The Pension Reform Act 2014 (PRA 2014) confers certain rights on employees, providing protection, compensation and alleviation to the employees and their loved ones during their working years and upon retirement. These rights cover all employees in the Public Service of the Federation, Federal Capital Territory (FCT) and States that have implemented the Contributory Pension Scheme (CPS) and the private sector. Therefore, employees and employers need to know these rights are to be guided accordingly.
Right to pension
Section 3(1) of the PRA 2014 states, “There is established for any employment in the Federal Republic of Nigeria, a Contributory Pension Scheme for payment of retirement benefits of employees to whom the Scheme applies under this Act. The Scheme shall apply to all employees in the Public Service of the Federation, the Federal Capital Territory, States, Local Governments and the Private Sector….” Accordingly, this means that every employee covered under this Act has a right to a Pension.
Right to the employer’s contribution
Section 4(1) of the PRA 2014 states that “The contribution for any employee to which this Act applies shall be made in the following rates relating to his monthly emoluments: (a) a minimum of ten percent by the employer; and (b) a minimum of eight percent by the employee…” What constitutes monthly emoluments is as defined in the employee’s employment contract. Still, it should not be less than the sum of basic salary, housing and transport allowances. Therefore, every employee covered under this Act has a right to the employer’s contribution towards their pension, which is a minimum of 10% of their monthly emolument.
Right to Life Insurance
Section 4(5) of the PRA 2014 states that “…every employer shall maintain a Group Life Insurance Policy (GLIP) in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover. Where the employer failed, refused or omitted to make payment as and when due, the employer shall arrange to effect the payment of claims arising from the death of any staff in its employment during such period….” Thus every employee covered under this Act has a right to Insurance. Section 5.5 of the Revised Guidelines on GLIP for Employees provides that employers shall display a copy of the GLIP certificate conspicuously within their premises.
Right to determine how to access retirement benefits
Every employee covered under the PRA 2014 has a right to determine how to access their retirement benefits by choosing Programmed Withdrawal or Annuity. Specifically, section 7(1) of the PRA 2014 states that “A holder of a retirement savings account shall, upon retirement or attaining the age of 50 years, whichever is later, utilize the amount credited to his retirement savings account for the following benefits: (a) withdrawal of a lump sum from the total amount credited to his retirement savings account provided that the amount left after the lumpsum withdrawal shall be sufficient to procure a programmed fund withdrawal or annuity for life….”
Right to choose a PFA
Section 11(1) of the PRA 2014 states, “Every employee to whom this Act applies shall maintain an Account, in his name, with any Pension Fund Administrator of his choice…” Therefore, every employee covered under this Act has a right to choose a PFA without any interference from their employer or by any third party.
Right to timely remittance of contributions
Section 11(1) of the PRA 2014 states that “The Employer shall…not later than seven working days from the day the employee is paid his salary, remit an amount comprising the employee’s contribution…and the employer’s contribution to the Pension Fund Custodian specified by the Pension Fund Administrator of the employee…” Accordingly, every employee covered under this Act has a right to timely remittance of contributions into their retirement savings account (RSA).
It is pertinent to note that it is in the best interest of every employee covered under the PRA 2014 to observe and report any infractions of the laws mentioned above. Employees should also ensure that they open only one RSA, confirm that their employer is remitting both the employer and employee portions of monthly remittance to their RSA and that they are receiving quarterly statements of their RSAs.
In conclusion, RSA holders are encouraged to regularly review their RSA statements and report non-remittance of their monthly pension contributions to the National Pension Commission (PenCom). It is also vital for employees to verify that their employers have subscribed to Group Life Insurance Policy (GLIP) and that the premiums are paid annually, consistent with relevant laws. PenCom remains committed to the effective regulation and supervision of the pension industry in Nigeria.