The Senate Passing of the Police Pension Bill is a Lurch Backwards into the Inglorious Past of the Pre-Pension Reform in Nigeria. By Ivor Takor, mni Esq.
The Senate on Tuesday through its twitter handle, informed the public that it has passed the Bill for the Establishment of a Police Pension Board. The Bill excludes the Nigerian Police Force from the Contributory Pension Scheme (CPS) and return the force to the old Defined Benefits Scheme (DBS). It is not the first time the Senate and the House of Representatives are involved in this lurch backwards towards the inglorious past of pension scheme in Nigeria. All their past misguided efforts had always been jettisoned by Past Presidents. Former Presidents Goodluck Jonathan and Muhammadu Buhari did not assent to previous Bills on the issue. For good reason, President Bola Ahmed Tinubu should also ignore the Senate’s Danse Macabre, which is also called the dance of death.
Nigeria carried out a comprehensive pension reform in 2004 with the enactment of the Pension Reform Act 2004, which was later repealed and replaced with Pension Reform Act 2014. The Contributory Pension Scheme (CPS) established under the PRA 2004 and later PRA 2014 is a mandatory scheme in the public service and for any employer with three (3) employees and above in the private sector; contributions are made by both employer and employee and put in individual employees Retirement Savings Accounts (RSAs), thereby creating a ready pool of fund for payment of pension.
The nature of RSAs is their portability from one employer to another and from one Pension Fund Administrator (PFA) to another; the RSAs are privately managed by Pension Fund Administrators, licensed for the purpose; withdrawals from the RSA on retirement of the account holder are Lump sum, Annuity & Programmed withdrawal. The law makes it mandatory for every affected employer to take a life insurance cover for his employees. The CPS is strictly regulated and supervised by the National Pension Commission (PenCom).
The Military, Department of State Security and the Nigeria Intelligence Agency were exempted from the CPS. This exemption had led to several failed legislative attempts in the past to exempt personnel of the Nigeria Police Force from the CPS since the 6th National Assembly. In 2011, a private member’s Bill was sponsored during the 6th National Assembly, seeking to exempt the Police and other Paramilitary Agencies of Government from the CPS. The 6th National Assembly declined the Bill and resolved that the issue of quantum of retirement benefits of police personnel, which was the main reason for seeking the exemption can be addressed by upward review of the rate of pension contribution under the CPS and not by exemption.
Nature of the scheThe Contributory Pension Scheme (CPS) established under the PRA 2004 and later PRA 2014 is a mandatory scheme in the public service and for any employer with fifteen (3) employees and above in the private sector; contributions are made by both employer and employee and put in individual employees Retirement Savings Accounts (RSAs), thereby creating a ready pool of fund for payment of pension; the nature of RSAs is their portability from one employer to another and from one Pension Fund Administrator (PFA) to another; the RSAs are privately managed by Pension Fund Administrators, licensed for the purpose; withdrawals from the RSA on retirement of the account holder are Lump sum, Annuity & Programmed withdrawal. The law makes it mandatory for every affected employer to take a life insurance cover for his employees. The CPS is strictly regulated and supervised by the National Pension Commission (PenCom).The Military, Department of State Security and the Nigeria Intelligence Agency were exempted from the CPS. This exemption had led to several failed legislative attempts in the past to the exemption of personnel of the Nigeria Police Force from the CPS since the 6th National Assembly. In 2011, a private member’s Bill was sponsored at the 6th National Assembly seeking to exempt the Police and other Paramilitary Agencies of Government from the CPS. The 6th National Assembly declined the Bill and resolved that the issue of quantum of retirement benefits of police personnel, which was the main reason for seeking the exemption can be addressed by upward review of the rate of pension contribution under the CPS and not by exemption.
In 2012, the Nigeria Police High Command made another case to the Federal Government for the exemption of their personnel from the CPS. The then Secretary to the Government of the Federation (SGF) constituted a Joint Committee comprising the National Salaries, Income and Wages Commission, the Nigeria Police and the National Pension Commission (PenCom) to consider the submission and present a position to the Government. After considering the report of the Joint Committee, the Government decided that the personnel of the Nigeria Police Force should continue to be covered under the CPS.
The Nigeria Police Force was further advised by the Government, to liaise with PenCom to draw-up modalities for addressing all areas of concern. Pursuant to the directives of the Government, the Nigeria Police applied to PenCom for, and was granted a Pension Fund Administrator (PFA) licence under the name the NPF Pensions Limited, subject to certain terms and conditions. The PFA is one of the Pension Operators in the country today and is doing well.
