Re-echoing the safety of the contributory pension scheme

By ROSEMARY ONUOHA

The Contributory Pension Scheme, CPS, was established 9 many years ago by the Federal Government.

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It is meant to make sure that improvident people conserve in purchase to cater for their livelihood throughout old age, establish a uniform set of principles, rules and standards for the administration and payments of retirement rewards to employees in the 2 private and public sectors and that retirees get their pension as at when due.

Before then, what obtained in the public sector was a defined advantage non-contributory pension scheme whereby retirees have been paid from budgetary allocations. In the personal sector, there were different varieties of pension schemes based on individual employers and their agreement with in-home unions exactly where they existed.

With the enactment of the Pension Reform Act, 2004 (PRA), the Federal Government arm of the public sector embraced contributory pension by January 1, 2005 even though it was created necessary for the private sector by July one, 2005.

Structure of Contributory Pension

The National Pension Commission (PenCom) was established in line with provisions of the pension reform law.  It is statutorily empowered to regulate the pension sector from the scratch and to produce structures for the smooth operation of the scheme and it licensed 18 Pension Fund Administrators (PFAs), 6 Closed Pension Fund Administrators (CPFAs) and 4 Pension Fund Custodians (PFCs).

Under the scheme, employers deduct 6.5 per cent of personal employees month-to-month salary and contribute at least the very same amount which is credited into the workers’ Retirement Cost savings Accounts (RSAs). The respective PFAs chosen by individual staff then control the accumulated funds, which is under the custody of the PFC selected by the PFA.

Offering an update on the scheme, the Acting Director Basic of PenCom, Mrs. Chinelo Anohu-Amazu stated Nigeria’s contributory pension scheme amongst 2004 and final year grew at an regular fee of 27.05 per cent yearly and from inception succeeded in reversing and plugging the N2.6 trillion pension hole that weighed down defined benefits schemes in the nation and accumulated virtually N4 trillion as at February 2014.

Also, the Pension Fund Operators Association of Nigeria (PenOp) confirmed that the variety of contributors beneath the scheme rose to 5.9 million final month and forecasted that half a million workers would join the scheme this year.

Setbacks for Contributory Pension

The residual defined positive aspects non-contributory pension scheme in the country has continued to pose significant threats to Nigeria’s contributory pension scheme in its tenth yr.  Fraud in the administration of the residual defined positive aspects schemes have persisted although retirees beneath the rested schemes suffered hardships and a variety of forms of dehumanisation.

Even with the assurances of contributory pension, each report about fraud and mismanagement in the residual schemes rubs off negatively on the new scheme because a lot of Nigerians do not really recognize that the 2 schemes are like 2 parallel lines that can never meet.

2 years in the past, whilst PenCom and pension operators were shoring up self-assurance for contributory pension, the National Assembly uncovered massive fraud in the residual scheme.  This discovery threw spanners into the operates of contributory pension stakeholders and the picture of the scheme dipped significantly.

Whilst some members of the public blamed best government functionaries for pilfering retirees’ stipends place under their custody, pension operators blamed the media for misrepresenting information that emerged from the probe.  The fallout of the crisis forced stakeholders back to the drawing board, in an attempt to reposition the sector with a view to create a strong brand of the new contributory pension scheme.

And as they count their blessings, information of another pension scam appreciated broad publicity last week and like preceding ones it was erroneously reported that it took area in the workplace of the contributory pension regulator, PenCom.

The Chairman of the Independent Corrupt Practices and Associated Offences Commission (ICPC), Mr. Ekpo Nta was reported as getting said that his organisation apprehended a Clerk in PenCom who opened 50 different bank accounts with various names and signatures and banked over N450 million in these accounts.

These reports produced a lot of negative feedback from Nigerians who could not hide their disappointment following this discovery that has cast aspersions on all the assurances of safety and sanctity of pension fund beneath contributory pension scheme.

Reacting to the reports, the Head of the Communications Unit at PenCom, Mr. Emeka Onuora came out strongly in defense of PenCom saying “the commission wishes to state categorically that no official of PenCom is concerned in any type of looting of pension fund.”

Investigations also confirmed that PenCom does not engage clerks and as such, none of its personnel goes by that designation even as it denied getting been informed by any company that its worker was getting investigated or prosecuted for looting pension fund.

The ICPC chairman later denied saying the culprit operates in PenCom and clarified that the apprehended junior officer works in the civil.

Safeguards

PenCom has continued to beat its chest about the safeguards place in place below the contributory pension scheme to ensure security of contributors’ income.  Some of these safeguards contain the anti-fraud mechanism laced about its operation even as the commission assures that loopholes that fraudsters who intend to corner the fund could consider benefit of are plugged to a very sensible extent.

Giving much more assurances, Onuora explained “There are safeguards to shield the pension funds from all varieties of misappropriation with the functions of custody and administration of the funds plainly delineated. Although the PFCs are in custody of the money, the PFAs manage and administer them.”

He highlighted the truth that PFAs and PFCs are also mandated by the Commission to preserve large amounts of transparency and accountability and to give contributors unfettered access to any details relating to their accumulated pension financial savings.

In addition, PenCom has in area stringent regimes, which consist of everyday monitoring of the investment activities of PFAs and the institution of stringent spend-out authorisation needs.  These guarantee that PFAs are not reckless in their investment choices, even though guaranteeing that only the proper beneficiaries would have access to pension income.

Some other measures include the guarantee to the full sum and value of the pension fund and assets held by Pension Fund Custodians as mandated by the regulator as properly as threat rating for instruments that pension funds could be invested in.

In addition to the engagement of a Compliance Officer (CO) who is saddled with the responsibility of making certain compliance with the provisions of the law with regards to pension issues, PenCom evaluations the internal guidelines and rules of operators, keeps track of the actions of pension operators and gets typical reports on their activities.

Each PFA is also necessary to keep a Statutory Reserve Fund, into which shall be credited yearly with 12.5 per cent of the net profit soon after tax or as stipulated by PenCom to meet claims.

The Commission also imposes legal and administrative sanctions for non-compliance with rules and regulations as any operator discovered wanting is sanctioned in line with the law amongst other items.

“These checks and balances had been embedded in the law to give the contributors rest of thoughts and encouraged employees not to be skeptical about the new contributory pension scheme. The pension reform has addressed troubles of past pension schemes to a large extent,” PenCom assured.

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