20 years after: 26 states fail to implement new pension scheme

Twenty years after the enactment of the Pension Reform Act 2004, 26 states of the federation have failed to fully implement the Contributory Pension Scheme (CPS), a report from the National Pension Commission has shown. Investigation by Daily Trust showed that while some states are partially implementing the scheme; others are yet to join, just […]

Twenty years after the enactment of the Pension Reform Act 2004, 26 states of the federation have failed to fully implement the Contributory Pension Scheme (CPS), a report from the National Pension Commission has shown.

Investigation by Daily Trust showed that while some states are partially implementing the scheme; others are yet to join, just as others have the bill to domesticate the scheme stuck at their respective state legislative assemblies.

The Pension Reform Act 2004 introduced the Contributory Pension Scheme for payment of retirement benefits of employees in both public and private sectors, which is being managed by the National Pension Commission (Pencom).

The Act, which came into fruition during the Olusegun Obasanjo administration, brought a sustainable alternative to the Defined Benefit Scheme, which relies on budgetary allocations and is currently managed by the Pension Transitional Arrangement Directorate (PTAD).

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On July 1, 2014, former President Goodluck Jonathan signed into law the new Pension Reform Act 2014, which repealed the Pension Reform Act 2004. Similar to the repealed Act, the new PRA governs and regulates the administration of the contributory pension scheme for both the public and private sectors in Nigeria.

Under the Act, the employer and the employee are required to make a minimum contribution of 10 per cent and 8 per cent respectively.

However, a quarterly report by the pension commission showed that only six states and the Federal Capital Territory have fully implemented the pension scheme as at the end of June 2023.

The report revealed that Delta State was to a large extent implementing the scheme, while Anambra, Benue and Kebbi states were partially implementing it.

Niger, Ogun and Rivers states extended their transition periods to the scheme.

The report showed that Jigawa is fully implementing the Contributory Defined Benefits Scheme (CDBS), just as Kano had a partial implementation of the CDBS.

Adamawa, Gombe and Zamfara states have not started implementing the CDBS.

The CDBS, which according to the regulator is hybrid, is contributory, but the benefits are defined. This implies that every month, pension contributions are deducted from workers, while the funds are pooled together and used to pay retirees.

The report listed states that are yet to implement the contributory pension scheme as Abia, Bauchi, Bayelsa, Ebonyi, Enugu, Imo, Kogi, Nasarawa, Oyo, Sokoto, and Taraba; while Akwa Ibom, Borno, Cross River, Katsina, Kwara, Plateau, and Yobe, are at the law enactment stage of adopting the scheme.

According to the report, states that are fully implementing the contributory pension scheme are Edo, Ekiti, Kaduna, Lagos, Ondo, Osun, and the Federal Capital Territory (FCT).

 

Situation heart-rending – Workers

A civil servant in Nasarawa State, who gave his name as Salihu and concealed his second name for fear of victimisation, said most civil servants at the state level turn to beggars soon after retirement.

“I have been in the civil service for over 25 years, meaning my retirement time is inching closer. Sadly, there is the likelihood I will join the wagon of those that will be living hand to mouth because the existing pension template is nothing to write home about,” he said.

In Taraba, another civil servant, who did not give his name, said: “Even your monthly salary is not good enough to sustain you and your family, but the situation is worse after retirement. I wonder how Nigeria will succeed in fighting corruption in an atmosphere of fear by civil servants who are scared to retire for fear of the unknown”.

In Sokoto, Mahe Abdullahi said civil servants steal money once they have the opportunity and keep it as their pension. “Governors sit on pensions and pay stipends whenever they like, or when there is Sallah, Ramadan or Christmas. This is why you see civil servants who have the opportunity to steal do so without fear or favour. They believe it is their pension, even though what they are doing is wrong,” he said.

Andrew John, a civil servant in one of the ministries in Imo, said the state houses of assembly have a role to play in saving civil servants.

“A law should be enacted at the state level that will not only domesticate the pension law, but also make the deduction a first line charge.

“Unless such monies for civil servants are deducted at source, pensioners, especially at the state level will continue to suffer,” he said.

In Oyo, a civil servant opined: “If you have a good living wage, and all the states of the federation embrace the new pension laws, naturally there would be good savings for civil servants to rely on after retirement.

“I want to believe that the greed, the stealing, the poor productivity we are witnessing at the state level revolve around the fear of the unknown by civil servants,” he said.

A government official in one of the states in the North East, who does not want to be named, said retired civil servants at the state levels were at the receiving end.

“There was a kind of a random sampling conducted in our states and it was frightening! Large percentage of civil servants who retire at the directorate level and below die earlier, when compared to those who retire after scaling to the position of a permanent secretary.

“Even though this has not been proven scientifically, what we deducted is that the living conditions and earnings of those that attain higher ranks are far better. They cope with challenges of life because their pensions are by far better,” he said.

 

Experts urge govs to enrol workers in contributory pension

The Chief Executive Officer of the Pension Fund Operators Association of Nigeria, Oguche Agudah, in a chat with our reporter, urged state governors to enrol workers on the contributory pension scheme to enjoy its benefits.

He stated, “Over the last 20 years, pension funds have maintained steady growth. Unfortunately, only private sector workers as well as federal government workers are enjoying the benefits of the scheme, which is why as operators we call on state governors to jump onto the scheme

“The Constitution empowers them to legislate on pension matters. But what we see is that successive governors push the decision to their successors and nothing is done at the end of the day.

“State governors can leverage on the scheme for infrastructure investments, which will in turn benefit the states”, he added.

In his reaction, a pension expert, Sani Mustapha, said the states that were yet to key into the contributory pension scheme “Are just suffering their pensioners.”

He stated: “The Defined Benefit Scheme that is unfunded and unstructured leaves the pensioners to pray for the day the state remembers their sufferings and doles out a token of three to six months’ payment, and then a break of one year with no pension.

“The unfunded pension arrangements leave all the pension stakeholders dissatisfied as every time it has to rely on budgetary allocations, which is not the way to go”, he said.

 

Pension fund assets hit N17trn

Data from the National Pension Commission (PenCom) indicated that the pension fund assets grew from N850 billion in 2007 to N17.927 trillion as at the end of November 2023. The data showed that the public sector contributed a total of N4.87 trillion; while the private sector contributed N4.5 trillion in the second quarter of 2023, bringing the total contributions to N9.37 trillion.

The data reflected that N7.98 trillion was brought in as accruals to the pension fund investments by the 19 Pension Fund Administrators (PFAs) under the Contributory Pension Scheme (CPS).