mentioned the five benefits retirees, those who retired in 2007 and then we have the ones who retired after 2007. Now we have a set of people who retired after 2007, but what the law states are that for you to access your retirement savings account, the employer also has to pay an accrued right which accrued from a defined benefit level so your service before 2007 the accrued right is calculated and the two are joined together to access your RSA. We have a small portion of employees that fall into that bracket and were systematically clearing that backlog of accrued rights.

Every month on average, Lagos State pays about N1 billion to clear these accrued rights. Now, over the last three to four years of Mr Governor’s administration, a total of N48.3 billion has been paid to clear this backlog and the last one was paid in February, I think it’s about N1.2 billion. Every month we’ve been clearing that backlog so I wouldn’t say it’s correct that we have three to four years outstanding. You know we were about to get into 2022 for the Local government and 2021 for the minstrel.

Could you shed more light on accrued rights paid in October and December of 2022? 

As I said earlier, Lagos State is the most pension-compliant state in the country. What that means if you look at the law that sets up a pensioning form law that was domesticated in Lagos state if you look at all the provisions of the laws, we comply so it says Lagos state should transition then define benefits to contribute to pension we’ve done that, we’ve set up LASPEC Lagos State pension commission, pension transitioning department which is the management of old scheme now working together with LASPEC.

We also have 10 per cent of what we call the redemption fund account. It was placed in the law so that employers can fund the account so that they can pay the backlog. That is why I said that when you look at the provisions of the law, we are in full compliance. We even have what we call a pension shuffle account. The budget for that is N200 million per month in a year. From that pool of funds, we are systematically paying this backlog that every single state including the federal government has to clear that backlog that we talked about to pensioners.

The report that Lagos State has not paid for three months is inaccurate. The last payment was in January. In December, we paid N2.54 billion to about 750 old retirees. On October 14th or 12th, we also paid over N1 billion. People are liable to make erroneous statements. That’s erroneous for sure. The facts are online when those retirees collected their accrued rights in October. We did November and December together which is why we had N2.54 billion in December and just N1 billion in October.

What happens if an employee leaves office before retirement age?

If the employee leaves office before retirement age, there are two things: you can either choose to transfer that you’re leaving from one organisation to a different organisation to continue the deduction with the new organisation; you can also choose to change the organisation to join a different PFA.

If you retire before 50, I believe you can also choose to access a certain percentage – 25 per cent – of your retirement savings and then leave the remaining till whenever you choose to access your savings. That money is not lost; it’s going to be there to access when you are ready.

As the governor has talked about pensions, how soon do you think they can prepare?

Mr Governor directed that we clear all the backlog as quickly as possible. With the rate at which we are paying the accrued rights, the plan is that this year, we’ll be able to finish the backlog payment so that once people retire, they have instant access to the retirement savings account. Hopefully, this year, we will be able to clear that backlog. And the rate at which we are doing it, we believe that in the upcoming month, it will be cleared.

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