Outline
Introduction
Establishment and Coverage of the CPS
Administration of Retirement Benefits Under the PRA2014
RSA Registration and Funding
Transitional Provision for Public Sector
Other new provisions
Areas of Inconsistency of the LSPRL 2007 with the PRA 2014
Introduction
The signing of the PRA 2014 into law in July 2014 ushered in some new provisions to enhance the successful implementation of the Contributory Pension Scheme. This presentation, therefore, seeks to highlight these new provisions vis-a-vis the provisions of the Lagos State Pension Reform Law 2007
Establishment and Coverage of the CPS
States & Local Government Employees – (s.1)
Private Sector Organizations with 3 or more (S.2)
Minimum Contribution Rate: 18% of monthly emolument [S.4(1)
Employer may agree to pay employee Additional Benefits upon retirement [S.4(4)(a)]
Exemption: Military & Security Services (S.5)
Administration of Retirement Benefits Under the CPS
Eligible Professors to take their full terminal benefits in line with the Universities (Misc.) Act – Framework for implementation being drafted by the Commission
Employees entitled under their conditions of service to retire with full benefits can do so – Framework for implementation being drafted by the Commission [S.7(d)&(e) ]
Persons who lose their jobs and could not secure employment within 4 months can access up to 25% of RSA balance [S.7(2) & S.16(5)]
Pension Fund Investment Income now tax exempt (S.10)
RSA Registration and Funding
Employers mandated to request PFA to open Nominal RSA for employees that fail to do so within 6 months of employment
OAGF & FCT Treasury have statutory responsibility to make deductions & remit pension contributions to FGN and FCT employees respectively [S.12(3) & (4)]
Accountant General of Lagos State and LASPEB, respectively, to ensure this.
RSA Registration and Funding cont’d….
DMO has statutory responsibility to issue Retirement Benefit Bonds recognizing accrued pension rights [S.15(1)(a)]
Responsibility lies on the Lagos State Government to ensure this.
Budget Office has statutory responsibility to ensure funding of RBBRF Account and pension review on Accrued Rights portion in line with S.173(3) of the Constitution [S. 39 & S.15(4)&(5)]
Responsibility lies on the Lagos State Government to ensure this.
Transitional Provision for the Public Sector
FGN to pay into RBBRF Account not less than 5% of monthly wage bill [S.39(2)] – Lagos State Government
PenCom to determine funding requirements and advise Budget Office of shortfall on yearly basis [S.39(3)]- LASPEB
Budget Office has statutory responsibility to ensure adequate appropriation and payment of amount so determined [S.39(4)]- Office of the Accountant General of Lagos State
OAGF has statutory responsibility to effect deduction and payment of pension contributions [S.40(2)]- Office of the Accountant General of Lagos State
Similar responsibilities on OAGF apply to FCT Treasury and all States of the Federation
Other New Provisions in the PRA 2014
Pension Protection Fund – S.(82)
To be funded by:
(a) Annual Subvention of 1% of monthly wage of FGN employees
(b) Annual Levy on PenCom and Pension Operators
(c) Income from investment of the fund
Utilization of PPF
(a) Funding of Minimum Pension Guarantee (MPG)
(b) Compensation for shortfall or financial losses from investment activities
(c) Any other eligible purpose
Other New Provisions in the PRA 2014 cont’d…
Establishment of Federal PTAD as an Extra Ministerial Department under the Federal Ministry of Finance and its structure – S.(42)
Part of RSA to be used to secure Residential Mortgage: Subject to Guidelines, PFA may apply a percentage of RSA balance for payment of Equity Contribution for residential mortgage – [S.89(2)]
Existing Schemes and Closed Pension Fund Administrators now closed to new employees
Conflict of interest issues now strictly sanctioned
Some Notable Offences and Penalties – S. (99 – 104)
Mismanagement or diversion of pension assets attracts fine of amount equal to 3 times the amount so mismanaged or 10 years imprisonment or both
Other New Provisions in the PRA 2014 cont’d…
Attempt to commit any specified offence is also an offence and punishable as full offence
Reimbursing a Director, Manager or Staff of Operator companies for sanctions levied on them personally is punishable by N5m fine and forfeiture of amount reimbursed
Refusing to produce document or give information to the Commission’s examiners attracts not less than N200,000 fine or 3 years jail term. Continuous refusal attracts N100,000 fine for everyday it continues.
