CPS key to managing states salary, pension burdens

A recent report confirmed by government says that out of the 36 states of the federation, 33 are unable to pay salaries regularly. What this means is that such states will continue to be in huge debts to meet wage bill, and most importantly pensions. This is bound to continue unless such states decide today to move away from old order by embracing the Contributory Pension Scheme (CPS) and funding it.

One of the states in the South-East had recently compelled hungry pensioners who have not been paid in the last 12 months to sign an undertaken for a pay-off.  The pensioners who are helpless were made to accept 40 percent of their total pension arrears owed them by the state government, with an undertaking that they will not make any other claim on the arrears. They signed so that they will not die of hunger. And the reason for the action as given by the state is that this is a response to the current economic situation facing the country. Many have said that this is an inhuman treatment and raising all kinds of curses. But the situation is not going to change if nothing is done today by affected states to protect the future, by embracing the Contributory Pension Scheme and funding it. Funding, critical!

The inability therefore, of these states to pay workers monthly salaries, which have become more critical in the last one year following the current economic hardship in the country, area strong warning that States and Local Governments that fail to plan for their workers’ pensions now would run into more troubles in the shortest possible time.

The situation is more critical when States would have to take loans and bailouts to pay salaries amidst falling internally generated revenues (IGR), resulting to total abandonment of capital projects.

Analysts have said that states more than ever before must key into the Contributory Pension Scheme (CPS) to save present and coming governments the burden of meeting pension obligations to retiring workers.

Recent developments with regard to inadequate finances affecting most states of the federation is a pointer to the urgent need for states to adopt the CPS, says the director-general (PenCom), ChineloAnohu-Amazu.

She stated that prior to the enactment of the PRA 2014, several states in the Federation, had adopted the CPS and was at various stages of implementation. However, the scorecard for the South-East Zone has not been encouraging since no state has attained full implementation status, she noted.

“The PRA 2014 has enhanced States and Local Government participation in the CPS by expressly prescribing the coverage of employees of States and Local Governments, in addition to the Federal Public service and private sector.”

“I would therefore like to passionately appeal to all the States and Local Governments in the South-East Zone that are yet to adopt or implement the CPS to quickly embark on doing so in order to avail their employees of the numerous benefits of the Scheme while avoiding huge future pension liabilities.”

“In our quest to assist the States in guided implementation, PenCom has established functional offices in the six geo-political zones including Awka for the South-East Zone. These offices have been equipped to provide the required technical assistance to States and Local Governments in their efforts to adopt and implement the CPS.”

Speaking on developments in pension reform, Anohu-Amazu stated that PRA 2004 which was enacted 10 years ago to govern the Nigerian pension industry, has after a comprehensive review of its implementation been repealed and replaced by PRA 2014.

“The PRA 2014 introduced certain reforms such as the upward review of the minimum rate of pension contribution and the sanctions and penalties against infractions of the provisions of the Act. Furthermore, it introduced a provision that allows contributors seeking to own their primary homes, to apply part of their Retirement Savings Account balances as equity contribution for residential mortgage, subject to the guidelines issued by the Commission.” The process of issuing these guidelines is already at advanced stages and it is our expectation that as soon as implemented, this would facilitate access to home ownership by pension contributors while bridging the housing deficit in Nigeria, the DG promised.

“The PRA 2014 Act has also made provisions for voluntary participation in the CPS, thereby paving the way for the coverage of the Informal Sector through the Micro Pensions initiative. Already, the Commission has commenced a series of activities intended to kick start this initiative which focuses on the underserved segments of the Nigerian workers. PenCom is partnering with organized labour and well established trade groups in that regard. It is noteworthy that the PRA 2014 has also addressed other issues aimed at ensuring the sustainability of the CPS. These include establishment of the Pension Protection Fund and Minimum Pension Guarantee.”

“It is also pertinent to note that the Pension Reform Act 2014 re-enacted the fundamental provisions of the repealed PRA 2004, which include inter alia, the establishment of the Contributory Pension Scheme, uniform standards for pension administration as well as the National Pension Commission as the sole regulator and supervisor of pension matters in Nigeria”