Low Remittances Mar State’ retirement system entry into force

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Despite the passage of the Contributory Pension Scheme (CPS) in 25 states, only five of them have timely transferred workers’ pensions, LEADERSHIP-Check has shown.

The miserable level of remittances has hampered the successful domestication of the Pension Reform Act of 2014 (PRA) in those respective states.

This means that while the affected states have joined the CPS, the level of implementation of the provisions of the pension laws means that this does not result in any benefits for workers in the states who do not make regular transfers.

In the Pension Industry Report for Q1 2022 recently released by the National Pension Scheme (PenCom) and retrieved from LEADERSHIP, the affected states were identified as Lagos, FCT, Osun, Kaduna, Delta, Ekiti, Ondo, Edo, Benue states Kebbi, Niger, Rivers, Ogun, Bayelsa, Kogi, Anambra, Abia, Taraba, Imo, Sokoto, Adamawa, Ebonyi, Nasarawa, Enugu and Oyo.

Of the 25 states, only five states are outstanding in the monthly transfer of both employee and employer portions of contributions. These include; States Lagos, FCT, Osun, Kaduna and Delta.

The remaining 20 states, LEADERSHIP says, pay either the employee’s portion or the employer’s portion, while some have outstanding pension payments ranging from a year to three years and more, though some have stopped paying contributions for a very long time.

The affected states are currently struggling with enormous outstanding salaries and as a result have suspended monthly pension transfers to their employees’ Retirement Savings Accounts (RSAs).

The investigation revealed varying degrees of non-compliance. While some states did not contribute their 10 percent, creating a huge deficit in the workers’ RSAs, some withdrew the 7.5 percent from their workers’ salaries and refused to transfer it to the RSAs.

Similarly, some states have completely neglected both sides of the contributions, while others have made some changes to existing federal legislation and still refuse to implement their own law.

As a result, since the CPS regime, several million state civil service workers have retired without receiving their full entitlements.

While the states of Kwara, Plateau, Cross Rivers, Borno, Akwa Ibom, Bauchi, Katsina and Yobe have implemented their billing phase pension laws, Kebbi and Rivers only remitted employee contributions, while the states of Jigawa, Kano, Gombe and Zamfara have other pension schemes.

Advocacy groups believe that failure to implement a pension system in these states has pushed retirees into poverty in old age, with workers still in active service preparing for retirement in poverty, combined with the fact that their family members will not retire any compensation in the event of the death of the worker, while still on duty or off duty, as a result of such non-compliance.

In an interview with LEADERSHIP, PenCom’s former Head of Corporate Communications, Mr. Peter Aghaghowa, said on the subject that states’ autonomy over their own pension systems is a challenge that threatens the smooth functioning of pensions in the states.

Aghaghowa said: “State implementation of pensions is a different kettle of fish because of the autonomy they have over it. This is unlike what is available in the federal pension system where we have a firm grip on it.

“Unfortunately, it is workers who will suffer the consequences of not paying pension contributions, because what they receive in retirement depends on what is in the pension savings account.

“So imagine what it will be like if no money is pouring into your retirement account now. However, PenCom has not rested. We are regularly involved with the state governments. We have even gone so far as to pay some of them courtesy calls and take matters up to the state governors themselves.”

Mr. Ivor Takor, Executive Director of the Center for Pension Right Advocacy (CPRA) spoke about the need for reform of the pension industry, saying that the reform is necessary because of many issues facing both public and private sector pension systems.

He said: “The public sector, federal, state and local governments operated the ‘Defined Benefit Scheme’ under the Pensions Act 1990, which was universal throughout the nation’s civil service.

“The system was unsustainable due to a lack of adequate and timely budgetary provisions and increases in salaries and pensions.

Added to this were demographic shifts due to increasing life expectancy; So retirees started to live longer. Pension administration in this sector has been largely weak, inefficient, less transparent, highly corrupt and cumbersome.

“The reform therefore aimed to introduce measures aimed at developing a system that is sustainable and capable of achieving the ultimate goal of providing a stable, predictable and adequate source of retirement income for every worker in the country. In short, this led to the pension reform that created the pension industry as we know it today.”

Takor said: “The past and current governors of the affected states have shown that they do not comply with the provisions of the existing labor laws.

“Moreover, they governed and continue to govern their states in gross violation or violation of the provisions of the country’s constitution, which they have sworn to uphold. Section 188(2)(b) provides that a governor or acting governor may be removed from office if the holder of such office has been guilty of gross misconduct in the exercise of the functions of his office.”

Subsection 11 of the PRA 2014 provides that: “In this section, gross misconduct means a material breach or breach of the provisions of this Constitution, or misconduct of a kind which in the opinion of the House of Assembly would be considered gross misconduct.” The failure to enact a Pensions Act for government employees and withhold their pension is a gross violation or violation of the provisions of the Constitution that makes it a criminal offense.”

4 states only, FCT remits employee pension under CPS – PenCom

Meanwhile, former Lagos State Pension Commission (LASPEC) Director-General Ms. Folashade Onanuga said the Defined Benefit Scheme (DBS) promise was juicier and more enticing than the CPS for officials and politicians.

Under DBS, she said, the state contributes the entire pension, but under CPS, the employer contributes 10 percent, while the employee contributes 8 percent of an employee’s monthly salary.

However, she urged PenCom to reconsider the lump sum percentage under the new system to make it attractive to contributors, and implored states to prioritize workers’ pensions as it is a savings scheme that will benefit them in retirement will be beneficial.

At a recent seminar in Lagos where she presented the issues paper, she noted that alongside regulatory awareness there needs to be fiscal commitment and awareness, particularly on the part of state governments, to ensure speedy compliance with the new pension system.

“Even though a lot of things are struggling with government funding, I believe that if there’s a pension obligation, we’ll always find a way,” she said.

Onanuga called on pension fund operators to raise awareness at the state level to ensure the government enforces the 2014 PRA in their respective states.

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