The new Pension Act 2014 has eliminated the delay protocol and placed life insurance claim settlement procedure under Section 57 of Insurance Act 2003. Benefits will now be paid by the insurer direct to beneficiaries named in the life policy. The lawyers, Probate Division of the Courts and the Pension Fund Administrators will no longer be involved in redemption of death benefits under Group Life.
Funds will thus be available to meet contingent needs of spouse, continuity of children education and exigent needs of other dependants following death of a breadwinner. Both the Pension Commission and the National Insurance Commission deserve commendation for inclusion of Section 8 in the new Pension Act 2014.
However, the delay associated with redeeming pension benefits marooned in a PFA’s office following the death of a contributor caused by delay in procuring Letter of Administration still remains. The Pension Commission might need to consider adoption of a modified version of Section 57 of the Insurance Act 2003 to resolve the problem.
The revised definition of annual total emolument under the Pension Act 2014 has also increased the financial responsibility of the Employer. Under the Pension Act 2004, definition of emoluments for both Pension and Group Life were identical and was strictly confined to basic salary, housing and transport allowance. The new definition under Group Life is Gross Emolument which encompasses every component of remuneration in the individuals’ contract of service. The enhanced definition will lead to a modest increase in Group Life insurance premium.
The Board of enquiry to be set up by PENCOM having to meet after an employee has been declared missing for 12months to approve settlement of a claim will unavoidably lead to delay in Group Life claim settlement of the individual concerned. Perhaps a time frame within when such meeting shall hold should have been given. An alternative option is the swearing of an affidavit and two publications in a national newspaper twice. The first publication is to be made when it is discovered that the employee is missing. The second publication following the first could be made after 12 months if the employee remains missing. The reviewer believes this should be sufficient qualification for a claim to be paid.
Tax Exemption Issues
Tax Exemption benefits accruing to the Employer and the Employee from contributions are detailed in Sections 10 of the new Pension Act 2014.
Obligation of Pension Fund Custodian
The Pension Fund Custodian shall maintain all pension funds and assets in its custody to the exclusive order of the relevant Pension Fund Administrator and the Commission-Section 70 (1)
The Pension Fund Custodian shall not utilize any pension fund or asset in its custody to meet its own financial obligation to any person whatsoever-Section 70 (2)
Comment
This section emphasizes that pension fund is exclusively for Pension and should be treated as such. Section 70 aims to protect the sanctity of the fund. Any infraction constitutes a grave criminal offence and shall be visited with the severest of sanctions as will be discussed in subsequent sections.
Offences and Penalties and Enforcement Powers
A person who contravenes any of the provisions of the Act commits an offence and where no penalty is prescribed, shall be liable on conviction to a fine of not less than N250,000.00 or to a term of not less than one year of imprisonment or to both fine and punishment-Section 99 (1)
Any person or body who attempts to commit any offence specified in this Act commits an offence and is liable, on conviction, to the same punishment as is prescribed for the full offence in the Act-Section 99 (2)
A Pension Fund Administrator or Pension Fund Custodian that reimburses or pays for a staff, officer or director directly or indirectly a fine imposed under the Act commits an offence and is liable on conviction to a fine of not less than N5,000,000.00 and also forfeits the amount repaid or reimbursed to the staff, officer or director-Section 99 (4).
Offences Relating To Misappropriation of Funds by PFA, PFC and Others
A Pension Fund Administrator (PFA) or Pension Fund Custodian) or person or body who misappropriates or diverts pension fund commits an offence under the Act and is liable on conviction to a fine of an amount equal to three times the amount so misappropriated or diverted or to a term of not less than 10years imprisonment or to both fine and imprisonment-Section 100 (1)
Offences Relating To Pension Fund Custodian
A Pension Fund Custodian who contravenes the Provision of section 70 of this Act commits an offence and is liable on conviction to a fine of not less than N10,000,000 and each of its director or principal officers is liable to a fine not less than N5,000,000 or to a term of not less than 5years imprisonment or to both such fine and imprisonment.-Section 101
Offences by Body Corporate
Where an offence under the Act is committed by a body corporate, the body corporate or every
•director, manager, secretary or other officers of the body corporate
•person who was purporting to act in such capacity mentioned in paragraph (a)
had knowledge or believed to have knowledge of the commission of the offence and who did not exercise due diligence to ensure compliance with this Act shall be deemed to have committed the offence and shall be proceeded against in accordance with this Act-Section 103
Comment
These sanctions are severe and underscore Government irrevocable commitment to protect the sanctity and safety of Pension Funds from pension fund pirates as recently witnessed in Abuja in the flagrant abuses in the police pension fund administration scheme.
General Comment
The reviewer has some concerns with Section 7 (1) (c) of the Act which deals with annuity for life purchased from Life Insurance Companies licensed by the National Insurance Commission. It is estimated that Life offices are carrying a little above 20% existing Pension fund and the proportion is bound to spike in the foreseeable future due to increasing popularity and the immense advantage of annuity. It seems the Pension Act 2014 has no provision for potential delinquent life offices which might be tempted to abuse the massive annuity funds entrusted to their care.
This brings to mind the case of defunct Lion of Africa Insurance Company Limited. Like the Titanic, it sank with quite a chunk of Pension funds of employees of Federal and State Governments agencies, Private companies and Private Individuals. The retirees continue languishing in penury and may probably continue in this state till their last day.
Pension Fund should just not disappear into thin air. The insurance company has since been liquidated or it is still under liquidation. Till date, many questions remain unanswered. How did the fund disappear and who and what institutions were involved?
It is the considered opinion of the reviewer that the National Insurance Commission might also need to consider creating Sections in its own Act to match Sections 70, 100 and 101 of Pension Act 2014 to specifically cater for institutions underwriting annuity products. It will make the institutions more responsible and to be constantly aware that there is a price to pay and that severe sanctions await underwriting offices which choose to commit infractions on guidelines laid down by both NAICOM and PENCOM on the handling of Annuity Funds.
OLAGUNJU B. Bashir Jeffery WA
