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| Anohu-Amazu |
Would the National Pension Commission (PenCom) and
pension operators be able to effectively execute the various policies they have
outlined to prop the pension industry this year? This is the question they must
answer. Chuks Udo Okonta, in this report examines some of the policies and how
they will impact the sector if properly implemented.
Since the signing of the Pension Reform Act (PRA) 2014 by
President Goodluck Jonathan in July 2014, the public has waited anxiously for
the National Pension Commission (PenCom) to come up with guidelines that will
enable operators execute the changes introduced by the Act, but the commission
seemed to be taking its time to craft the guidelines, which may be introduced
in the first quarter of this year.
The guidelines are expected to give the Act the teeth to
bite as most of the laws were hinged on what PenCom is to initiate to enforce
them.
Another task PenCom has to undertake is to liaise with
the states that have embraced the Contributory Pension Scheme (CPS) pushing for
amendments in their Acts to accommodate the changes introduced by PRA 2014.
Some of the major
highlights of the Pension Reform Act 2014 include:
Upward Review of the
Penalties and Sanctions
The sanctions provided
under the Pension Reform Act 2004 were no longer sufficient deterrents against
infractions of the law. Furthermore, there are currently more sophisticated
mode of diversion of pension assets, such as diversion and/or non-disclosure of
interests and commissions accruable to pension fund assets, which were not
addressed by the PRA 2004. Consequently, the Pension Reform Act 2014 has created
new offences and provided for stiffer penalties that will serve as deterrence
against mismanagement or diversion of pension funds assets under any guise.
Thus, operators who mismanage pension fund will be liable on conviction to not
less than 10 years imprisonment or fine of an amount equal to three-times the
amount so misappropriated or diverted or both imprisonment and fine.
Power to Institute
Criminal Proceedings against Employers for Persistent Refusal to Remit Pension
Contributions
The 2014 Act also
empowers PenCom, subject to the fiat of the Attorney General of the Federation,
to institute criminal proceedings against employers who persistently fail to
deduct and/or remit pension contributions of their employees within the
stipulated time. This was not provided for by the 2004 Act.
Corrective Actions on
Failing Licensed Operators
The Pension Reform Act
2004 only allowed PenCom to revoke the licence of erring pension operators but
does not provide for other interim remedial measures that may be taken by
PenCom to resolve identified challenges in licensed operators. Accordingly, the
Pension Reform Act 2014 now empowers PenCom to take proactive corrective
measures on licensed operators whose situations, actions or inactions
jeopardize the safety of pension assets. This provision further fortifies the
pension assets against mismanagement and/or systemic risks.
Restructuring the System
of Administration of Pensions under the Defined Benefits Scheme (PTAD)
The Pension Reform Act
2014 makes provisions for the repositioning of the Pension Transition
Arrangement Directorate (PTAD) to ensure greater efficiency and accountability
in the administration of the Defined Benefits Scheme in the federal public
service such that payment of pensions would be made directly into pensioners’
bank accounts in line with the current policy of the Federal Government.
Utilization of Pension
Funds for National Development
The Pension Reform Act
2014 also makes provisions that will enable the creation of additional
permissible investment instruments to accommodate initiatives for national
development, such as investment in the real sector, including infrastructure
and real estate development. This is provided without compromising the
paramount principle of ensuring the safety of pension fund assets.
Enhanced Coverage of the
CPS and Informal Sector Participation
The Act expanded the
coverage of the Contributory Pension Scheme (CPS) in the private sector
organizations with three (3) employees and above, in line with the drive
towards informal sector participation.
Upward Review of Rate of
Pension Contribution
The Pension Reform Act
2014 reviewed upwards, the minimum rate of Pension Contribution from 15 per
cent to 18 per cent of monthly emolument, where 8 per cent will be contributed
by employee and 10 per cent by the employer. This will provide additional
benefits to workers’ Retirement Savings Accounts and thereby enhance their
monthly pension benefits at retirement.
Access to Benefits in
Event of Loss of Job
The Pension Reform Act
2014 has reduced the waiting period for accessing benefits in the event of loss
of job by employees from six (6) months to four (4) months. This is done in
order to identify with the yearning of contributors and labour.
Opening of Temporary RSA
for Employees that Failed to do so
The Pension Reform Act
2014 makes provision that would compel an employer to open a Temporary
Retirement Savings Account (TRSA) on behalf of an employee that failed to open
an RSA within three (3) months of assumption of duty. This was not required
under 2004 Act.
Consolidation of Previous
Legislations Amending the PRA 2004
The Pension Reform Act
2014 has consolidated earlier amendments to the 2004 Act, which were passed by
the National Assembly. These include the Pension Reform (Amendment) Act 2011
which exempts the personnel of the Military and the Security Agencies from the
CPS as well as the Universities (Miscellaneous) Provisions Act 2012, which reviewed
the retirement age and benefits of University Professors. Furthermore, the 2014
Act has incorporated the Third Alteration Act, which amended the 1999
Constitution by vesting jurisdiction on pension matters in the National
Industrial Court.
