Pension reform to the rescue
When it became clear that the yearly verification exercises did not produce an efficient payment system, the Pension Reform Act was enacted in 2004 by the Obasanjo administration. This was to address the several bottlenecks associated with pensioning in Nigeria.
The Act ushered in a privately managed but fully funded Contributory Pension Scheme (CPS) for individuals working in the Nigerian private and public sectors. The Act also established the National Pension Commission (PenCom) as the sole regulator and supervisor of all pension matters in the country
“I had my doubts when my then organisation started using one of the Pension Fund Administrators (PFA) for my pension scheme. But so far, I will say I am really impressed by the promptness of my PFA in paying both my gratuity and my monthly pension,” Agnes Eboh, a recently retired private sector employee said.
Mrs. Eboh had initially nursed the same fear as Mr Ochidi. But now she’s a PFA fan and evangelist.
Introducing PFAs
In nine years, over 6.6 million working Nigerians have been registered with the PFAs, says Misbahu Yola; chairman of the Pension Fund Operators Association of Nigeria (PenOp).
Briefing newsmen in Abuja after a consultative forum with PenCom in Abuja, Yola says pension assets accumulated by the PFAs are secured with FGN securities in terms of bonds and treasury bills.
“Out of the about N5 trillion accumulated pensions assets, about 70 per cent ( N3.5 trillion) has been invested in Federal Government bonds and treasury bills. 15 percent (N750 billion) of the assets has been invested in money market instruments, 12 percent in equities, while the rest are in other investments portfolio,” he said.
There are also plans to invest some funds in infrastructure across the country as soon as PenCom’s draft regulations guiding the process, come into effect, he added.
Ensuring Compliance and Managing Defaulters
According to the PenOp chair, “the Federal Government has complied with pension remittance up till July of 2015 while state governments’ remittance have not been regular for varying reasons. Also, not all the states of the federation have fully integrated with the CPS.
“We are also having compliance challenges with the private sector and since PenOp aren’t empowered to force compliance, we can only encourage defaulters” Mr. Yola submitted.
So is there any body enforcing compliance or sanctioning defaulters? Mr Emeka Onuora speaks up for PenCom, the responsible commission.
“In the first instance, it is the aggrieved employee who will have to inform the commission of his defaulting employer so that PenCom can start investigation and recover their contributions. Any information given to the commission is treated as confidential so that employees will not have to be afraid of victimisation,” he said.
Mr. Onuora explained that the commission hires the services of recovery agents who help in recovering employees’ remittance which has yielded good results. He advised employees to always report cases of non-remittance to the commission as quick as possible to prompt necessary actions on defaulters.
Wooing the informal sector
On July 1, 2014, former President Goodluck Jonathan repealed the 2004 Pension Reform Act and replaced it with the 2014 Pension Reform Act (the “2014 Act”).
The “2014 Act” re-defined minimum requirement for employers to enrol their employees in the CPS. It states that businesses have to be registered with the Corporate Affairs Commission and have a minimum of three workers on its payroll as against the five workers written in the “2004 Act”.
While advising small scale businesses and artisans to save for their retirement, the PenOp chair said artisans or business people who do not fall within the category of the formal sector can register with any formal sector to make their contributions.
The Executive Secretary of PenOp, Susan Oranye reiterated the operators’ association’s resolve to constantly engage all stakeholders to ensure proper management and an effective administration of retirement benefits.