The nation’s Contributory Pension Scheme established under the Pension Reform Act 2004, which was threatened by exit of military and planned exit of police as well as other paramilitary forces, would now see more consolidation as Federal Government has closed the door for such exits.
This development, industry analysts are happy with and they say it would bring about consolidation in the sector, increase market size, enhance service delivery, ensure overall protection of retirees future and in all, achieve the key objective of the pension reform in the country.
Total pension assets under management as that end of last year stood at about N3 trillion with 5 million employees both in the public and private sector already registered in the scheme, where the pension assets was growing at an average N20 billion monthly.
The Presidency, it was learnt has directed the Nigeria Police Force to remain under the CPS rather than striving to exit from the scheme, while directing the Pension Regulator, the National Pension Commission to look into their issues and accommodate them in the existing CPS.
Following the exit of the military from the CPS, the Nigeria Police Force, the State Security Service, the Nigeria Customs Service and other paramilitary organisations began threatening to exit the scheme, which analysts said portend great danger to the success achieved in the last few years.
Rather than being permitted to exit the pension scheme, the Presidency advised that while the issues raised by the police authority were valid, efforts should be made by the National Pension Commission (PenCom) to address these concerns within the system. To further assuage the feelings of the police, it was further recommended that the police may be allowed to set up a Pension Fund Administrator (PFA) to manage their own pension funds and assets.
This development is taking place just as experts in pension matters have raised an alarm that the rank and file in the nation’s armed forces will suffer in the long run from the exit of the military from the Contributory Pension Scheme.
While blaming the military hierarchy for the exit, it was argued that even though senior officers may not find it difficult to get their pension and gratuities at retirement, the junior officials may not be so lucky.
According to Peter Esele, the president of Trade Union Congress of Nigeria (TUC), “TUC went to the National Assembly and we tried to appeal to the National Assembly not to allow the military to pull out but to no avail. One of the reasons why we were saying that is that the military hierarchy at the very top said that at a particular time they would not be getting as much as they expect, claiming they had reformed their pension board.
“But we must not fail to warn, that sooner or later, they will find out that they have made a very grievous mistake. If because you have a good man or woman at the helm of the military pension board today, it does not mean that tomorrow you will continue to have a good man or woman there.
PenCom has also warned that the confidence of workers in the pension system and the new scheme in particular would be undermined due to policy reversals. The Commission stressed that a systematic exemption of public sector institutions from the contributory pension scheme by the Federal Government would send wrong signals and cause ripple effect of adverse consequences on the financial sector in the country.
Analysts maintained that if these institutions are allowed to pull out of the contributory pension scheme, the integrity of the scheme will be hurt and more organisations may pull out and it could lead to the death of the scheme.
Eguarekhide Longe, managing director, AIICO Pension Managers Limited, had stated that the action should be discouraged and urged the need to boost confidence in CPS. He expressed worry that if these groups were being given approval to operate a close PFA, they would sign out and begin to manage their accounts.
Adekunle Hussain, director general, Lagos State Pension Commission, had also advised “What I would advise is that if they want to operate on their own, they could operate like closed PFAs, but adopt the CPS rather than sticking to the old scheme.”
According to him, the CPS was well managed, and it ensured mandatory savings, strict discipline and safety of contributed funds.