Transfer window
Pension contributors over
the years have been anxiously waiting for the transfer window to port from
their fund managers to other service providers who they believe will offer them
better services.
Inspen gathered from a reliable
source that the National Pension Commission (PenCom) and operators are battling
with some challenges especially biometric issues which are considered a clog to
the transfer process.
The Managing Director of a
pension firm said in an interview that operators are all concerned about having
the window opened and that due to some challenges, operators and PenCom would
not commence the process when things are not in proper shape.
The source noted that
part of the process of the transfer window is ensuring that operators’ records
are complete and accurate, adding that as part of the process, the
identification method must be had, and to achieve a seamless transfer, the
biometrics must be carefully done.
“We are all concerned, it
is important we get it in place. We have made significant process. As at now,
we can give you assurance that it is upmost in our minds and it is receiving a
lot of attention from the regulator and operators.
“We have engaged
consultants, done costing and have made significant process. PenCom also has
its side of the transfer window and they are working seriously too. The true is
that they are not ready and we are also not ready yet.
“If I want to transfer my
account from Pension Fund Administrator A to B, the PFA had to identify me to
ensure that it is my account that is being moved from A to B. The only way to
have a seamless transfer is to have biometrics. That is the crust of the
transfer window; otherwise, you would find that in moving a subscriber’s
account from a point to another, you may move the data of another person.
“Biometrics is the crux
and it is what we are waiting to put in place. There is a PenCom leg and
operators leg in the biometrics process. If you look at it on our attempt in
Nigeria to have an identity, you would see that it is complicated process.”
The source stated that data
process has remain a challenge in Nigeria, adding that as the nation lacks
identity process, having a good biometrics process would take some time.
She said the operators
having considered the extent of work and cost required to build a reliable
database, decided, to put effort together, stressing that while the operators
are working on the process, they are also pursuing collaboration with other
industries that are considering a biometric system.
Mortgage financing
One of the unique features
of the PRA 2014 is the law that empowers contributors to access parts of their
contributions for residential mortgage.
The PRA 2014 made
provision that allows contributors seeking to own their primary homes, to apply
part of their retirement savings account balance balances as equity
contribution for residential mortgage, subject to the guidelines issued by the
commission.
PenCom has assured that when the act is implemented the
development would assist in bridging the housing deficit in Nigeria.
Informal Sector
Participation
The Act expanded the
coverage of the CPS in the private sector organisations with three (3)
employees and above, in line with the drive towards informal sector
participation.
This is one development if properly harness, would expand
the frontier of the scheme as more money will be injected into the coffers of
the operators.
The initiative would also help boost the saving culture
of people who are not in structured employment. It will also help improve their
life at old age.
States involvement in the
scheme
Ondo State is the newest
state to have embraced the scheme in recent times.
The Governor, Dr Olusegun
Mimiko, in a bid to ensure immediate implementation of the Contributory Pension
Scheme (CSP) has approved the appointment of 12 Pension Fund Administrators
(PFAs) and Jayeola Olowosuko, as pioneer Director-General for the state pension
commission.
The PFAs already
appointed by the state include: Oak Pensions Limited; Trust Fund Pensions; PAL
Pensions Limited ARM Pensions Limited; Premium Pensions Limited and Legacy
Pensions Limited.
Others are APT Pension
Managers Limited; Pension Alliance Limited; LNPC Pension Fund Administrators
Limited; Leadway Pensure PFA Limited; Sigma Pensions Limited and Fidelity
Pension Limited.
Efforts to sanitise the pension system is seriously been
resisted by the refusal of many state
governments to enact their laws and embrace the contributory scheme, which is
adjudged the best way to eradicate corruption and ensures better lifestyle for
retirees at retirement.
Available statistics
revealed that only six states - Lagos, Ogun, Niger, Kaduna, Delta and Jigawa
are the ones contributing to the scheme.
In the South-East Zone, Abia, Ebonyi and Enugu were yet
to enact the law on the CPS. Imo State enacted its law on CPS in 2008 and
appointed Pension Fund Administrators (PFAs) to register its employees but
information available showed that the State has suspended the implementation of
the Scheme.
Anambra State, it was learnt only recently enacted its
law on the Scheme and is still expected to carry out the next necessary steps
like setting up administration structure, appointment of PFAs, registration of
employees by the PFAs, remittance of pension contributions and determination of
accrued pension liabilities of workers among others.
States in the South-West Zone have made reasonable
progress in the adoption and implementation of the CPS. Lagos State is one of
the pioneers in implementation of the CPS, having enacted its law in 2007. The
State had fully implemented the CPS with a total of 45,730 employees registered
and pension contributions remittance of N46.50billion as at July, 2013.