In April 2014, the Federal Government issued a White Paper on the Report of the Presidential Committee on the Restructuring and Rationalisation of Federal Government Parastatals, Commissions and Agencies accepting the Committee’s recommendation that the practice whereby certain categories of retirees were agitating to opt out of the CPS should be stopped. Government noted that it would be unable to sustain pension payment under the defined benefits scheme and further directed that only the Military, Department of State Security and the Nigeria Intelligence Agency may withdraw from the CPS.
In 2017, another Private Member’s Bill was presented to the 8th National Assembly seeking to exempt the Nigeria Police and other Paramilitary Agencies from the CPS. During the Public Hearing on the Bill held on 28 September 2017, the Nigeria Police High Command, the Office of the Secretary to the Government of the Federation (OSGF), PenCom, the Nigeria Labour Congress (NLC), the Trade Union Congress (TUC), the Nigeria Union of Pensioners (NUP) and other stakeholders in the pension industry overwhelmingly rejected the proposal because of the preponderance of its disadvantages. The 8th National Assembly therefore declined the proposal for exemption and resolved that the welfare of the Nigeria Police personnel should be enhanced within the framework of the CPS.
The Senate passed the current Bill despite opposition to the Bill by critical stakeholders including the Federal Government, the National Pension Commission, the Pension Fund Operators Association of Nigeria, the Nigeria Labour Congress as well as some Civil Societies Pension Advocacy Organisations, during the Public Hearing organised by the Senate Committee on Police Affairs on 20th January, 2023.
The immediate past Secretary to the Government of the Federation, Boss Mustapha, had written to the Inspector General of Police in January 2022 to draw his attention to his Office circular, Ref: 59149/S.1/C.1/11/266 dated July 20, 2021, which had said police must be under the CPS, reminding him that the circular is still in force. The former SGF also referred the Police high Command to the White Paper on the Report of the Presidential Committee on Restructuring and Rationalisation of Federal Government Parastatals, Commissions and Agencies, which expressly forbids any government body, apart from the military and the intelligence services from exiting the Contributory Pension Scheme. This was brought to the attention of the Senate Committee on Police Affairs during the 20th January, 2023 Public Hearing in the passed Bill.
It is still baffling that despite the above, the Senate still went ahead to pass the Bill, a few days to the end of their tenure. I am not in agreement with those who are insinuating that previous attempts and the current passing of the Bill is motivated by pecuniary interest. I see the passing of the Bill as a moderate face to reactionary politics. In essence, this amounts to a defence of the status quo, the existing state of affairs. For some, this desire to resist or avoid change is deeply rooted in human psychology.
In his essay ‘Rationalism in Politics’ (1962), for example, Micheal Oakeshott argued that to be a conservative is to prefer the familiar to the unknown, to prefer the tried to the untried, fact to mystery, the actual to the possible, the limited to the unbound, the near to the distant, the sufficient to the super abundant, the convenient to the perfect, present laughter to utopian bliss’. By this, Oakeshott did not suggest that the present is in any way perfect or even that it is valued on account of its familiarity, a familiarity that engenders a sense of reassurance, stability and security.
Both the DBS and the CPS, have been tried and the results are in the public domain. Therefore, moving the police from the CPS back to DBS is irrational; lacking usual or normal mental clarity. It is a decision that is not endowed with reason or understanding.
The rationales for the reforms were that the DBS in the public service was unfunded; unsustainable as it had an outstanding pension liabilities in the public service as at 2004 was N2.4 trillion; its administration was weak, inefficient and lacked regulatory control, which gave room for corruption; demographic shifts and aging, made the CPS in the public service unsustainable. In the private sector, most workers were not covered by any form of retirement benefit scheme; the funds of the few private sector pension schemes that were in existence, were not segregated from the funds of the companies. Consequently, any company that went under, the workers were left without pension.
The current situation is that from a situation of hopelessness, with a Federal public service pension liability of N2.4 trillion as at 2004, which was one of the reasons for the 2004 reform, the pension industry, which was non existent in 2004 has accumulated pension assets of N15.45 trillion as at February 2023. There is now a ready pool of funds for payment of retirement benefits to members of the scheme.
The Bill is indefensible because during the Public hearing, the promoters of the Bill, failed to present any new superior grounds that would necessitate a review of the previous parliamentary and executive decisions on the matter. On the contrary, the arguments against the exemption of the Police are more compelling today and reinforced by economic, fiscal, social and public policy reasons. President Tinubu should therefore consign the Bill in the dustbin where it belong.
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