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MEMORANDUM PRESENTED AT THE PUBLIC HEARING ORGANISED BY THE HOUSE OF REPRESENTATIVES COMMITTEE ON PENSION ON TWO BILLS FOR THE AMENDMENT OF THE PENSION REFORM ACT 2014 HELD ON TUESDAY 22ND FEBRUARY, 2022 BY IVOR TAKOR, mni Esq, EXECUTIVE DIRECTOR OF CENTRE FOR PENSION RIGHT ADVOCACY (CPRA)

Takor Ivor

MEMORANDUM PRESENTED AT THE PUBLIC HEARING ORGANISED BY THE HOUSE OF REPRESENTATIVES COMMITTEE ON PENSION ON TWO BILLS FOR THE AMENDMENT OF THE PENSION REFORM ACT 2014 HELD ON TUESDAY 22ND FEBRUARY, 2022 BY IVOR TAKOR, mni Esq, EXECUTIVE DIRECTOR OF CENTRE FOR PENSION RIGHT ADVOCACY (CPRA).

On Tuesday 22nd February, 2022 the House of Representatives Committee on Pension held a Public Hearing on two Bills all seeking to amend the Pension Reform Act 2022. The first Bill, “A Bill for an Act to amend the Pension Reform Act 2014 to provide for the exemption of the Nigerian Police Force from the Contributory Pension Scheme and for related matters [HB. 1578] was sponsored by Hon. Francis Ejiroghene Waive while the second Bill, “A Bill for an Act to amend Sections 1 (c), 7(2), 8(1), 18, 24 and 99 of the Pension Reform Act cap P50 LFN 2014 providing that a pensioner shall receive at least 75% of his retirement benefits immediately upon retirement and criminalise the undue delay in the payment of pension [HB. 1008]” sponsored by Hon. Jimoh Aremu Olaifa.

The Centre for Pension Rights Advocacy made a submission to the Committee on Monday 21st February, 2022 as required and formally presented a summary of the submission during the public hearing along with critical stakeholders such as the National Pension Commission, who’s presentation was made by the Director-General of the Commission, Aisha Dahiru-Umar. She was accompanied by the Commission’s Commissioners, Company Secretary and Legal Adviser as well as some Management staff; The Nigeria Police Force, presentation was made by a Deputy Inspector General of Police, who was accompanied by Some very top Police Officer; The Chief Executive Officer of the Pension Fund Operators Association of Nigeria (PenOp) Oguche Agudah made a presentation on behalf of the Association; Hon. Uche Ekwe a former Member of the House of Representatives, who is a Head of Department/National Assembly Liaison Officer of Nigeria Labour Congress (NLC) represented the President of NLC, Comrade Ayuba Wabba, mni and presented NLC ‘s position on the Bills. The TUC, the other Labour Centre was represented by her Secretary-General.

The position of the Centre on the first Bill, which seeks to amend the Pension Reform Act of 2014, to include the Nigeria Police Force as part of the categories of persons exempted from the Contributory Pension Scheme (CPS), was that the duties of the Nigeria Police Force, which include the protection of lives and properties, prevent, detect and investigate crimes; and to prosecute offenders. In order to maintain public safety and public order, the men and women appointed into the Force, put their lives on the line daily with some paying the supreme price, leaving behind members of their families. Therefore the Bill gave all those gathered at the public hearing and Honourable members of the House of Representatives Committee on Pension, the opportunity to discuss the welfare and wellbeing of officers of the Nigeria Police Force as well as members of their families.

The Centre submitted that the Contributory Pension Scheme established under the Pension Reform Act 2014 is the most guaranteed law in the country that protects these officers from old age poverty and destitution as well as financial protection for members of their families in the event of death of their bread winners, for the following reasons:

1. Section 4 of the Act, makes provision for the creation of a ready pool of fund, that will be used in the payment of pension for life to an officer. Payment of pension to retiring officers is no longer left at the mercy of annual budgets, which has to do with availability of fund as was the case with the old Defined Benefits Scheme.

2. Section 4(4) provides that notwithstanding any of the provisions of the Act, an employer may agree to (a) on the payment of additional benefits to the employee upon retirement or (b) elect to bear the full responsibility of the Scheme provided that in such a case, the employer’s contribution shall not be less than 20 percent of the monthly emolument of the employee. CPRA is of the view that this is where the National Assembly as well as all critical stakeholders should be focusing on. The Centre is convinced that the men and women of the Nigeria Police Force, in view of the very risky nature of their duties, the government and indeed the society at large should protect them from old age poverty and destitution.

