CPS: Hope kept alive despite harsh economic situation

Many non compulsory financial savings plans that were in place and targeted towards retirement or for other specific projects by individual and households have suffered some setbacks since the past few months when Nigeria’s economy nose-dived into recession.

These individual and households whose income have been badly hit by rising inflation, exchange rate crises, irregular inflows and general illiquidity in the economy, have resorted tocutting down their expenditure on future or non pressing items, including their non compulsory savings plans, especially for retirement.

Quite a proportion of the population have applied economic principle of “Scale of Preference”, focusing on basic needs like food, health, education and other household bills, while suspending other expenses that were not going to threaten immediate survival.

But despite the whole situation, contributions for pensions under the Contributory Pension Scheme(CPS) as provided in the Pension Reform Actcontinued to move forward in organisations that remained healthy and profitable.

Therefore employees in these organsiations both the public and private sector continued to see their savings for pensions grow, despite fall in their disposable income and rising expenditure.

Steven Abioudun, a middle manger in a mortgage institution lamenting the economic situation and how his income and plan have been affected by the economic recession, said “My only hope now is my pensions which has continued to accumulate despite the current economic situation”

Abioudun stated that he has stopped every other savings plan he had before now because his take home pay could hardly be sufficient any longer, left alone, making savings.

He stated that his joy is that his pension contribution remains intact, and growing since his employer is still able to pay salaries regularly, pointing that CPS is one good thing that has happened to employees in Nigeria.

Polycarp Onwumere, who worked in an oil servicing company but was thrown into the labour market when his company closed down in January this year as a result of economic recession, was quick to add that his hope now is the accumulation he has in his Retirement Savings Account (RSA).

Onwumere expressed appreciation to the initiators of the Pension Reform Law, which established the CPS, stating that if not the savings in his RSA contributed by him and his employer, he would have gone home empty handed because his company could no longer pay salaries for a long time and as no business was coming it, it has eventually closed shop.

“There is no business again and everybody has been asked to go home and the company has folded up”.

“Thanks to CPS because at least, I have over N4 million in my RSA from the last six years I spent with the company”.

The Pension Reform Act 2014 provides that, “there shall be established a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the public service of the Federation, the Public Service of the Federal Capital Territory, the Public Service of the State Government, the Public Service of the Local Government Councils and the private Sector.

The objectives of this scheme is to ensure that every person who worked in either the public Service of the Federation, Federal Capital Territory, States and Local government or the Private Sector receives his retirement benefits as and when due ; and to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.

The provisions of this Act shall apply to any employment in the public service of the Federation, the public Service of the Federal Capital Territory, the Public Service of the state, the public service of the local governments and the private sector.

In the case of the Private Sector, the Scheme shall apply to employees who are in the employment of an organization in which there are 3 or more employees.

Notwithstanding the provision of subsection (2) of this section, employee of organization with less than three employees as well as self-employed persons shall be entitled to participate under the scheme in accordance with guidelines issued by the commission.

Pension Fund Operators Association of Nigeria (PenOp) said the PRA 2014 was enacted to ensure workers have comfortable lifestyles when working and at retirement, stressing that this laudable objectives can only be achieved when employers enroll their employees in the scheme.

The Association noted that benefits, such as withdrawal of 25 per cent due to disengagement from service; prompt payment of retirement benefits and more which were lacking in the old scheme are now enjoyed by subscribers in the Contributory Pension Scheme.

Susan Oranye, executive secretary, PenOp speaking on other benefits to be maximised by workers said: “The Pension Reform Act 2014 reviewed upwards, the minimum rate of Pension Contribution from 15 per cent to 18 per cent of monthly emolument, where 8 percent will be contributed by employee and 10 per cent by the employer. This will provide additional benefits to workers’ Retirement Savings Accounts and thereby enhance their monthly pension benefits at retirement.”

“The Pension Reform Act 2014 has reduced the waiting period for accessing benefits in the event of loss of job by employees from six (6) months to four (4) months. This is done in order to identify with the yearning of contributors and labour.

“The Act expanded the coverage of the Contributory Pension Scheme (CPS) in the private sector organisations with three employees and above, in line with the drive towards informal sector participation.”