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State pensions raise concerns over workers’ retirement welfare

ARM-Pensions

Concerns are growing over the fate (after retirement) of civil servants at the state level as nine years after the enactment of the Pension Reform Act, some states of the federation are yet to key into the contributory pension scheme (CPS), while some others which started have suspended implementation.

The Pension Reform Act 2004 brought into existence the CPS to replace the old pension scheme, which was largely unfunded with pension liabilities in excess of N2 trillion.

In the old scheme, employers including governments carried the entire burden of their employees’ pensions. The new scheme, however, shares the responsibility of pensions between the employer and employee.

Under the new scheme, employers and employees in both the public and private sectors contribute 7.5 percent each (totalling 15 percent) of the employee’s monthly earnings, which is kept with a licenced custodian and managed by a pension fund administrator (PFA) of the employee’s choice, to provide succour for the employee upon retirement.

But years after, some states are yet to replicate the law to enable them to switch over to the CPS, which results show is the best thing that could happen to Nigerian workers.

Worried by this development, the Nigeria Labour Congress (NLC) has directed the leadership of its state councils to take up the matter with their respective state legislatures and governors in order to avoid a situation where workers in such states are subjected to the same indecent treatment that retirees under the old pension scheme passed through. The old system frequently saw pensioners collapsing and sometimes dying on queues during verification exercises.

Chris Uyot, secretary-general, NLC, told BusinessDay that the national executive council (NEC) of congress has resolved that the state councils should engage their governors and legislators, saying the directive became imperative to put paid to the inhuman conditions which retirees under the old system were subjected to, and to arrest the fleecing of pension monies in custody of government agencies.

“Although the CPS is not the total solution to the pension challenge faced by workers, it is better than the old scheme under which the accrued benefits of civil servants are not guaranteed upon retirement,” Uyot said.

“We have seen billions of pension monies under the old scheme in different government agencies fleeced, leaving retirees to groan in their old age. We do not want to see this ugly picture of retirees collapsing while queuing up for verification exercises. This is why the states should key into the contributory pension arrangement which we see as an improvement over the old scheme. So we have directed our state councils to insist that their respective governments key into the CPS in view of the obvious implications of not doing so,” he added.

However, documents accessed by BusinessDay show that the South-West zone, comprising Lagos, Ogun, Ekiti, Ondo, Oyo and Osun, tops the list of states that have enacted the CPS law. States in the zone, apart from replicating the law, have commenced the implementation of the scheme which guarantees stress-free retirement for their workers.

But this is not the same in other geopolitical zones, where some states seem unperturbed by the non-implementation of the scheme for their workers.

Lagos, however, stands out among the complying states as it was the first in the federation to embrace the scheme, having enacted the law since 2007. So far, it has a total of 45,730 employees, with pension contributions remittance of N46.50 billion as at July 2013.

Furthermore, the state issued retirement benefit bonds of N18.9 billion to its retirees which have been fully redeemed and proceeds paid into the employees’ individual RSAs, while 2,242 employees from the state have retired under the scheme as at August 2013.

In the case of Osun State, it adopted the CPS and enacted its law in 2009. It has also made significant progress in its implementation of the CPS, having so far registered 45,106 employees under the scheme and remitted N4.15 billion as pension contributions, while the sum of N1.90 billion has been remitted into the Retirement Benefits Bond Redemption Fund Account.

However, the state is yet to renew the Group Life Insurance Policy for its employees in 2013 and has also not carried out an actuarial valuation to determine accrued pension rights of employees.

Ogun State adopted the CPS and enacted its law in 2007. It has also made significant progress in its implementation of the CPS, having so far registered 24,902 employees under the scheme and remitted N10.90 billion as pension contributions, while the sum of N3 billion has been remitted into the Retirement Benefits Bond Redemption Fund Account held at the Central Bank of Nigeria. However, the state is yet to put in place a Group Life Insurance Policy for its employees.

Ekiti State enacted its law on the CPS in January 2011 and has also 37,676 employees registered under the scheme. The state has conducted an actuarial valuation to determine pension liabilities under the old scheme and put in place a Group Life Insurance Policy for its employees. However, it is yet to commence remittance of pension contributions into employees RSAs with PFAs.

Oyo State enacted its law on the CPS in January 2010. However, it is yet to commence the full implementation of the CPS.

In the case of Ondo, the state has only drafted a bill on the CPS, a copy of which had been reviewed by the commission and comments duly forwarded to the state.

The South-East zone is yet to take its rightful place in terms of the adoption and implementation of the CPS, with no state among the five in the zone attaining full implementation status. Three states in the zone, namely Abia, Ebonyi and Enugu, have not enacted the law on the CPS. Imo, which enacted the CPS law in 2008, has suspended its implementation. Anambra State only recently enacted the law on the CPS and is struggling with its implementation.

Generally, the level of implementation in the South-East zone raises concerns when viewed against the fact that the decision to adopt the CPS was taken by the National Council of States at its meeting of July 2006.

Only Niger State is in full compliance with the contributory pension scheme out of all the states in the North-Central zone.

By: JOSHUA BASSEY & MODESTUS ANAESORONYE