Bleak future for retirees as FG balks on N45bn accrued pension

The Federal Government has failed to meet its obligation of funding the Retirement Benefits Bonds Redemption Fund (RBBRF) for public sector retirees for the past 11 months, since September 2015 with total outstanding amounting to about N45 billion, BusinessDay findings show.

This is further worsened by the appropriation of  N50 billion in the 2016 budget for payment of Federal Government Employees’ retirement accrued rights, against  N91 billion required to fund the scheme, leaving a shortfall of N41billion, according to calculations by the industry regulator, the National Pension Commission (PenCom).

The implication is that the  pension accrued rights would be underfunded in 2016 to the tune of N41 billion and this would further lead to more crises in the pension system.

It further means that  government will be compounding the plight of more retirees who would be unable to access their retirement benefits, says a market analysts who is worried by the situation.

This ugly development has set a bad precedent on the Country’s thriving pension system,  where private sector employers look up to government for compliance. It is further undermining the wellbeing of public sector retirees who are leaving employment now without available fund to pay them pensions.

The current development has made it difficult for Pension Fund Administrators (PFAs) to commence payment of pension benefits to affected public sector retirees who left employment within this period.

For most states, the situation is the same, as many that  could not pay salaries or have embarked on  salary cuts,  have also stopped  remitting pension dues.

Eguarekhide Longe, chairman, Pension Fund Operators Association of Nigeria (PenOp) said compliance with regard to remittance of pension contributions from the public sector on both federal and state levels has lagged significantly.

“While remittances from the Federal Government, through the National Pension Commission (Pencom) were last received since September 2015, some states have outstanding remittances dating back over two years.”

Longe  expressed regrets that some retirees had not been able to access their pensions even at presentation of bonds issued to them by government.

“This is so because there aren’t enough resources from the Federal Government to meet the obligation.

The Pension Reform Law mandates the Federal Government to set aside a percentage of its total monthly wage into a retirement savings bond account so that upon the retirement of the affected individuals, this bond will be redeemed and then paid.

Section 15(1) (a) (b) of PRA 2014 states that the transfer entitlement (the accrued rights to retirement benefit) for any non-exempted public service employees who had been under any unfunded DB pension scheme existing before the commencement of PRA 2004, shall be recognised in the form of a bond to be known as the Federal Government or Federal Capital Territory Retirement Benefits Bonds (RBB) issued by the Debt Management Office (DMO).

Chinelo Anohu-Amazu, director-general, National Pension Commission(PenCom) had informed that at the beginning of the reform, there was a cut-off date and those who had three or less number of years to go, didn’t have to join the scheme, while those who had four or more years to go, joined the new scheme. “Already, they were mid way into their career and so had some rights due them. So the law says, those rights are to be computed as though they had retired in 2004 and then converted as bond to be redeemed at the time of their retirement.”

This is the issue, and the PFA’s saddled with managing RSA under the CPS are unable to pay because the payment schedule says they will need to add both the accrued rights and the contributions together, so that there will be agreement on whether it is for lump sum, programmed withdrawal or it’s for annuity. It will have to be a totality of what is due you; otherwise, it will not be a realistic payment.”

The Pension Fund Operators Association of Nigeria (PenOp) recently said the CPS has been working perfectly, but the delayed accrued rights payment and remittances  by government are dragging the shadow of the old scheme into the new scheme, making it look ineffective.

According to the Pension Reform Act 2014, the objective of the CPS, among others, is to ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory, States and Local Governments or the Private Sector, receives his retirement benefits as and when due.

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