In
a statement according to Samuel Aruwan, Special Assistant to the
Governor El Rufai on Media and Publicity, the Pension Reform Law of
Kaduna State, passed in 2016, will come into force on 1 January 2017. By
that date, all public sector workers will migrate to the contributory
pension scheme which replaces the defined benefits scheme. The current
government inherited arrears of pensions and gratuity amounting to
N14bn. The sheer size of this outstanding liability underlines the
challenge with the defined benefits scheme which tends to subject the
pensioner to hardship, and is prone to fraud.
By
that date, all public sector workers will migrate to the contributory
pension scheme which replaces the defined benefits scheme… The sheer
size of this outstanding liability underlines the challenge with the
defined benefits scheme which tends to subject the pensioner to
hardship, and is prone to fraud.
The New Contributory Pension Scheme
The
new Contributory Pension Scheme seeks to ensure that all retirement
benefits due to genuine workers in the public service are paid as at
when due. It is designed to be user friendly and transparent, with
workers being able to receive updates on their Retirement Savings
Account (RSA) while they are in service. The contributory nature of the
new scheme, with employer and employee making contributions to the RSA
for each worker, also ensures that the pension obligation becomes
manageable for the government. These overcome the deficits that have
made the defined benefits system (also known as pay-as-you-go) such a
nightmare for pensioners and an unsustainable burden on public finances.
The challenges of the old scheme have included a weak administrative
framework and corruption. The adoption of the Contributory
Pension Scheme in Kaduna State aligns the state with the pension
reforms that were introduced by the Federal Government through the
Pension Reform Act of 2004.
In preparation for the
commencement of the Pension Reform Law, Kaduna State has appointed H.R.
Nigeria Limited as actuaries to conduct valuation of the defined and
contributory pension schemes. This is to determine the accrued pension
liabilities in respect of each employee of the government based on the
contract of service existing before the effective date of the new law.
The actuarial valuation
will calculate the amount needed to pay the pension rights already
built up and those that will become payable. The outcome of the
valuation will assist seamless migration to the contributory scheme. The
new pension arrangements will protect the earned pension rights of
workers, and end the nightmare and problems that unfunded pension
schemes have created for pensioner and government alike.
Pension operators in the country are
increasingly getting uncomfortable with the moves being made by the
Federal Government to use part of the N5.8tn Contributory Pension Scheme
assets to fund infrastructure development and move the nation out of
economic recession.
Operators, who spoke to one of our
correspondents, said it was wrong for government officials and senators
to accuse the administrators of the CPS of holding on to the fund when
the economy was going through a difficult time.
They insisted that contrary to that position, the fund was actually not idle.
“Despite the fact that we have been
explaining that the fund is not idle but is invested wisely, because it
belongs to the contributors and retirees who subscribe to the scheme, it
is disturbing that government officials have continued to display their
level of ignorance on how the scheme works by demanding that we should
release the money to them,” one of the operators, who spoke on the
condition of anonymity said.
The Director-General, National Pension
Commission, Mrs. Chinelo Anohu-Amazu, said on Wednesday that there was a
need for the government to provide adequate guarantees to secure
investment of the fund in infrastructure.
She stated this at the African Pension Awards, which was organised as part of activities for the World Pension Summit.
There have been calls by stakeholders in
the public and private sectors that the fund should be spent on
addressing the infrastructural gap in the country.
However, Anohu-Amazu said while the
commission was not opposed to the idea of deploying the pension fund for
infrastructure, adequate mechanism must be put in place to ensure its
safety.
The PenCom DG explained that pension
funds alone would not be able to address the infrastructure needs of the
country, adding that other sources of funding such as Public-Private
Partnership arrangements should be explored.
She said, “Today, pension and social
security systems serve as catalysts for generating pool of long term
investible funds that can be used to develop necessary ingredients for
economic development such as infrastructure.
“Given the current global economic
challenges occasioned by the drop in commodity prices, the funds
generated under viable pension schemes have become veritable sources of
financial intermediation.
“In order to support economic
development, it is fundamental that the pension fund is diversified to
include investment in identifiable infrastructure, real estate and other
key aspects of the real economy.
“In achieving this, pension funds
require adequate guarantees by the government, in addition to the
development of the enabling vehicles through which the investments will
be made.”
Former President Olusegun Obasanjo had
warned at the World Pension Summit on Tuesday that while the pension
funds could provide the needed funding for developmental projects,
caution must be taken in order not jeopardise the objectives of the
pension scheme.
Obasanjo, whose administration was
instrumental to the establishment of the CPS in 2004, said with the fund
rising to about N5.8tn, there would always be the temptation to tamper
with it for other compelling needs such as infrastructural development.
He said, “I am particularly happy that
what we put together 10 years ago has become so successful that we have
well over seven million employees captured from both the public and
private sectors, and as you have heard, we have almost N6tn in pension
assets.
“I like innovation and I like what you
are talking about in the next two days – pension innovations and
sustainability – but I will add two things. Your innovation must be with
caution.
“When people have to work all the days
of their lives that they are strong and they make contributions for
their future, we cannot be too adventurous with the so called innovation
because when they need the money, the money must be there.”
The former President added, “One of the
things that makes me very happy about the pension scheme is that in the
last five years or so, when almost anything goes about public funds, the
pension fund remains sacrosanct, and I believe that is something we
must preserve no matter what we do.
“Our innovation must be with caution and
security. We must never reduce trust or eliminate trust from the
pension fund. People must have trust that when they require money in
their old age, in their retirement, from the money they have
contributed, the money will be there.”
Obasanjo added that while he was not
opposed to the idea of deploying the pension fund for infrastructure, it
must be done in such a way that it would not affect the prompt payment
of pensioners who had contributed to the scheme in their active days.
He said the sustainability and integrity
of the pension industry was vital as any issue of mistrust from
pensioners would lead to its collapse.
The Chief Executive Officer, RiskGuard
Africa Nigeria Limited (Pension & Insurance), Mr. Yemi Soladoye,
said that pension funds were long-term funds and that part of the
reasons for creating them was to finance national development projects.
“As long as the issue of safety and
security of the fund is guaranteed, it is okay to borrow the government
part of the fund, because that it part of the reasons why we generate
long-term funds,” Soladoye said.
He, however, pointed out that the bulk
of the fund should be invested in government securities, because it
would be safe there except the country was no longer safe for
investment.
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Telecoms
service provider Globacom, has announced new solutions for pension
administration . The solutions will boost pension administration and
make operations easy for pension fund users.
They will also serve as the springboard to launch pensions’ industry unto higher grounds.
Globacom’s Head of Operations, North
Central, Mr. Akeem Yusuf, announced this yesterday in his presentation
at the World Pension Summit in Abuja.
According to him, the solution will
provide best customer experience in pension administration using an
architecture of three main components – Customer-on-Board, Payment
Collection Process and Automation.
Globacom, the diamond partner of the
summit, said that the Customer–on-Boarding component will make it easy
for pension administrators to register, administer and manage their
customers.
Yusuf also explained that with the
payment collection process leg of the architecture, all payments will be
updated, using Glo Mobile-to-Pension administrators’ database on real
time basis.
He said that there will be real time
update of payments along with customer alerts, all these being done
through a mobile money agent.
