Five years after the Pension Reform Act stipulated that the pension contributions of workers should be increased from 15 per cent to 18 per cent, many private firms have complied with the new Act, while the Federal Government has yet to do so.
Persistent complaints of low monthly stipends by workers, who retired under the Contributory Pension Scheme, led the operators in the sector to push for an upward review of the remittances into the workers’ Retirement Savings Accounts.
When the Contributory Pension Scheme was introduced in 2004, the law established a contributory scheme in which the workers and employers contributed 7.5 per cent each of the monthly emoluments into the workers’ RSAs with their respective Pension Fund Administrators.
However, many workers who retired were paid ridiculously low pensions, which in some cases were less than 10 per cent of the last salaries they earned while in paid employment.
Based on the provision that the pension law should be reviewed every 10 years, the Pension Reform Act was on July 1, 2014 amended. The amendment, therefore, made it mandatory for all employers under the Contributory Pension Scheme to raise workers’ pension remittance to 18 per cent.
According to the amended law, eight per cent of the workers’ monthly salaries should be the employees’ contribution, while the employers should contribute the remaining 10 per cent.
The contributions, which are kept by the Pension Fund Custodians, are administered and invested by the PFAs.
The essence is to ensure that the funds continue to increase until the workers retired, which will further translate into higher returns on investments and give retirees higher monthly stipends.
But while most private sector employers have complied, the Federal Government has continued to remit the old amount of 15 per cent into the workers’ RSAs five years after.
Findings also revealed that the Federal Government owed remittances of some parastatals for many months.
The implication of this, according to experts, is that many workers will still retiree with low savings or retire into penury.
Experts also said that the non-remittance of the monthly deductions into the workers’ RSAs for many months, together with the shortfall in remittances, would further deprive the workers the opportunity of earning returns on the monies that would have been invested by their PFAs.
Recently, the Senate approved the N30, 000 minimum wage for workers and urged the Federal Government to immediately commence the implementation.
The federal workers are also expecting the government to implement the 18 per cent pension remittance into their RSAs under the new minimum wage dispensation.
After the amendment of the PRA, PenCom stated, “These modest milestones notwithstanding, the implementation of the PRA 2004 was not bereft of challenges. Indeed, some issues were noted in the course of the implementation since the PRA 2004 and this underscored the imperative for a comprehensive review of the PRA in order to consolidate on the pension reform.
“The re-enactment of the PRA in July 2014 provided a sound basis to guide the second decade of the Nigerian Pension Reform. The PRA 2014 sought to ensure that more tangible benefits accrue to retirees towards a more blissful retirement. Some of the major developments introduced by the new law include an increase in monthly pension contributions to 18 per cent from the previous 15 per cent, in order to ensure that retirement benefits are enhanced under the CPS for the benefit of contributors.”
The acting Director-General, PenCom, Aisha Dahir-Umar, said one of the salient objectives of the Pension Reform Act 2014 was to make pension administration transparent and seamless.
She said the commission had been prosecuting recalcitrant employers who failed to remit their employees’ pension contribution into their RSAs.
“Through this initiative, the sum of N15.31bn, representing the principal contribution of N7.85bn and penalty N7.46bn, has been recovered from defaulting employers.”
While private sector employers were being clamped down upon, the United Labour Congress lampooned the Federal Government for flouting its own laws by failing to make 18 per cent remittances into workers’ RSAs.
The President of ULC, Joseph Ajaero, said the pension scheme was fraudulent and was not meant to serve the interest of the workers.
He said, “Despite the fact that the Federal Government has not been remitting the 18 per cent in the past five years, the Federal Government is borrowing from the funds to finance some of its programmes. There will be a time when there will be no money to pay retiring members of staff. That one will be soon.
“And because of the attitude of the Federal Government, most private employers, including those in the power sector, have not been remitting for even two years or more because the Federal Government was supposed to be both a player and a regulator. So, if they are not playing their own role, it will be difficult for them to regulate the industry.
“Non-remittance of the pension fund is a criminal offence. The worker is supposed to pay his own percentage and the employer is supposed to pay his own percentage and deduct at source from the worker and remit. There is a need to find out whether the Federal Government has been deducting from workers, which you know it is a criminal offence. In that case, if the Federal Government is defaulting, who is in charge of equally prosecuting the Federal Government?”
On compliance with the 18 per cent remittance, he said, “They should not just remit the five years arrears, they should remit it with the new percentage and interest because this money, while it is there, is supposed to attract some interest and it should be remitted along with the interest of the five years.”
A former President, Trade Union Congress, Peter Esele, also said the Federal Government must not be seen to be violating its own laws.
He said, “The government should respect the law and set a good example for the private sector to follow. The onus is also on the labour union to remind the Federal Government over and over again. Whether it is N30, 000 minimum wage or whatever, it is by the law that the Federal Government should implement the 18 per cent.
“The central labour movements should spearhead it to make the Federal Government own up to its responsibility.”
While commenting on the three per cent shortfall of five years, he said, “They have to pay back the three per cent shortfall. There is no ignorance before the law.”
An Actuarial Scientist and Chartered Insurer, Dr Pius Apere, said the increase in employer’s compulsory contribution rates from 7.5 per cent to 10 per cent was contained in Section 4 (1) (a) of PRA 2014.
He said, “The main objective of the PRA 2014 is to establish uniform rules, regulations and standards for the administration and payments of retirement benefits as and when due.
The Chairman, Trade Union Congress, Ogun State, Olubunmi Fajobi, said it was unfortunate that the government was not obeying its own laws.
He said, “The laws were made and signed into law by the government and for five years now, the government is still acting flagrantly against the provisions of the laws. But you understand that the challenges around the CPS are more than what is being deducted, where deductions were made and remittances were not made correspondingly.
“The first thing that should be paramount is complying with the law, irrespective of the minimum wage. The government should first obey its own laws.
“I am also saying that all the states that are in default of the CPS, as a matter of urgency, should look for ways out of this. It is a logjam that creates jeopardy to the future of the workers and the government should show concern. Where people return to penury, what will become the state of the citizens of the country?”
On the non-compliance with the 18 per cent remittance, he said, “It should be taken as arrears since the law has been amended; it is as good as saying the government is in arrears.”