Pension driving economic reforms for good governance

The best investment any state government can do to achieve public service excellence is prioritizing the welfare of its employees. Employees in public service remain the biggest asset of any government for quality service delivery, economic growth and good governance.

Prompt and regular payments of salaries are very important for the employee, but what is more important is the future plans for pensions, and how retirees of such State are treated. It does not only give employees rest of mind,it motivates them to work harder, shun corruption because they are sure ofa guaranteed future.

Immediate past Director General of the National Pension Commission (PenCom), Chinelo Anohu-Amazu encapsulates this believe when she said that the Contributory Pension Scheme will help bring an end to corruption in public service because employees will no longer be afraid of their future in retirement.

Lagos State has done well as long as pension is concerned and could attest to why the state is succeeding in its effort to bring economic prosperity to its citizens.

The State Government committed to this scheme has regularly paid monthly contributions into the RSA of workers, and as at March, 2017, about N78, 592 billion had been credited into employees’ accounts maintained by 10 Pension Fund Administrators (PFAs). It has also been consistent in setting aside funds for the payment of accrued rights as provided in the Pension Reform Law such that the State government has paid about N61 billion since the commencement of the Retirement Benefit Bond Certificate Presentations in 2010.

Total of 339 retirees will have their RSA credited with accrued pension rights of N1.6 billion made up of gratuity and pension benefits under the Defined Benefit scheme for employees who transited into the Defined Contributory Scheme.

The Pension Reform Act (PRA) 2004 as repealed by PRA 2014 has been beneficial to government by its support to the overall macroeconomic policies of reform. The provisions of the law have also encouraged labour market flexibility while pensioners are no longer at the mercy of employers.

These were the remarks of the Lagos State Governor, Akinwunmi Ambode while speaking on the State’s full commitment to pension reforms at the opening session of a training for officers of the Lagos State Pension commission (LASPEC) titled, ‘Implications of the PRA 2004’

The Governor who was represented by Commissioner, Lagos State Ministry of Establishments, Training and Pensions, Akintola Benson said the training is to ensure that the officers of LASPEC can effectively discharge their duties and the generality of the public service can adequately prepare for the future.

He stated that the general benefit of the Act as implemented in Lagos State has boosted the welfare status of workers and pensioners in the state, while stating that it has allowed the maintenance of a Retirement Savings Account (RSA) by each employee, which give workers responsibility over their retirement savings.

Benson further stated that workers could choose how to allocate their retirement savings and diversify their investments over a range of investment instruments and also having a pension scheme that pays out benefits in the form of a programmed withdrawal or annuity for life. Annuity for life affords workers with protection against longevity risk, by pooling mortality risk across others.

“On a holistic note, the provisions of the law encourage labour market flexibility. The worker is free to move with his or her account when in another employment and or residence.  In this way, it is an important tool for enabling workers and employers to adapt to changing circumstances especially in a global environment in which change is a constant aspect of social and economic life.

“The government also stands to enjoy benefits under the law. The law will stem further growth of pension obligations and provide a platform for addressing this liability.  It will also impose fiscal discipline in the budgetary process because pension obligations would be accurately determined. Also, the health of the economy is always a major concern of the government.  Thus, aside from the law’s potential to promote national savings and by implication, economic growth, funded pension schemes have the capacity to promote capital market development.  Moreover, it is often argued that funded schemes have the capacity to promote economic reforms generally.

Before the 2004 Federal Pension Reform Act, most State Governments and companies in Nigeria operated under the Defined Benefits Scheme (DBS), popularly referred to as the ‘Pay as You Go’ scheme. History revealed that the model woefully failed as a result of the inability or willful refusal of employers to budget for and/or properly utilize funds to service pension obligations. Lagos State considers it morally reprehensible for any employer to neglect or refuse to plan and cater for the retirement benefits of its employees who gave the prime of their active years to the employing institution.

But the state government by signing into the new scheme has demonstrated its virtuous moral compass such that, under the administration of Ambode, in particular, the State Government has faithfully honoured its obligations under the Law.

Following this commitment, the State Government has been consistently winning the National Pension Commission’s award for the Best Pensions Compliant State in the Federation. “We aim to maintain this rating by continuing and improving on the timely payment of all pensions and other applicable benefits to our retiring workers upon disengagement from service.”

Benson said that in spite of the onerous funding obligations under the CPS, the administration of Governor Ambode has been dogged in meeting the funding obligations.