EDITORIAL: Retirement bottlenecks choke pensioners

The Federal Government Pension Scheme has been bedevilled by many problems since inception.

It was often one of the most vulnerable items in budget implementation that were routinely subject to abuse in the light of resource constraints.

In many cases, even where budgetary provisions were made, inadequate and untimely release of funds which often resulted in delays and accumulation of arrears of payment of pension rights was a challenge.

It is sad that sixteen years down the line several interventions by the Federal Government including the introduction of the Contributory Pension Scheme in 2004, the Pension Reform Act 2014, Amendment Bill of May 16, 2017 and the PenCom Regulation on Investment of Pension Fund Assets 2019, to assist Nigerians with pension plans and retirees benefits have not yielded any positive efforts.

We would not have bothered if every public servant were subjected to the same treatment.

Ministers, senators, House of Representatives members, governors, and heads of agencies all receive their pensions and retirements benefits far ahead of their retirement dates.

But the middle and lower cadres in the public sector, still wait for about 12 months or more to get their first pension.

To address and eliminate the problems associated with pension schemes in the country, the Federal Government initiated a pension reform and enacted into law – the Pension Reform Act No 2 of 2004.

The act, Contributory Pension Scheme is a process where an employee pays a compulsory fraction of employees’ monthly salaries into the scheme.

On 1st July 2014, President Goodluck Jonathan signed an amendment into law.

The new Pension Reform Act 2014 which repealed the Pension Reform Act of 2004 clearly states that any interests, profits, dividends, investments, and other income accruable to pension funds or assets are not taxable.

Some of the key changes include increase in the minimum number of employees required to make mandatory contributions under the Act, increase in the minimum contribution into the scheme and the imposition of fines and penalties on Pension Fund Administrators (PFA) for failure to meet their obligations to contributors and violation of the provisions of the Act.

At the commencement of the new Pension Reform Act 2014, only about 2.4 million out of over 60 million Nigerians of working age contributed to the Pension Scheme.

Effectively, this meant less than 5% of Nigerians were covered leaving over 95% exposed to social insecurity in their old age.

According to the Federal Government, the value of pension assets in Nigeria was about N4.21 trillion at the end of March 2014.

The key objectives of the reform are to ensure contributors receive their benefits as at when due and to assist improvident individuals to save up to cater for their livelihood during old age.

While the new Act is generally a step in the right direction, some of the changes introduced appear not to have been thought through.

Some of the changes appear to have been made at the last minute thereby creating some gaps, ambiguities, and inconsistencies within the law.

Hence, Nigerian retirees are yet to overcome the fear of retirement because the system does not fully integrate them until one year after.

This is contrary to the mission of PenCom, which says “it exists for effective supervision of the Nigerian pension industry to ensure that retirement benefits are paid as and when due.”

The fear of retirement without their final entitlements has led many civil servants to change their date of birth through swearing of affidavits.

According to PenCom, a Retirement Savings Account holder is supposed to have access to his/her Retirement Savings Account upon retirement based on his/her condition of service or upon attaining the age of 50 years (whichever comes first) or is medically incapacitated.

It further states that where an employee voluntarily retires, disengages or is disengaged while still under 50 years of age, they can have access to 25 per cent of their Retirement Savings Account provided that such employee is unable to secure another employment after four months of such disengagement.

A recent report by PenCom states that the pension industry with over 8.78 million contributors had as at the third quarter of 2019 received a total of N5.60 trillion as pension contributions from both the public and private sectors.

The total contributions received from the public sector amounted to N60.56 billion or 39.54% while the private sector contributed N92.60 billion or 60.46%.

While noting that the total value of pension fund assets based on unaudited valuation reports as at September, 2019 stood at N9.58 trillion, the breakdown of the pension industry portfolio according to the report also showed that the pension fund assets were mainly invested in Federal Government Securities, with an allocation of about 72 % of the total pension assets (FGN Bonds: 47 %, Treasury Bills: 24 %, Sukuk Bonds: 1 % while Agency Bonds and Green Bonds: less than 1 %).

Despite the above huge contributions, retirees are not promptly paid. Many are subjected to spurious verifications.

Are the Pension Fund Administrators willing to pay the retirees at all?

How would a retiree who is possibly over 50years of age or medically incapacitated, survive without a pension for 12 months?

After spending sixty years or thirty-five years of active service to the nation gathering all types of experiences PFAs still term them novices who do not know how to handle their funds!

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The Pension Fund administrators should stop exploiting Nigerians. We call on the National Assembly promptly to amend the Nigeria Pension Reform Act, to allow public servants withdraw 80% of their savings while still active in service.

We also call on Labour unions (ASUU, NLC, others) to take the government to task on this issue.

We call on the Federal Government to note that pension funds are not free money. Therefore, such funds should not be used to fund consumption.

Uncertainty about pension leads to corruption and untimely death of retirees. Finally, all stakeholders should ensure that retirees get their emoluments immediately they leave active service.