3. Section 4(5) provides that “In addition to the rates specified in sub-section (1) of the section, every employer shall maintain a Group Life Insurance Policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover. While subsection 6 provides that “Where the employer failed, refuse or omitted to make payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period”. According to the CPRA, the provisions quoted above are duties imposed on an employer by law and not gratuitous. Therefore they are legally enforceable.

4. Furthermore, Section 11 of the Act makes the Retirement Savings Account (RSA), where an officer’s pension contributions are credited, managed and invested, a personal account of the owner. The Nigeria Police Force has no access to the funds in the RSA. Therefore even in the unfortunate situation where an owner is dismissed, the owner cannot be deprived of the already earned pension benefits in the RSA.

5. Section 17 established the National Pension Commission (PenCom), whose objects among others as stated in Section 18(C) include regulating, supervising and ensuring the effective administration of pension matters and retirement benefits in Nigeria. Therefore pension matters are not left at the pleasure of the employer.

6. In 2011 the Police sort approval for exemption from the Contributory Pension Scheme (CPS). A Committee of stakeholders was set up by the President to look into the demand and make appropriate recommendations. The end result was the licensing of a special Pension Fund Administrator (PFA) in 2014, The NPF Pension Ltd. CPRA stated that to the best of their knowledge, the PFA is being managed professionally, free from all Public Service bureaucracy and the command structure of the Nigerian Police Force.

The positive impact of the CPS is not only felt by members of the Scheme. Nigeria’s Net Assets Value of pension assets under the CPS as at 31st December, 2021 was N13.42 trillion. This is against a background of Federal Government budgetary pension deficit, estimated at N2 trillion as at June, 2004 when the CPS commenced. Pension fund under the CPS is providing the country with long term investable fund. The fund is also impacting positively on other sectors of the financial sector of the economy. As the fund press for improvements in the architecture of allocative mechanism, including investment, risk management, better accounting, auditing, and brokerage; information disclosure; insurance supervision and management for the group life insurance policy and annuity; new security rating agencies have developed. The fund has also contributed in the development of equity market, all contributing in the overall economic development of the country. Combined, PenCom and Pension Operators employ professionals in diverse fields as well as hundreds of young graduates, thereby contributing in job creation.

Consequent upon the above, CPRA made the following submission:

1. In line with the provision in Section 4(4)(a) the Federal Government should be paying retirees of the Nigeria Police Force 300% of their last annual gross pay as gratuity on retirement, while the contributions in their Retirement Savings Account (RSA) should be utilize for the payment of their pension. This will boost their monthly take home pension.

OR

2. In line with the provision in Section 4(4)(b) the Federal Government as their employer, should take the sole responsibility of contributing for their pension.

3. Police Officers from the Rank of Assistant Inspector-General of Police and above should retire with their full salaries as pension, as is the case with Federal Permanent Secretaries and Universities Professors.

4. The above should be within the provisions of the Contributory Pension Scheme under the Pension Reform Act 2014.

Concluding submission on the Bill, CPRA appealed to Honourable Members of the House of Representatives Committee on Pension and other Honourable Members of House of Representatives, to be at the forefront of ensuring that our gallant men and women of the Nigerian Police Force, are given adequate retirement benefits within the provisions of the Contributory Pension Scheme, while teaming up with the Federal Government to put a stop to agitations by some segments of the Federal Public Service to exit the CPS, whenever the President issues a Proclamation for the inauguration of the National Assembly.

