BusinessDay

Lack of political will undermines states’ pension compliance

… as Lagos, Kaduna, FCT lead in full compliance

The lack of political will on the part of many state executives and the inability of citizens to hold leaders accountable for their promises have been identified as key reasons for poor compliance of many state governments to the country’s Contributory Pension Scheme (CPS).

These account for why only two states in the country – Lagos and Kaduna, and the Federal Capital Territory (FCT) out of the 36 states – could be said to have fully complied with the Pension Reform Act 2004, as amended in 2014.

Contributory Pension Scheme (CPS) is an arrangement where both the employer and the employee contribute a portion of an employee’s monthly emolument towards the payment of the employee’s pension at retirement.

The main objective of the Pension Reform, which brought the CPS, is to ensure that every person that worked in either the public or private sectors in Nigeria, including the self-employed persons, receives his/her retirement benefits as and when due. The minimum rate of contribution is 18 percent of the employee’s monthly emoluments, where 10 percent is contributed by the employer and 8 percent by the employee.

However, the employer may decide to bear the full responsibility of the contribution provided it is not less than 18 percent of the monthly emolument of the employee.

According to the figures released by the National Pension Commission (PenCom) on state compliance level for the period ended February 2020, Lagos, Kaduna and the FCT have fully complied with the scheme. These are in terms of pension remittance, monthly payment of pensions as well as provision of group life assurance for their employees.

The data from PenCom further show that Delta and Osun states are paying their monthly pensions to retirees, but yet to include group life cover, while Edo has complied with instituting group life cover for Edo workers.

The Act stipulates that every employer, to which this applies, must maintain a life assurance policy in favour of the employee for a minimum of three times the annual total emolument of the employee. Under the policy, total annual emolument is defined as the basic salary, transport and housing allowances and shall not include bonuses, overtime, directors’ fees or other fluctuating emoluments.

Meanwhile, apart from Lagos, Kaduna and FCT, other states like Ondo, Edo, Anambra, Ekiti, Osun, and Delta are remitting employer-employee contributions to their Pension Fund Custodians.

Rivers and Kebbi are at the moment only remitting employee’s portion of the contribution.
As at the end of February 2020 also, 25 states including the FCT have enacted the pension laws, while seven others were still at Bills stage.

Chief executive officer of one of the PFAs, who does not want his name mentioned, says, “We are doing all we can to encourage states to key into the scheme, but unfortunately a lot of the governors don’t want to compromise their luxury and comfort.”

According to the CEO, another reason is that citizens have glued themselves to whatever governments give to them, without the willing power to demand for their rights.

Dan Ndackson, head, States Operations Department of PenCom, had said during an interview that in adopting the CPS, challenges come from two angles – one is from the executives of the states and the second is from the labour unions.

According to Ndackson, the challenges that come from labour are as a result of ignorance because it is co-employee scheme, which guarantees the employee the likelihood of him getting something at retirement much more than the old scheme. “So, even though the scheme has some challenges in some states, I link it to the ignorance of them not understanding the benefits of the scheme,” he said.

Ndackson noted that the greatest challenges that this scheme faces are those that come from the chief executives of the states.

“The truth is that, any state government that adopts the scheme makes a sacrifice. What sacrifice does that government make? The money that ordinarily some could have used for some other things, including wrong uses, have to be paid religiously on a monthly basis. Not so many chief executives are comfortable with that.

“This therefore is one important index to measure a governor or state government that is forward looking and interested in the welfare of its citizens. In this case, not only has the governor made sacrifice to use tax payers money judiciously, he has shifted away from the norm of public sector wastages that see chief executives on that capacity living luxury life and extravagance on public funds, when there are pressing needs in their states,” the PenCom official had said.

Get real time updates directly on you device, subscribe now.