Being the memorandum submitted by the National Pension Commission (PenCom) to Senate Committee on Establishment and Public Service at the Public Hearing on the Bill for an Act to amend the Pension Reform Act 2014, to provide for definite percentage a retiree can withdraw from his Retirement Savings Account (RSA) and for other matters related, held 29 November 2017 by Aisha Dahir – Umar, acting DG of the Commission: Excerpt:
Introduction:
The National Pension Commission (“the Commission” or “PenCom”) expresses its profound appreciation to the Distinguished Members of the Senate Committee on Establishment and Public Service for their unflinching support to the development of the pension industry in Nigeria. We also wish to thank the esteemed Committee for the opportunity to make a presentation at this Public Hearing on the Bill for an Act to Further Amend the Pension Reform Act 2014 to Provide for Definite Percentage, a Retiree can withdraw from his Retirement Savings Account and for Other Matters related thereto.
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Distinguished Members of the Senate Committee would recall that the Commission is established by the Pension Reform Act (PRA) 2014 as the regulator and supervisor of the pension industry in Nigeria. One of its principal objects is to regulate, supervise and ensure the effective administration of pension matters and retirement benefits in Nigeria. Accordingly, the Commission is empowered by the Act to establish a uniform set of rules, regulations and standards for the administration and payment of retirement benefits. The Commission approves licences, regulates and supervises the Pension Fund Administrators, the Custodians and other institutions relating to pension matters.
The Commission has carefully reviewed the Bill for an Actto further amend the PRA 2014 to provide for definite percentage a retiree can withdraw from his RSAand for other matters related thereto. It is the Commission’s fervent hope that its submissions would be useful in deciding on the matter.
Comments on the Sections of the Bill
The Commission observed that the Bill refers to the Pension Reform Act 2004 which has been repealed and replaced by the Pension Reform Act 2014 (PRA 2014). However, a review of the proposed sections sought to be amended in the Bill reveals that the numbering of the sections and the provisions sought to be amended is as provided in the PRA 2014. Accordingly, we submit that reference to the PRA 2004 is erroneous as the PRA 2004 is now defunct.
A review of the title of the Bill reveals that it is meant to amend the PRA 2004 “to provide for the definite percentage that a retiree can withdraw from the Retirement Savings Account”. This appears to be at variance with the explanatory memorandum to the Bill which provides that “the Bill seeks to provide succour to retirees in the delay and other difficulties they are encountering in withdrawing their savings from the Retirement Savings Account”.This indicates an apparent disconnect between the intention of the Bill and what its sections actually provide.
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It is important too, at the onset address the issue of delay in payment of pensions to retirees under the Contributory Pension Scheme, which actually started from 2014. Perhaps, it will be appropriate to clarify as follows:
The National Pension Commission, on an annual basis, undertakes the verification and enrolment of FGN employees due for retirement in the coming year as well as determining the quantum of money required to pay their accrued benefits. These benefits accrued under the old Defined Benefits Scheme, for services rendered by these employees before and up to June 2004. Whenever these benefits are computed, the Budget Office of the Federation is notified of the number and grades of the prospective retirees and the total accrued benefits due to them. This would allow the Budget Office to make adequate arrangements to pay these benefits as they mature in the coming year on monthly basis.
Payment of these accrued benefits is made directly into the Retirement Savings Accounts (RSAs) of the beneficiaries from a dedicated account, the Retirement Benefits Bond Redemption Fund Account (RBBRFA), being managed by the Central Bank of Nigeria (CBN). In 2014, the required monthly inflow into the RBBRFA was N5.9 billion, but the FGN gave only N2.5 billion. This left a gap that resulted in huge arrears that is still not fully redeemed by the FGN.
In February 2015, some funds were released by the Federal Government, which was utilized to pay the arrears up to December 2015. In 2016, the FGN could not remit anything into the RBBRFA due to the falling revenue of the FGN that resulted in the recession experienced during the year. This continued up to April 2017, when the sum of N54 billion was released to defray some of the liability. This amount was only enough to pay the arrears due to FGN employees who retired between January and August 2016. In July 2017, two months monthly subventions were released into the RBBRFA, which was utilized to pay those who retired in September 2016.
Given the difficulties being experienced by the pensioners due to the delays in releasing the accrued benefits and the mounting liabilities, the FGN set up an Inter-Ministerial Committee, chaired by the Honourable Minister of Finance, to determine all pension liabilities due to the FGN retirees. It is our understanding that the sum of N743 Billion was earmarked for payment of pension and salary arrears and forms part of the N2.74 trillion expenditure approved by the Federal Executive Council, which was also sent to the National Assembly for approval.
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Section 2 (a) of the Bill:
This provision seeks to amend Section 7(1) of the PRA 2014 by inserting the words “or retires, disengages or is disengaged from employment as provided under Section 16(2)(a) and (b) of this Act” immediately after the phrase “whichever is later”. The import of the proposed amendment is to include the persons who retire under 16(2) of the PRA 2014 (on the advice of a suitably qualified physician or a properly constituted medical board certifying that the employee is no longer mentally or physically capable of carrying out the functions of his office or due to total or permanent disability either of mind or body) in the modes of accessing the RSA as stipulated under Section 7 of the Act.
It would be recalled that Section 7(1) of the PRA 2014 deals with the following modes of accessing the RSA upon retirement or attaining the age of 50 years, whichever is later: Withdrawal of a lump sum, provided that the amount left shall be sufficient to procure a programmed fund withdrawals or annuity for life, in accordance with extant guidelines issued by the Commission from time to time; Programmed monthly or quarterly withdrawals calculated based on an expected life span; or annuity for life purchased from a Life Insurance Company licensed by the National Insurance Commission (NAICOM), with monthly or quarterly payments, in line with guidelines jointly issued by the Commission and NAICOM.
It would further be recalled that Section 16(2) of the PRA 2014 already allows an employee who retires before attaining the age of 50 years either on the advice of a suitably qualified physician or a properly constituted medical board certifying that the employee is no longer mentally or physically capable of carrying out the functions of his office [S. 16(2)(a)], due to total or permanent disability either of mind or body [S. 16(2)(b)] or by the terms and conditions of his employment’S. 16(2)(c)], to access his RSA by Section 7 of the Act.
The proposed amendment is, therefore, superfluous as far as these groups of persons are concerned.
To be continued next week.
