Like a leaking roof, you are in trouble without pensions
Not having a pension plan that is sustainable and guaranteed is like someone leaving in a house without a roof or where the roof is leaking. When rain comes the person is confused and worried because there is no place to run to, whereas those that have roof upon their head are relaxed and not bothered about the rains.
This is the situation that people without a sustainable pension scheme like what the Contributory Pension Scheme (CPS) offers would face in the future when they retire from active working life.
Before the coming of CPS in 2004, Nigeria operated a defined benefit scheme that was non funded and unsustainable with its attendant huge pension debt running into trillions. So, states and employees that have continued to align with the old pension arrangement after a reprieve has come following the CPS over 10 years ago is doing a disservice to its employees and citizens. Let alone at a time when states are finding it difficult to pay workers salaries on grounds of poor revenue and mismanagement by past administrations.
This is worsened when the States would have to need loans and bailouts to pay salary arrears amidst falling internally generated revenues (IGR’s), making government expenditure more towards recurrent spending.
Analysts say more than ever before, States must key into the Contributory Pension Scheme to save present and coming governments the burden of meeting pension obligations to retiring workers.
For this reason, danger lies ahead for States in the South-South geopolitical zones over their inability to adopt the contributory Pension Scheme 10-years after its establishment, whereas their counterparts in other geopolitical zones have complied and saved billions of naira for their employee’s pensions.
Like an ‘SOS’, states and local governments in the South- South geopolitical zone are being beckoned to adopt this scheme and protect the future of their workers and citizens, as well as create an economic backbone for such states to be able to provide infrastructure for the betterment of their citizens.
At the National Pension Commission’s (PenCom’s) Sensitisation Workshop on developments in the Pension Reform Act 2014 for South-South geopolitical zone held last week in Uyo, Akwa Ibom States, the Director General of the Commission, Chinelo Anohu-Amazu said that while many states in the country have adopted the CPS and are at various stages of implementation “no State in the South-South geo-political zone has fully implemented the CPS”.
“This situation has denied the States the obvious advantages of the Contributory Pension model including its sustainability as a system, robust framework that eliminates the incentives for corruption in benefits administration and ability to access the pool of investible pension funds to drive economic and infrastructural development in their respective domains.”
Anohu- Amazu who was represented by Muhammed Kaoje PenCom, Commissioner for Inspectorate in PenCom said under the 2014 Act, the Contributory Pension Scheme now covers employees of State and Local Governments in Nigeria, and so has set the standard and framework within which States and Local Governments are required to adopt and implement the Scheme for the benefits of their respective employees.
“I would therefore passionately appeal to all the States and Local Governments in the South-South geopolitical zone to step-up their efforts to implement the Contributory Pension Scheme in order to avail themselves and their employees of the numerous opportunities and benefits of the Scheme.”
She stated that PenCom has established functional offices in the six geo-political zones in Nigeria, with it South-South Zonal Office located in Calabar, Cross Rivers State, to facilitate and offer the needed technical assistance to States and Local Governments. Individuals and organizations may equally approach our zonal offices nearest to them to seek information and assistance from PenCom on any pension matter, Anohu-Amazu stated.
Until 2004, Nigeria had operated particularly in the public sector, a Defined Benefit (DB) pension scheme, which was largely unfunded and non-contributory. The system was also characterised as a pay-as-you-go (PAYG) scheme since retirees were to be supported not by their previous contributions but by annual budgetary provisions. Because it was largely unfunded, the DB system led to massive accumulation of pension debt, which was estimated at more than one trillion naira. But with the coming into force in June 2004 of the Pension Reform Act as amended in 2014, a new and successful pension scheme was established.
The new scheme which is known as the Contributory Pension Scheme, as the name suggests, is contributory in nature, making it mandatory on employers and employees in both the public sector and private sector organisations with three or more workers to contribute 10 and 8 percent respectively of the emoluments of the employee into a Retirement Savings Account (RSA).
Apart from ensuring that every worker receives his entitlement as and when due, the other objectives of the scheme includes to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.