The position of CPRA on the second Bill, which seeks to amend certain sections of the Pension Reform Act 2014 by providing that a pensioner shall receive at least 75% of his retirement benefits, immediately upon retirement and criminalise the undue delay in the payment of pension was as follows:
1. The balance in the Retirement Savings Account (RSA) of a retiring holder of the RSA does not automatically translate to retirement benefits. Section 7(1) states the three retirement benefits available to a retiree. Therefore the question that the sponsor of the Bill needed to address was which of the retirement benefits mention in section 7(1)(a)(b)(c) should a retiree withdraw not less than 75%?. For the avoidance of doubt, the provisions of subsection (1) are as follows: (a) “a lump sum from the total amount credited to his retirement savings account provided that the amount left after the lump sum withdrawal shall be sufficient to procure a programmed fund withdrawals or annuity for life in accordance with extant guidelines issued by the Commission, from time to time” (b) “programmed monthly or quarterly withdrawals calculated on the basis of an expected life span”; and (c) “annuity for life purchased from a Life Insurance Company licensed by the National Insurance Commission with monthly or quarterly payments in line with guidelines jointly issued by the Commission and the National Insurance Commission”.
(a) Section 7(2), if taken along with Section 16(2) and (5), talks of those disengaged based on medical grounds and frictional unemployment.
(b) For those who are disengaging as a result of frictional unemployment, Section 16(3) provides that “Persons who retire under subsection (2) of this section shall be reintegrated into the Scheme upon securing another employment, subject to the guidelines to be issued by the Commission from time to time”. This is surely referring to section 16(2)(C). It is not in the interest of such an individual to collect up to 75% of his retirement benefits.
2. Going along with the sponsor, is opening up retirees to a future life of poverty and destitution, for the following reasons:
(a) The proposed amendment unwittingly, seeks to turn the Contributory Pension Scheme (CPS) into a Provident Fund Scheme. Members of a Provident Fund Scheme can take out as much of their benefits as they would like on retirement. It is important to note that Nigeria established a National Provident Fund (NPF) in 1961 for non pensionable private sector employees but was jettisoned in 1999 because it was largely a saving scheme and not a pension scheme. It was replaced with the Nigeria Social Insurance Trust Fund (NSITF), whose pension component was replaced with the Contributory Pension Scheme in 2004.
(b) Pension schemes are aimed at giving an employee who retires either as a result of old age or medical ground, a life style closer to what the employee was used to during his/her working life. 25 percent balance in a retirees Retirement Savings Account (RSA) assuming that is what the sponsor is proposing in the Bill, if spread through the retiree’s expected life span, cannot be adequate to reasonably cater for his livelihood during old age or infirmity, either of the mind or body.
3. On the criminalization of undue delays in the payment of retirement benefits, the high point of the Pension Reform Act 2014 is that it makes provisions for offences, penalties for noncompliance and enforcement of compliance. Therefore any attempt to strengthen those provisions, to ensure that retirees and pensioners are paid their benefits timely, is welcome. However, on the criminalization proposed as new subsection 5 of section 99, CPRA was of the following views:
(a) It is of common knowledge that delays in the payment of benefits under the Contributory Pension Scheme are being experienced only in the public sector. It submitted that delays have not been mentioned in the payment of benefits to private sector retirees. The delays have been with Federal Public Service and have to do with the nonpayment of accrued rights of those who were in service before June 2004, when the Contributory Pension Scheme commenced.
(b) Pension Fund Operators have never been found wanting with regards to timely payment of benefits whenever the Federal Government releases funds for the purpose. If any Organisation or employer is guilty in this regard, such an Organisation or employer is the Federal Government.
(c) Any law that cannot be enforced is dead on arrival. It is better such a law is not enacted because it would have been a waste of the time of lawmakers.
Consequent upon the above, CPRA holds the following views:
1. Amending or inserting the stated sections/subsections of the Pension Reform Act 2014 will lead to old age poverty and destitution for those it had intended to be “beneficiaries”;
2. The Federal Government as an employer is responsible for the undue delays in the payment of retirement benefits to retirees of the Federal Public Service and not Pension Fund Operators;
3. To criminalise delays in the payment of retirement benefits should therefore be targeted at the Federal Government and not Pension Fund Operators.
4. There are certain statutes that may be inherently unenforceable, as the amendment being sort to criminalise undue delays in the payment of pension benefits even as appealing, wise, just or expedient as it may appear to be. This proposal is a mirage.

The CPRA therefore conclude its presentation by submitting that the Bill, as populist as it may appear to be, is not in tandem with the spirit behind the pension reform carried out in the country in 2004, which established the CPS. Moreover, it will lead to old age poverty and destitution for people the Bill is meant to benefit therefore CPRA submit that the Bill should be rejected.

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  1. Pingback: Proposed amendments to Pension Reform Act may threaten Nigerian's savings culture • Tabarau Gazette

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