Pension remittance major worries for PFAs
Pension remittance at both public and private sector level has suffered some set back in the wake of dwindling fortunes in the economy, following the economic recession that the country went through. Nigeria has just technically exited recession , but this was yet to reflect in many sectors, which are just struggling to find their feet largely evidenced in the delay and non-payment of salaries.
Most affected states have been falling back on series of loans from the federal government to pay workers salaries and pensions, which has also affected expected compliance with the PRA 2014 by a number of states.
The challenge of non remittance particularly in the private sector is a major challenge confronting the Pension Fund Administrators (PFAs), who have continued to get calls and enquiries from helpless employees.
According to experts at Investment One Pension Managers Limited, Pension Fund Administrators (PFAs) have to deal with the issue of employee’s remittance on daily basis. Customer service telephone lines in many PFAs are overly busy with calls from employees needing clarification on the issues of the non- remittance of their monthly contributions by their employers. Some even call to report their employer’s unwillingness to remit the Pension Contributions that they have deducted from their monthly emolument. Many out of ignorance even accuse the PFAs of complicity with employer to rob them of their contribution which of course is untrue.
So many employees over time have developed the penchant for checking their RSA balances or remittance alert on monthly or quarterly basis which if not gotten at the specified time might result in various forms of verbal assault on the customer service staff and the PFA in general.
It has been reported several times that a lot of employers especially in the private sector are not abiding with the provisions of the PRA 2014 as amended on employee’s remittance. Many deduct pension contributions from the monthly emolument of their employees and refuse to remit to their PFAs simply because they want to maintain a robust cash flow. Some will remit only the employees part of the contribution and keep back the employers part of the contribution. Under the PRA 2004, an employee was expected to contribute a minimum of 7.5 percent of his monthly emolument while the employer is also expected to contribute another 7.5 percent on behalf of the employee and a minimum of 15 percent where the employer chooses solely to make the pension contribution. But under the PRA 2014, the employers minimum contribution for the employee is 10 percent while a minimum of 8 percent contribution is expected from the employee and a minimum of 20 percent from the employer where the employer choses to solely make the contribution.
The issues of non-remittance of pension contribution (especially in the private sector) are caused by both the employer and the employee. Many employers feel that a 10 percent contribution on behalf of their employees is a high sacrifice to make monthly, rather, they remit the employee’s contribution only. So many employers are still unwilling to fully enter into the Pension scheme talk less of remittance of pension contribution because of their experience with the old defined benefit scheme. When they get into the pensions scheme, it is done partially; it is very common for companies to only enroll their administrative staff into the contributory pension scheme excluding majority of their operative staff.
Employees in some companies reluctantly refuse to register with any PFA due to ignorance of the provisions of the PRA 2014. They will tell you that registration will mean taken a fragment of their hard-earned money to save for the future that they cannot see. However PRA 2014 has made provisions that compel an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee that failed to open an RSA within 3 months of duty. The remittance of that employee will go to that PFA which will continue to manage the remittances under the Transitional Contributory Fund (TCF) until the employee opens a retirement savings account with the PFA of his or her choice. The transitional PFA will then transfer his remittances to the new PFA through a written instruction by PenCom.
Some organizations prefer a particular PFA to others and force their employees to register with that PFA. However, the employee may have their own choice of PFA or may have an already existing pin from a previous registration. The employer sometimes refuses to remit to that employee’s choice PFA reason that they do not want to deal with more than one or at most two PFAs at a time. They therefore force their employees to register with the company choice of PFA resulting in double registration and the employee having two pin numbers.
The National Pension Commission frowns against employers who refuse to comply with the provisions of the PRA 2014 on contribution remittance of their employees.
An employer is expected to remit the contributions of the employees not later than 7 working days from the day salary is paid. Failure to do this will attract sanctions; if the employer is in default of two weeks he is subject to pay 2 percent of unpaid contribution to the Retirement Savings Account (RSA) holder in addition to the original un-contributed amount. In addition to the letters of advice, caution and warning, the employer will be made to pay 1 percent of the outstanding payable to the Commission if the default persists for 3 months. Continuous default could result in naming and shaming of the organization. The organization might also be subject to legal action if violation persists and the directors of the company may also be suspended or removed.
The Commission’s appointed recovery agents have the duty to ensure that all unremitted pension contributions are fully remitted to the respective PFA.