Double whammy for 32 pension defaulters

It has become double whammy for 32 employers that failed to remit their employee’s pensions to their Pension Fund Administrators (PFAs) as provided in the Pension Reform Act 2014.

In a recent data released by the National Pension Commission (PenCom), the 32 affected employers paid N319.47 million, comprising principal contributions of N128.18 and penalties N191.29 million, through the activities of Appointed Recovery Agents.

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From the commencement of the recovery exercise in June 2012 to 31 December 2023, a total sum of N25.45 billion, comprising of principal contributions of N12.93 billion and penalties N12.52 billion.

Through appointed recovery agents of the Commission, the defaulting employers are made to pay unremitted contributions alongside accrued interest and penalties.

Section 11 (6) of the Pension Act 2014, states that any employer who fails to remit the contributions within the time prescribed shall, in addition to making the remittance already due, be liable to a penalty to be stipulated by the commission.

The penalty, according to the pension law shall not be less than 2 percent of the total contribution that remains unpaid for each month, or part of each month that the default continues, and the amount of the penalty shall be recoverable as a debt owing to the employee’s retirement savings account as the case may be.

If after seven days of the payment of salaries any employer refuses for whatever reason to remit the pension contributions of his employee to the PFA where such employee has opened a Retirement Saving Account, the PFA is obligated to report the employer to PenCom if the funds are not received by the 14th day from the payment of salaries. Such an employer will be liable to a penalty in addition to the funds due, a senior official of PenCom who did not want his name mentioned said.

Ivor Takor, director general, Centre for Pension Right Advocacy had said pension remittance should be taken seriously by employers because it been deducted from their salaries and the law says the deduction should be paid into the RSAs of the employees, not later than seven days after salaries are paid.

Oguche Agudah, CEO, Pension Funds Operators Association of Nigeria (PenOp) said the concept of using recovery agents to tackle issue of unremitted pensions is a good development and they have been doing quite well.

He said their efforts are applauded and encouraged. However, In addition to the recovery agents, we need to do more on enlightenment of the public (both employers and employees) on the benefits of taking an active part in the contributory pension scheme.

Agudah also said, “Taking part in the scheme, reduced a company’s effective tax rate, because their contributions are tax exempt. In addition, it is a tool for employee engagement, retention and attraction.”

The Pension Reform Act 2004, as amended in 2014 establishes a Contributory Pension Scheme (CPS) for all employees in the country to ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory or Private Sector receives his retirement benefits as and when due.

The scheme empowers employers to deduct pension contributions at source and remit such deductions to the employees’ Pension Fund Administrator, which then ensures that each contributor’s PIN is credited with the amount due.

Under the scheme, an employee contributes 8 percent of his monthly emolument, that is, the sum total of basic salary, transportation and housing allowance, while the employer also contributes 10 percent of the employee’s monthly emolument towards the retirement benefits of the employee. The employer is empowered to deduct at source the monthly contribution of the employee in his employment and, not later than seven working days from the day the employee is paid his salary, remit this amount to the custodian specified by the pension fund administrator.

In case an employer refuses to pay the contributions stipulated in the Pension Act to the PFA chosen by the employees, the PFA is at liberty to report such employer to the National Pension Commission (PenCom).

While employers with outstanding pension contributions yet to be remitted to their employees’ RSAs are being identified through the review of monthly return of contribution not received from employers submitted by PFAs, the details of defaulting employers, including the name of employees whose pension contributions were not remitted, the amounts involved and the period covered, are being generated and verified to ensure accuracy.