Pension

Lawmakers, ministry of finance, budget office, PenCom to meet over pension accrued rights

Cross section of participants at the event.

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Chuks Udo Okonta

The federal lawmakers, have vowed to invite officials of ministry of finance, budget office and National Pension Commission (PenCom) over non-payment of retirees pension accrued rights by the government.

The decision was informed by the non payment of accrued pension rights by the federal government since March 2023, thereby barring retirees from earning their monthly pension benefits.

The Deputy Chairman House Committee on Pensions, Mohammed Lateef, disclosed this at the recently held Pension Fund Operators Association of Nigeria (PenOp) 4th National Assembly Retreat 2024 in Lagos, stating that the House Committee has asked PenCom to come up with the total of unpaid accrued rights.

He noted that the lawmakers wants people to get their pension benefits immediately they retire, adding that the lawmakers would do all they could to ensure the issue of accrued rights is properly addressed.

Managing Director/CEO NUPEMCO Ugwu, Oluwakemi, speaking on a topic; ‘Accrued Right – The Challenges & Way Forward’ at the event, said accrued rights refer to the pension benefits that employees of the Federal Government Treasury Funded Ministries, Departments and Agencies (MDAs) are entitled to based on their service years before the commencement of the contributory pension scheme in 2004.

According to her, this does not apply to the private sector or an MDA’s employee who have been offered employment post the CPS.The pension benefits arise from employer’s obligation of retirement benefits in the defunct Defined Benefits Scheme before the commencement of the Contributory Pension Scheme (CPS), it was converted to bond payable/redeemable at retirement, she said.

On implications of delayed accrued rights, she noted that a PFA is unable to compute and pay retirement benefits immediately after retirement, adding that despite the balances in the RSA the PFA is unable to pay retirees because of section 2.3 of the Revised Regulation on the Administration of Retirement/Terminal Benefits which states that the components of an RSA at retirement shall include accrued pension rights or pre-act benefits (if any) for employees who were in employment before the commencement of the Contributory Pension Scheme (CPS), employer/employee pension contributions, returns on investment, and the fixed portion of voluntary contributions (if any).

She submitted that the delay begets bad publicity for the Industry, stating that since retirees are not fully aware of section 2.3, they assume the PFAs intentionally do not want to pay them.

She noted that the delay has also led to rise in the numbers of untimely and preventable deaths, stating that due to the waiting period, some retirees who would have had access to health care are deprived and they die early. This is very obvious in the University system where Professors retire at 70yrs. Life expectancy in Nigeria is less than 70yrs which means they have cheated death; yet they wait for an average of 1yr before they access their funds. This is very pathetic. Increase in crime rates: This may be one of the reasons for the increase in crime because the Children of the affected people may decide to ‘help’ themselves and their parents. Purpose of the CPS may be defeated: One of the major purposes of the CPS is to ensure that retirees are paid as at when due. If Retirees have to wait for an average of 1yr to be paid, then this purpose is defeated, she posted.

On way forward, she canvassed a dedicated funding, noting that establishing a dedicated pension reserve fund specifically for accrued rights payments and the fund should be insulated from other government budgetary constraints and competing priorities.

“Sustainable Funding Sources: Identify sustainable and diverse funding sources for the reserved fund, such as a portion of tax revenues, investment income, or special levies.Alternative Revenue Streams: Introduce special levies or taxes dedicated to pension funding, such as a small percentage of corporate profits deductible from the Company Income Tax (CIT).Enact Supporting Legislation: Pass legislation that mandates regular contributions to the pension reserve fund and outline clear rules for its management and disbursement,” she submitted.

According to her, there should be long-term budgeting, stating that implementing multi-year budgeting practices to better forecast and allocate funds for pension obligations over several fiscal years, would reduce the risk of shortfalls.

“Protected Budget Lines: Ensure that budget allocations for pension payments are ring-fenced, meaning they cannot be reallocated for other purposes within the fiscal year.Emergency Funds: Create contingency funds within the pension system to address unexpected shortfalls and ensure continuous payment of accrued rights even during fiscal constraints,” she posited.

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