Why FG retirees in 2023 are yet to get pensions

Retirees of Federal Government ministries, agencies and parastatals who left office in 2023 are yet to receive their pensions following the delay in the payment of their accrued rights.

This delay also affected the payment of death benefits to dependants of diseased employees whose accrued rights were yet to be paid.

The pension-accrued rights represent an employee’s benefits for the past years of service up to June 2004, when the Contributory Pension Scheme (CPS) was established.

The Federal Government in March 2022 released N13.89 billion for payment of accrued rights for CPS retirees who retired in 2022, and since then no new money has been released.

Read also: Pension assets rise by record N1.17trn in one month

Aisha Dahir-Umar, the director general of National Pension Commission (PenCom) clarifying claims about outstanding benefits to Federal Government retirees, said “The delayed payment of retirement benefits to some Federal Government retirees and deceased employees is because of the inadequate and delayed funding for the payment of Accrued Pension Rights”.

“Payment of the accrued rights is subject to release of funds by the Federal Government. So, it is beyond the powers of the Commission, she said

Dahir-Umar however said the Commission has been engaging the Federal Ministry of Finance for more funds to be released to settle these liabilities, but noted that it is not a secret that the government itself has budgetary constraints.

She said all those enrolled under the CPS have been receiving their benefits through their Pension Fund Administrators (PFAs) and there is no unsolved complaint before the Commission.

On a widespread report that the Commission gave a N10 trillion loan to the Federal Government, she described it as “totally misleading”

Dahir-Umar, in a media interview at the weekend, said apart from the fact that PenCom is not a bank and does not warehouse or manage pension funds, the Federal Government did not take a loan of N10 trillion from the Commission.

“Investments by the PFAs in the securities of the Federal Government of Nigeria (FGN) are not loans as erroneously portrayed, but investments in securities, through bonds and treasury bills, as approved by the relevant government agencies, in this case the Debt Management Office (DMO) and Securities and Exchange Commission (SEC). They are traded on authorized capital markets. That is, the Nigerian Exchange Limited and FMDQ OTC Securities Exchange,” she explained.

According to her, pension fund assets are not managed by PenCom. I have said it repeatedly that when we say pension assets have grown to N15 trillion, that does not mean PenCom has N15 trillion locked somewhere in its office or bank accounts.

“Pension fund assets are managed by the licensed PFAs and held in custody by the licensed Pension Fund Custodians (PFCs). The PFAs are responsible for investing pension fund assets in allowable asset classes, including FGN debts instruments.”

Dahir-Umar said the objectives are safety and fair returns.

“All these are in line with the provisions of the enabling law, the Pension Reform Act 2014, and the rules issued by the Commission. It is obvious from the above that what is referred to ‘loan to FGN’ is just investment in FGN securities by the PFAs, as is done by other institutional investors such as banks, insurance companies, asset managers, etc.”

Dahir-Umar added that it is an international best practice to invest in investible instruments issued or backed by the sovereign authority and that the FGN securities meet the objectives of safety and fair returns.

“The FGN has consistently met its repayment obligations, both principal amount and accrued interest, for all investments in bonds and T-bills to all investors including pension funds. The information is always in the open and accessible on our website, she said.

The DG had earlier disclosed in her report on the pension industry for 2021, that the Federal Government had paid a total of N980.18 billion to retirees of treasury funded Ministries, Departments and Agencies from the inception of the Contributory Pension Scheme in 2004 to December 2021.

She said, “In addition, the Federal Government continued to fund the Retirement Benefits Bond Redemption Fund account. With the release of N100.29 billion for the payment of accrued rights to retirees of treasury-funded MDAs, this brought the total amount released by the Federal Government into the RBBRF account, from inception to 31 December 2021, to N980.18bn.”

According to her, the most significant development in the pension industry in 2021 was the successful reduction of outstanding pension liabilities of the Federal Government under the Contributory Pension Scheme.