The French violent protest currently going on has to do with two contending points. On the one hand is a government with dwindling resources and rising challenges of increasing cost of social services and defence, while on the other hand, there is a burgeoning number of old/retired people with a generous and costly pension and other subsidies.
In the old pension model, people are supposed to work for a certain number of years, retire and stay on a number of years and die off. However, with the increasing life expectancy rate, statistics have shown that some people are presently living in retirement more than the period they worked. This trajectory does not point to a successful ending for the economy. That is why the French President had to take the bull by the horns and look for a two-year respite for the economy. But the beneficiaries and their dependents are having none of it.
In Nigeria, the pension sector underwent a needed reform in 2004, when it was discovered that almost N2 trillion was owed to pensioners. The Pension Reform Act 2004 introduced the Contributory Pension Scheme (CPS), which is a fully funded and privately managed pension scheme. The CPS has reduced the chances of what is happening in France to play in Nigeria. This is because all pension accounts, Retirement Savings Accounts (RSAs) are fully funded and are being invested and managed successfully under strict regulatory oversight by the regulator, the National Pension Commission (PenCom).
In 2014, the PRA 2004 was repealed through another reform and the Pension Reform Act (PRA) 2014 was enacted. This reform maintained the structure of the 2004 reforms by categorising the workforce at the federal level into two categories:
A. Workers that retired before and up to June 30, 2007 will remain under the defunct Defined Benefits Scheme (DBS) and have their pension administered by the Pension Transitional Arrangement Directorate (PTAD).
B. Workers that retired from July 1, 2004 are covered under the CPS and thus, expected to select a licensed Pension Fund Administrator (PFA) and open RSAs for their combined contribution of 10 percent (Employer) and 8 percent (Employee). Pension rights that accrued to them for their services up to June 30, 2004 would also be credited into their RSAs after retirement.
With the diligent work of the pension operators, PTAD, and the regulator, the pension sector has been sanitised resulting in reduced complaints and timely payment of benefits, but only when there are delays in payment of the accrued rights. The most complaints are from federal workers who retired and cannot access their RSA, why? This is because the government is not paying the accrued rights portion of the RSA on time.
It takes sustained effort to pay the accrued rights consistently by the present government to reduce the time retirees of Federal Government Ministries, Departments and Agencies (MDAs) have to wait in order to access their pensions from their RSAs. Presently, over nine million RSAs have been registered by the Nigerian workers, and funds amounting to over N15 trillion have accumulated as at January 31, 2023.
It should be noted that the administration of retirement benefits for Federal Government employees exempted from the CPS is now done by PTAD by the virtue of the PRA 2014. Thus, PTAD has inherited the pensioners of the Civil Service, Police, Custom, Immigration, Prison and Privatised government enterprises. Using cutting edge technology, best practice management, PTAD has been able to develop a clean database of pensioners, which has tremendously assisted in establishing regular monthly payment of pension. Many fraudulent pensioners were removed from the payroll saving government hundreds of millions of naira.
Many states had adopted the CPS, thus sanitising their pension sectors. This has helped greatly in isolating most complaints on pension to states that do not key into the CPS. They are also the states owing pensioners many months of unpaid pension.
Happily, the President-elect stands tall in the pension sector, as Lagos State is one of the earliest to reform its pension. Presently, retirees of Lagos State are among the happiest because they are not owed monthly pension and have a robust complaint resolution system.
Unfortunately, despite the achievements recorded by the pension reforms, there are consistent moves by detractors of pension transparency, simplicity, and integrity, to roll back the gains of the CPS. There are consistent attempts to get the PRA 2014 amended to exempt some agencies of the Federal Government from the CPS. The intention is always to have unfettered access to the pension monies and sink the country back to the days of misery by our senior citizens. These are small and seemingly isolated happenings, but when taken as a whole a certain pattern emerges.
The myriad of problems that will confront the President-elect that will need funding include security, employment, infrastructural development, and certainly debt servicing. Should pensions that have been resolved, at least at the Federal level, be allowed to come back and add to the headache of the government?
Four Areas to watch out for:
1. The Nigeria Police Force retirees make regular yearly efforts to leave the CPS and go back to the DBS! They always point out that their pension is lower than that of the Military personnel who have been exempted from the CPS due to the peculiarity of their service. Considering that Nigeria’s government has been borrowing funds to augment its expenditure of pension and salaries, why should somebody leave a fully funded arrangement for an arrangement that every month credit must be sought to pay?
2. Recently, the National Assembly workers under cloudy circumstances made the honourable members push for an act to be removed from the CPS. No one was called for a public hearing. The umbrella association of pension operators in Nigeria, Pension Fund Operators of Nigeria (PenOp) observed that “…all stakeholders like the workers union, employers of labour, regulatory authorities and other critical stakeholders were not engaged in the process” of passing this all-important amendment.
3. There are now some agencies of the government paying their old DBS retirees’ pension directly without recourse to the regulator. This is at variance with section 18(c) of the PRA 2014.
4. The case of former Permanent Secretaries and Heads of Service being paid pension from IPPIS (where Federal Workers are being paid salary) needs looking at.
The pension reform of 2014 has saved Nigeria from total chaos in the pension and retirement sector. Even though the coverage of the scheme has not gone round, the funds accumulated gives hope of some financial safety net to Federal workers and the Private sector – this includes states that have reformed their pension.
The incoming federal government should strengthen this reform by incentivizing states to key in, and ensuring all grievances are settled within the scheme and not go back to bad days of pension fraud and pensioners sleeping under bridges waiting for budgetary releases of pension funds.
•Mustapha writes from COPEHRA