The inability of Federal Government and some state governments to honour pension obligations of their respective workers has not only created several billions of naira in pension arrears for the two tiers of governments, but has left the Contributory Pension Scheme (CPS) in the country in utter disarray.
Findings by LEADERSHIP Sunday indicates that only ten out of the thirty states of the federation remit their contributions to the retirement savings account.
The Federal Government owes up to14 months pension arrears to retired federal civil servants, while some states owe as high as 20 months. Yet there has been a reduction in budgetary funding both in the states and at the Centre, and on a larger scale a total neglect of the budgetary provision for funding of the Retirement Benefit Bonds Redemption Fund (RBBRF) account and the remittance of monthly contribution from 2014 till date, explaining why retirees have not be able to get their monthly pensions.
Information from the National Pension Commission (PenCom) shows that as against the N91billion needed to offset pension arrears through RBBRF, only N50 billion was budgeted for in the 2016 national budget, leaving a shortfall of N41.71 billion. In fact, Sharon Ikeazor, the executive secretary of the Pension Transitional Arrangement Directorate, PTAD said the 2016 budget did not make any provision for the payment of pension arrears.
Although, LEADERSHIP Sunday could not confirm what was budgeted for pension in the 2017 national budget because it was gathered that there is no single overhead for pension as different MDAs have their allocations for it, information gathered indicate that there is also a shortfall from what is expected to pay retiring workers in 2017 as against what was approved in the budget. The likelihood of this will further aggravate the debt overhang and shortfalls that add to the arrears owed to pensioners.
The scheme was introduced in 2004, and according to a PenCom report, a total number of 22 states have enlisted in the scheme. In a bid to ensure all states enlisted, the 2014 Pension Reform Act (PRA 2014) made it compulsory for states to compulsorily implement the scheme.
According to a PenCom report, 26 states had so far enacted the law on Contributory Pension Scheme, CPS while others have initiated a bill but yet to be enacted. It was however, revealed that of the 26 which have enacted the law, and the 22 which has enlisted, only 10 states of the federation have commenced the remittance of contributions into the Retirement Savings Accounts (RSAs) of their employees, while only eight have begun funding of their Retirement Benefit Bond Redemption Fund Accounts.
Records also indicated that 673,116 contributors, who are workers of the various state governments, are registered with different Pension Fund Administrators (PFAs). Lagos, Ogun, Kaduna, Niger, Delta, Osun, Rivers, Anambra and two other states are indeed, the only states that have commenced the remittance of contributions to six PFAs and are funding their accrued rights.
The remaining 26 states, PenCom disclosed, were yet to commence the remittance of contributions into their workers’ RSAs or fund their accrued rights, as retirees in those states were left to their own faith.
The interim National President, NTA Contributory Pensioners Association of Nigeria, Mr. Kayode Da-Silva, said the experience of the pensioners were contrary to the intent and purpose of the contributory pension scheme. He noted that the rule guiding the contributory pension scheme stipulated that they get their payment within three months after their retirement.
As Ikeazor of PTAD sadly disclosed, the 2016 budget did not even make any provision for the payment of the pension arrears.
According to Mr. Jaiyeola Olowosuko, director-general, Ondo State Pension Commission, “The inability to fund the Retirement Savings Accounts (RSAs) of civil servants at the federal and state levels on a regular basis is a concern for the growth of the pension assets.”
Mr. Ivor Takor, director, Centre for Pension Right Advocacy, and former board member of PenCom, said the federal government has been unable to remit pension contributions since October 2015, even as state governments are defaulting in the payment of their workers’ pension contributions. Takor said most illiquid states have suspended pension budget for now, instead, pay salaries without remitting the employer’s monthly pension contributions into their workers’ RSAs.
“We understood that the federal government has not been able to remit pension contributions since October 2015 and this has to do with not only the employer’s contributions, but what then is happening to the contribution of the employees, because it has been deducted from their salaries and the law says the deduction should be paid into the RSAs of the employees, not later than seven days after salaries are paid.”
He added that it was unfortunate that some state governors left office and made arbitrary pension laws that only cover them and their office holders, some of them drawing massively from the purse of the state in the name of pension to build houses and cars and did not make laws for the state workers.
The director-general, Lagos Pension Commission (LASPEC), Mrs. Folashade Onanuga, notes that in spite of the challenges the states are facing, their inability to prioritise pension was responsible for the pension backlog they owe. “Even though there are a lot of things contending with state funds, I believe if there is a commitment towards pension, we will always find a way to pay it,” she said.
Mrs. Chinelo Anohu-Amazu, director-general, PenCom, while speaking on this development said the lack of or low funding of RSAs of civil servants was a serious concern, especially at the state level, stating that her commission has embarked on a serious awareness and sensitisation campaign in some states of federation in a bid to ensure prompt compliance and full implementation of the CPS.
With the country in recession, experts say it was going to be difficult for both the state and federal governments to clear this backlog of pension in a short time. LEADERSHIP Sunday, however, learnt that the federal government was seriously considering the bond option to offset the over N90 billion accumulated pension liabilities owed workers under the Contributory Pension Scheme (CPS).
A reliable source in the Presidency told our correspondent that due to the fact that successive administrations had not been consistent in the remittances of workers’ pensions into their RSAs and myriad of economic challenges bedeviling the current administration, the federal government has been advised by experts in the pension administration to approach the bond market to raise funds to tackle the backlog.
The federal government, according to our source, has examined the proposal and is set to embrace it soon. It was gathered that the Presidency had expressed concern that thousands of workers were due for retirement but there were no funds to pay them their retirement benefits, as contained in the Pension Act of 2014, hence the need to explore the bonds option as a way out of the thorny issue.
Some tread with caution on the purpose for the bond. The managing director/CEO, FUG Pension, Mr. Usman Suleiman, said: “If the federal government is issuing bond, the bond is not tied to anything. You cannot say whether it will go for settlement of arrears of pension or it would go to some other things.” Suleiman, however notes that “In the recent time, most of the bonds that government issues do go to recurrent expenditure, like the pension and payment of salaries.”
The Head of the Civil Service of the Federation, Mrs. Winifred Ekanem Oyo-Ita, said: “As a critical stakeholder in the pension administration in Nigeria, the Head of Civil Service is well- informed of some of the challenges faced by pensioners. “This is either as beneficiaries under the Defined Benefits Scheme (DBS) or the Contributory Pension Scheme (CPS); worthy to mention is the legion of complaints and challenges faced by pensioners under the DBS. Similarly, under the CPS, what has recently been on the front burner is the non- payment of pension to officers who retired from 2015 arising from the delayed funding of their accrued rights.
Source: Leadership Newspaper