For getting low pay while in employment, late enrolment or non-compliance of employers to the Contributory Pension Scheme (CPS), about 3,398 retirees who left employment in the first quarter of 2021 would not be able to get a pension package for retirement.
The reason is that the balance in their Retirement Savings Account (RSA) as at the date of disengagement is below the threshold required to procure a pension package as provided in the Pension Reform Act.
The National Pension Commission (PenCom) during the first quarter of 2021 granted approval for Enbloc payment of retirement benefits to 3,398 retirees whose RSA balances were N550,000 below and considered insufficient to procure Programmed Withdrawal or Retiree Life Annuity of a reasonable amount for an expected life span.
In this regard, a total sum of N803,027,095.31 was paid to the 3,398 retirees, and they all came from the private sector, as against 3,499 people that received N848.92 million during the last quarter of 2020.
Year-on-year basis, the figure was 2,227 retirees in the first quarter of 2020, and when compared with 3398 in the first quarter of 2021, it is a 52.6 percent increase.
Industry analysts say some of the reasons for this unhealthy development is poor compliance among private sector institutions, as some started compliance late, and when they started remittances were irregular.
They also attribute it to low pay earned by some employees, which amounts to almost nothing and too low to procure a pension package in retirement.
The implication of this is that many of these retirees would have to depend on their families for survival if they were not able to make other kinds of savings while in employment or become a nuisance to society, which is what the CPS seeks to address.
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Pius Apere, an actuarial scientist and chartered insurer, says Nigerian pensioners have two basic expectations under the CPS, namely “to have a sustainable standard of living in retirement and their benefits paid as at when due.”
Apere, who is also the chairman/CEO of Achor Actuarial Services Limited, says the above expectations cannot be fully met for all pensioners without the implementation of the Minimum Pension Guaranteed (MPG) as stated in Section 84(1) of the Pension Reform Act (PRA) 2014.
“This is true, particularly for those retirees with small Retirement Savings Account (RSA) balances because they have not accumulated enough as at the date of retirement to have a decent standard of living in retirement.”
According to Apere, the delay in implementation of MPG by the regulator many years after the CPS was established in 2004 has resulted in growing sense of disenchantment among current pensioners with relatively small RSA balances at retirement.
“This is because of the small monthly pension they have been receiving over the years relative to the huge gains (from investment returns and/or dividends) the Pension Fund Administrators (PFAs) are currently making. The MPG if implemented would have eliminated the disenchantment among the current pensioners, he states.
He notes however that the implementation of the Enhanced Pension (EP) programme by PenCom effective from December 2017 aimed at providing sustainable standard of living in retirement for the Programmed Withdrawal (PW) pensioners could be seen as cushioning the effect of the non-implementation of MPG for these PW pensioners, but stated that this could not help those in retiree life annuity.
Meanwhile, the Centre for Pension Right Advocacy (CPRA), has called on PenCom to put in place modalities for the full implementation of the MPG in the Pension Enhancement Framework, which PenCom introduced recently.
The group says the introduction of the Pension Framework by PenCom aimed at enhancing pension of those who are on Programmed Withdrawal under the CPS might not meet the expectations of pensioners.
Ivor Takor, executive director of CPRA, had however applauded the commission’s initiative to enhance pensions but noted that what had been introduced through the framework was just a palliative.