Offences by corporate bodies: Directors, Managers, Secretary and other officers who have knowledge or believed to have knowledge and did nothing to ensure compliance are personally liable
Contravening any provision of the Act where no specific penalty is prescribed attracts not less than N250,000 fine or not less than 1 year jail term or both
Areas of Inconsistency 0f LSPRL with the PRA 2014
Rate of Contribution into the Scheme – Section 14 (1)(a-b)
Under he PRA 2014, the rate of contribution is stated as follows:
a minimum of 10 percent by the employer; and
minimum of 8 percent by the employee
Note: rates of contribution specified above may, upon agreement between any employer and employee, be reviewed upwards from time to time
Areas of Inconsistency 0f LSPRL with the PRA 2014
Section 7(1)- Inclusion of Judicial Officers under Section 291 of the 1999 Constitution (as amended) under the CPS
Section 13(2) of the LSPR Law 2007 however seeks to exempt same category of employees from the CPS
Need for the LSPR Law 2007 to be amended to clarify the ambiguity, bearing in mind that Sec. 5 (1)(a) of the PRA 2004 exempts from the CPS, the categories of persons, including members of the armed forces, the intelligence and secret services of the federation
Areas of Inconsistency 0f LSPRL with the PRA 2014
Sections 22-33 – Establishment of the Lagos State Pension Commission and the associated membership, functions and powers, staffing and finance of the Commission
Provisions akin to functions and powers of PenCom under the PRA 2014
Section 41- Establishment of the Retirement Benefits Bond Redemption Fund to be invested and managed by the Lagos State Government
Account to be transferred to the CBN, Lagos State branch for management and investment for safety from the vagaries of our financial/economic environment
Areas of Inconsistency 0f LSPRL with the PRA 2014
Section 42 – Establishment of the Public Service of Lagos State Pension Departments
This is not necessary. The tasks it sought to perform are already vested in the Lagos State Pension Commission
Sections 52-60 – specified the conditions for listing and approving of PFAs and PFCs as well as sanctions and penalties for breaches
These provisions are ineffective as they are in conflict with PenCom’s powers and functions, e.g. Section 51 functions of the PFAs Vs. Section 55 of the PRA 2014
Areas of Inconsistency with the PRA 2014
Sections 52-53 on listing and approval of PFAs Vs. Section 60 of the PRA 2014
Section 55 on the publication of list of PFAs Vs. Section 65 of the PRA 2014
Sections 57-58 on the general obligations of PFAs and PFCs as well as specific obligations of the PFCs Vs. Sections 69-70 of the PRA 2014
Sections 59 on penalty for non-compliance Vs. Section 91 of the PRA 2014
Conclusion
Lagos State is commended for its implementation of the CPS
The State is however enjoined to ensure conformity with the PRA 2014 as some provisions in its law are inconsistent with the PRA 2014
Section 119 of the PRA 2014 provides that if any enactment or law relating to pensions is inconsistent with the Act, the Act shall prevail
Conclusion …cont’d
Besides, under the constitutional principles of “covering the field”, where the National Assembly has legislated on any matter within its purview, a subsequent State Law on the same matter would not apply. In the case of the pension industry, Sections 24 & 25 of the PRA 2014 confer on the Commission regulatory and supervisory powers on all pension matters including any scheme by States and Local Governments. This position was affirmed by the Federal High Court in Lagos, in the case of the Agricultural & Allied Workers Union of Nigeria Vs. Attorney General of the Federation (Suit No. FHC/L/CS/788/04)
Questions?
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