MEMORANDA OF THE CENTRE FOR PENSION RIGHT ADVOCACY (CPRA) PRESENTED AT THE PUBLIC HEARING ORGANISED BY THE HOUSE OF REPRESENTATIVES COMMITTEE ON PENSION HELD ON THURSDAY 28 SEPTEMBER 2017 AT THE HOUSE OF REPRESENTATIVES NEW AUDITORIUM, ROOM 034, NATIONAL ASSEMBLY, ABUJA.
AN ACT TO AMEND THE PENSION REFORM ACT, 2014 TO EXCLUDE MEMBERS OF THE NIGERIA POLICE, NIGERIA SECURITY AND CIVIL DEFENCE CORPS, NIGERIA CUSTOM SERVICE, NIGERIA PRISON SERVICE, NIGERIA IMMIGRATION SERVICE AND ECONOMIC AND FINANCIAL CRIMES COMMISSION FROM APPLICATION OF THE CONTRIBUTORY PENSION SCHEME.
Sponsored by Hon. Oluwole Oke.
The Bill seeks to amend Section 5(1)(a) of the Pension Reform Act 2014 to exclude members of the Nigeria Police, the Nigeria Security and Civil Defence Corps, Nigeria Customs Services, Nigeria Prisons Services, Nigeria Immigration Services and Economic and Financial Crimes Commission from the application of the Contributory Pension Scheme and Other Related Matters.
The CPRA hereby makes the following submission.
A private member Bill was sponsored during the 6th National Assembly seeking to exempt members of the Police and Paramilitary Agencies from the Contributory Pension Scheme. The two reasons given for sponsoring the Bill were:
(a) The military and Security Agencies had been exempted.
(b) The quantum of benefits paid to Police personnel and their colleagues in the paramilitary agencies was too small.
That no doubt may still be the reasons behind the current Bill.
THE POSITION OF THE NATIONAL ASSEMBLY THEN.
The 6th National Assembly took the following decision with regards to the Bill.
That the issue of quantum of benefits can be addressed by upward review of the rate of pension contributions under the Contributory Pension Scheme and not exemption.
That the Military and the Security Agencies personnel are expected by the nature of their duties to be faceless therefore their identities should be shielded. The Assembly concluded that the same can not be said for the Police and other Paramilitary personnel, who daily interface with the civilian population.
The Proposal for the exemption was therefore rejected and the Bill could not sail through.
The Police have registered a Pension Fund Administrator (PFA). (NPF Pension Ltd.)
THE POSITION OF CPRA ON THE CURRENT BILL
The position of the CPRA on this current Bill is as follows:
1. If there is Institutional memory at the National Assembly, the current Bill would not have reached this stage because the background information provided above, would have been brought to the attention of Honourable members of the House and the Bill would have enjoyed a quiet and very respectable death at the early stages.
2. We believe there is no knew compelling facts available, contradicting the seasoned and well reasoned position take by the 6th National Assembly to upturn that decision and entertain the current Bill.
3. The Police have registered a PFA for themselves that is doing well and has been able to hold its head high among the Committee of PFAs.
4. The issue of increase of contributions has been addressed under Section 4 of the Pension Reform Act 2014. It can still be addressed without necessary amending the Act for the following reasons:
(a) The rates of contributions under Section 4(1) (a) and (b) are minimum contributions. Therefore any employer, government inclusive can voluntarily or through negotiations with its employees increase its rate of contribution.
(b) Section 4(4)(a) gives the employer the right and opportunity to pay additional benefits to employees on retirement.
(c) Sections 4(4)(b) provides that an employer can elect to bear the full responsibility of the scheme.
5. As sound as the reasons given for the exclusion of military personnel from the CPS are, it is becoming doubtful, if their exclusion is in the interest of the rank and file personnel. Nothing points to this more like the news carried by Sun Newspaper on September 13, 2017 captioned “Ex-military men shut down Finance Ministry in protest”. The paper also carried a picture of protesters who it claimed were retired military officers. The Punch Newspaper on September 14, 2017 carried the same story.
6. The current Bill if passed into law, will bring un-intended outcomes, that may negatively affect industrial relations in the country and the economy due to the following:
(a) Other public servants through their unions, may commence agitations including strike actions to get governments, federal and states to take them out of the CPS.
(b) The pension industry that within a short period of time has transformed from a non existent industry into an industry that is looked at for infrastructure and economic development, because of its singular investable fund of over N6.7 trillion will be thrown into crisis that will affect the economy.
7. This Bill serves no useful purpose and as such, we believe it should not be pass into law. That is our position.
AN ACT TO ALTER THE PROVISIONS OF THE PENSION REFORM ACT 2014 AND FOR RELATED MATTERS
Sponsored by Hon. Amadi Dennis Oguerinwa
1. Amending Section 4(1)(a) to increase the Contribution of employers from 10 percent to 12 percent.
Increases in the rates of contributions by employers and employees will lead to higher retirement benefits. However, the current increase sort to be effect through the Bill will cause some distortions in that the increase for employers contribution from 7.5% to 10% that came with the enactment of PRA 2014 has not been fully complied with by many employers including the Federal Government.
Our position therefore is that this particular amendment should be put on hold. However, any employer’s increase in contribution arising either voluntarily or through collective bargaining, can be done through the provision of Section 4(1)(a) because the rate stated there is the minimum.
2. Amending Section 7(2) of the Act viz.
(i) Deleting the phrase “with approval of the Commission”
(ii) Substituting the word “twenty five” for the word “fifty” in line 4.
Our position on these proposed amendments are as follows:
(i) that removing the Commission’s approval is at variance with the provisions of Section 18 of the Act. Moreover, one of the problems of the pre reform pension schemes be it in the public sector or private sector was that they lacked regulation and effective supervision. Also the Commission’s approval on matter such as that will give uniformity of practice among PFAs, ensure compliance and guide against employees being shortchange because these calculations are too technical for individual employees to comprehend.
(ii) On the amendment to increase the amount to be collect by employee from 25% to 50%, we state that there are two types of disengagement here. Section (16)(2) is disengagement that is permanent while Section 16(5) is frictional unemployment (disengagement with a view of getting another job).
(iii) Lumping them together and causing them to withdraw equivalently from the Retirement Savings Account (RSA) is not equitable.
(iiii) Finally, the whole idea of pension is to alleviate workers from old age poverty. Therefore, any withdrawal from the RSA has to take this into consideration. The principal withdrawal in Section 7(1)(a) has no specified percentage for the above stated reason. A withdrawal of 50% from the account of a disengaged staff as proposed in the Bill is going to lead to old age poverty as the balance will not be sufficient to procure a monthly or quarterly programmed fund withdrawals or annuity.
This particular amendment should therefore be jettison because as attractive as it appears, it is not in the long term interest of the proposed beneficiaries.
Barr. Ivor Takor, mni
Centre For Pension Right Advocacy