The safety of the pension contributions- Odunze Reginald C

 

In all the presentations , I have done in pension related matters , numbering about 3500, spanning over a period of 7 years in the following sates  Zamfara,  Nasarawa, Abuja , Enugu, Imo , Abia, Kwara, Osun, Lagos etc  in both private and public sectors, the most re occurring question is how safe is my contribution.

The safety of any fund is the basic criteria in setting up the fund, when a fund has no safety; it is of no use in setting it up.

The objectives of the scheme in PRA 2004 were as follows:

Ensure that every worker receives his retirement benefit as at when due

Assist workers to save in order to cater for their livelihood during age

Establish a uniform set of rules, regulations, and standards for administration of pension matters

Establish strong regulatory and supervisory framework.

But in 2014 the PRA 2014 extended to the following

Establish  a uniform set of rules , regulations, and standards for the administration  and payments of retirement benefits for the public service of the federation, the public service of the FCT, the public service of the state governments, the public service of the local governments and the private sector  Section 1 subsection A of the PRA 2014

Assist the improvident individuals by ensuring that they save in order to cater for their livelihood during old age Section 1 subsection D  of the PRA 2014

Make provision for the smooth operations of the scheme

Ensure that every person who worked in either the public service of the Federation, FCT, States and Local Governments or the private sector receives his retirement benefits as and when due Section 1 subsection C of the PRA 2014

In an article by Odunze which appeared in 2011, titled “The Task of managing and safeguarding the pension fund” Odunze opined that  “With the call in Europe and America for an extension of the retirement age due to the failure of the pension schemes as a result of the last global financial crises, it becomes pertinent for the pension fund administrators, the pension fund custodian and the National pension commission . PenCom to embark on stringent financial and investment strategies to put the schemes on sound footings. This becomes necessary to safeguard the pension fund”

The failures of the National Provident Fund Act of 1973, The Pension Act of 1990 and the NSITF Act of 1993 are all fresh in our memories. The business environment is becoming more and more complicated, so also is the human nature and behavior. They all fail because of several reasons, which included corruption, not maintaining a good data base, not proper oversight function, non challant attitude of the officials involved.

The Pension Reform Act 2004 clearly pointed the provisions of Pension fund custodian, pension fund Administrator and the National pension commission and careful delineated their duties that serves as checks and balances to the establishment, administration and running of the schemes to make it safe and profitable to both the contributors, retirees, and return on assets to the administrators and other stakeholders in the scheme.

The recent amendment of the 2004 Pension Reform Act, which resulted in its repeal and the subsequent provisions of the Pension Reform Act 2014 will positively consolidate more on the pension assets as the relevant portions of the law has increased the coverage to states, local governments, and employers with minimum of three employees.

There is also the consolidation of the pension reform act as aptly captioned by the highlights of the pension reform act 2014, it should be noted that   “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. 

Punishment for defaulting employers : the pension reform act  in Section 11 (6) of the Act provides that an employer who fails to deduct or remit the contributions of its employees within 7 working days from the date salary is paid, in addition to making the remittance already due, will be liable to a penalty to be stipulated by the Commission.

Furthermore, Section 105 (1& 2) on offences under the Act empowers the National Pension Commission (PenCom), subject to the fiat of the Attorney General of the Federation (AGF), to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees.

With all these provisions, the scheme has the necessary provision to ensure compliance and safety of the fund as pension fund custodians are expected to have an indemnity of three times the value of their fund, in the case of custodian going bankrupt.

Like Jonny Walker we are not deterred by where we failed, but we set our minds on our destination and that is why we are bent on the safety of the fund that has clearly manifested with the recent remarks by the DG , stressing that the pension assets is well in excess of 4.6 Trillion Naira.

Odunze Reginald is the Lead Consultant, Chareg Consulting, a management and marketing  consultant  a social media and social marketing consultant , you can visit our twitter anchor @regydunze, find us on Facebook @ Reginald