As agitation by Labour for a new minimum wage continues with increasing attention of the federal and states governments, expert has identified the need to consider pensioners under the Contributory Pension Scheme (CPS) who are also affected by the reasons for increase.
According to the expert, increasing minimum wage generally signifies an acknowledgment of the rising cost of living and inflationary pressures.
“For instance, the last increase in national minimum wage from N18, 000 to N30, 000 in 2019 was driven by the need to ensure that workers earn a living wage that can meet their basic needs. Ideally, such increment should also prompt a review of pensions to ensure that pensioners were not left behind economically, says Ivor Takor, director, Center for Pension Advocacy.
Takor speaking on ‘Aligning Minimum Wage and Pension Adjustments: Legal Mandates and Equity in Nigeria’s Retirement System’ said the issue of minimum wage in Nigeria has always been a contentious topic, drawing extensive debate and negotiations between the federal and state governments, labour unions, and employers.
He said however that an often-overlooked aspect of these negotiations is their effect on the minimum pension, especially in the light of Section 173(3) of the 1999 Constitution of the Federal Republic of Nigeria (as amended) and Section 39(3) of the Pension Reform Act 2014.
He said the reality often falls short of this ideal. Despite the constitutional and legislative mandates, there have been instances where the review of pensions lags behind or is not implemented at all following wage increases. This delay or failure to adjust pensions accordingly results in significant economic strain on pensioners, many of whom rely solely on their pensions for sustenance, Takor said.
Section 173(3) of the Constitution stipulates that pensions should be reviewed every five years or together with any federal civil service salary reviews, whichever is earlier.
“Pensions shall be reviewed every five years or together with any federal civil service salary reviews, whichever is earlier.” This clause enshrines the right of pensioners to periodic pension reviews to reflect changes in the economic environment, such as inflation and cost of living adjustments, ensuring that retirees are not left behind as the economy evolves.
Section 39(3) of PRA 2014 provides that “Without prejudice to sub-section (2) of this section, the Commission shall, by the end of every calendar year, determine the adequacy of the Redemption Fund against the projected pension liability of Government arising from voluntary and mandatory retirements, death of employees in service and the right of pensioners to pension review in line with section 173(3) of the 1999 Constitution (as amended), and advise the Budget Office of the Federation of shortfall, if any.”
“The pension payable under the CPS shall be reviewed in accordance with the provisions of Section 173(3) of the Constitution of the Federal Republic of Nigeria, 1999.”
“This provision explicitly aligns the CPS with the constitutional mandate, ensuring that pensions under both the CPS and the DBS are subject to the same review mechanisms.”
“The interplay between the provisions of Section 173(3) of the Constitution and Section 39(3) of the Pension Reform Act 2014 establishes a legal framework that collectively mandate a corresponding review and adjustment of pensions, thereby ensuring parity between pensioners under the DBS and the CPS.”
The Constitution and the Pension Reform Act intentions are clear: all pensioners, regardless of the scheme they belong to, should receive fair and periodic adjustments to their pensions. This is crucial to ensure that they can maintain a reasonable standard of living despite inflation and other economic shifts. Discriminatory practices in pension adjustments violate these constitutional and legislative provisions, creating an unjust disparity between DBS and CPS beneficiaries.
Takor said the evident disparity in pension adjustments has led to widespread disenchantment among current employees and contributors to the CPS. The rightly believe that their contributions will not yield adequate post-retirement benefits, especially when compared to the seemingly more secure DBS. This sentiment has fuelled calls for exemptions from the CPS, as contributors seek to avoid a system that is unfair and unreliable.
Ivor Takor said to address these concerns, it is imperative to adopt a more equitable approach to pension adjustments. “Government must ensure that reviews and adjustments for CPS beneficiaries are conducted regularly and in line with economic conditions, similar to the DBS.”