Furthermore, the State had issued retirement benefit
bonds of N18.9billion to its retirees and these bonds have been fully redeemed
and proceeds paid into the employees’ individual RSAs; while 2,242 employees
from the State have retired under the Scheme as at August, 2013.
In the case of Osun State, it adopted the CPS and enacted
its law in 2009. It had also made significant progress in its implementation of
the CPS, having so far registered 45,106 employees under the Scheme. It had
also remitted N4.15 billion as pension contributions, while the sum of
N1.90billion had been remitted into the Retirement Benefits Bond Redemption
Fund Account. However, the State is yet to renew the Group Life Insurance
Policy for its employees in 2013 and had also not carried out an actuarial
valuation to determine accrued pension rights of employees.
Oyo State, has enacted its law on the CPS in January,
2010. However, it is yet to commence the full implementation of the CPS.
In the North Central zone, Niger State had fully complied
with the scheme
In the North-West zone, Jigawa state which was the first
out of the thirty-six states in the federation to enact its law on the
Contributory Pension Scheme (CPS) in 2005, had appointed Pension Fund
Administrators (PFAs) to manage the Pension Funds which have a total value of
N16.49 billion as at September, 2013.
Kaduna state adopted the CPS and enacted its law in 2007.
It has also made significant progress in its implementation of the CPS, having
registered 143,722 employees under the Scheme, with Pension Contributions of
N9.46 billion as at October, 2013. The state had conducted an actuarial
valuation and determined the accrued pension rights of its employees for their
service prior to the CPS and established a Retirement Benefits Bond Redemption
Fund which currently has a balance of N1.6 billion. The state is however, yet
to put in place, a Group Life Insurance Policy for its employees.
Although Zamfara state adopted the CPS, enacted its law
in 2005 and registered 63,254 employees under the Scheme and remitted N534.4
million as employee portion of the Pension Contributions as at November, 2013,
it is yet to commence remittance of employer portion of Pension Contributions
from the commencement of the CPS. It has also not put in place a Group Life
Insurance Policy for its employees.
Sokoto state enacted its law on the Contributory Pension
Scheme in 2007 and registered 46,808 employees with PFAs under the Scheme. The
state is yet to commence remittance of the Pension Contributions.
With regards to Kebbi state, it enacted its law on CPS in
2009 and registered almost 38,000 employees with PFAs under the Scheme. It has
however not commenced the remittance of pension contributions.
The status of Kano state shows that it enacted its law on
the CPS in 2006. It is however, yet to appoint PFAs and has not transferred
pension funds for management.
Kastina state drafted a bill on the Contributory Pension
Scheme which was reviewed by the Commission and found to be largely in
conformity with the Pension Reform Act 2004 (PRA). It has however not
translated the bill into law. The compliance status of the states in the
North-West zone as indicated clearly shows the imperative for the states to expedite
action on the full implementation of the Contributory Pension Scheme.
Director-General, National Pension Commission
(PenCom) Mrs
Chinelo Anohu-Amazu, said the PRA 2004 sought to address
in a holistic manner, the perennial problems associated with pensions in both
the public and private sectors established the new Contributory Pension Scheme
(CPS) stressing that the central among the key objectives of the reform are to:
stem the growth of outstanding pension liabilities; ensure that every person
who has worked in either the public or private sector receives his/her
retirement benefits as and when due; establish a uniform set of rules and
regulations for the administration and payment of retirement benefits in both
the public and private sectors; and promote economic growth through
diversification of pension fund investment across financial and productive
sectors.
New phase of pension
While the regulator and
operators are making efforts to move the sector forward, the public are already
eying another phase known as defined ambition pension system.
The system according to
an expert will enable pension contributors determine the amount they want at
retirement, which is contrary to the present defined contributions where
contributors do not know the amount they are entitled to when they retired.
Ex-Commissioner, National
Pension Commission (PenCom) and Principal Partner/Chief Executive Officer,
Retirement Benefits Advisory Dr Musa Ibrahim, while speaking on this new system
at the Conference on Pension Reform Act,
2014 theme: “Sensitising major stakeholders on Developments ushered in by the
Pension Reform Act 2014” organised by PenCom in Lagos, urged pension
stakeholders in the industry, especially PenCom and operators to begin to work
out measures to align with this system which is being entrenched in other
climes.
According to him, the
need for the new system has become necessary due to some deficiencies in the
defined contributions.
He said the new system
allows people target what they want at retirement, stressing that that is
missing in the present system.
Ibrahim also expressed
misgivings over the making of pension a constitutional issue. He noted that
pension ought to be a contractual agreement between employers and employees.
Conclusion
Public expectations from
PenCom and operators are high. It behooves on them to properly articulate and
follow the set policies so that the sector can move from where it is to the
envisaged heights.
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