Nigeria’s contributory pension scheme (CPS), which came following the establishment of the Pension Reform Act 2004, have been described by many as government’s most successful reform policy.
The claim is not just because it has succeeded in addressing the biggest problem facing pension in Nigeria at a time, which is financing deficit and issues of mismanagement of the funds by public officers, it has succeeded in giving workers the assurance that their pension will be available as at when due.
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These continues to reemphasise the diligence in management of the funds by the Pension Fund Administrators (PFAs) and the pension custodians who have securely kept the invested assets , as well as the oversight functions of the National Pension Commission (PenCom) that has kept the funds protected.
The overall success of the scheme is shown here, on the amount of money paid as retirement or terminal pay-outs since inception of the scheme to June 2023.
Data from PenCom analysed by the Pension Fund Operators Association of Nigeria (PenOp), shows that the cumulative pay out on programmed withdrawal since inception of the scheme to June 2023 amounts N964.24 billion, while life annuity amounts N227.29 billion.
Death benefits paid to contributors and retirees dependants amounted to N356.32 billion, while enbloc payments of retirement benefits is N43.31 billion, as withdrawal of 25 percent amounts to N208.86 billion.
PenOp says payout of retirement benefits has consistently been a testament to Pension Fund Operators’ commitment to retirees.
Nigeria’s former President Olusegun Obasanjo stated recently that he was pleasantly surprised at the growth of the pension assets over the last 20 years. He mentioned that when his administration instituted the pension reforms and pushed to have a bill to reform the way pension administration were done in Nigeria, they did not think that the assets will grow this quickly and have the positive effect it has had so far.
Obasanjo who stated this in a recent interaction with Oguche Agudah, CEO, PenOp as part of activities to mark 20 years of the sector one of the major reasons for the reform was his pain at seeing so many pensioners queuing up to collect their pensions during his first term in office, especially military men who had served the Nation.
With this in mind, he resolved to see how the government could make pension management and administration private sector driven and more in line with global best practices.
When asked about why they chose Contributory Pension Scheme (CPS) for Nigeria, He said “it’s simple, we just see what other countries are doing and if it’s good for us we copy it and adapt. There is no harm in copying if we see what other countries are doing and it’s good for them, we adapt”.
In addition, he said what the pension industry needs to do now is to see how the pension assets that have been saved over the years can help more in national development, especially infrastructure investments in a safe and sustainable manner that does not jeopardize people’s pensions.
The National Union of Pensioners Contributory Pension Scheme (NUPCPS) during a courtesy visit to PenOp recently stated that the Contributory Pension Scheme (CPS) is the best thing that has happened to Nigeria’s Pension administration.
The pensioners who were represented by their executives from various states of the Federation mentioned that the way that the CPS is framed is in the best interest of pensioners if implemented to the letter. They said the CPS has eliminated fraud, has given them certainty of payments of pensions, and has also allowed them to be able to plan.
Having said this however, they said there are aspects of the CPS that can be improved upon, and they called on the PenOp CEO to engage with other stakeholders to ensure that these things are looked into. Some of the things they mentioned had to do with constant engagement with the pensioners by the industry, the enhancement of their pensions and more transparency in terms of how their returns are shown to them.
Agudah, responding to the call, said the pensioners are the reason the industry exists and that all workers in the pension space have the pensioners to thank for their jobs.
He assured the pensioners that the pension industry is committed to the welfare of the pensioners, and will continue to listen and engage with them ever so often to hear them out.
He assured them that Pension Fund Operators are working daily to ensure the best outcomes for pensioners.
