• Tuesday, March 05, 2024
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BusinessDay

Understanding the CPS and contributor’s concerns

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Awareness and continuous education on the benefit and workings of the country’s contributory Pension Scheme (CPS) would go a long way in sustaining the achievements of the scheme and building more confidence for higher penetration.

Therefore, providing explanations and answers to questions and concerns of contributors and the larger public is an issue that must be taken seriously by operators and stakeholders.

Here, this edition will look at some of the questions raised by contributors and members of the public and what operators’ responses are:

How can I be sure that my contributions are safe?

All those managing or keeping custody of pension funds and assets will be licensed and continually regulated and supervised by the National Pension Commission.

What is the guarantee that the pension funds under the CPS will be well managed and not diverted for other purposes?

The functions of the Pension Fund Administrator (PFA) and custodian are clearly spelt out in the Pension Reform Act 2014. The Act provides adequate safeguards against the misuse of the pension funds and assets by any operator.

What happens if a PFA fails or is liquidated?

The pension funds and assets in the Retirement Savings Account (RSA) are kept by the PFC and as such the liquidation of the PFA will not affect the funds and assets. Besides, every PFA is expected under the Pension Reform Act 2014 to maintain a statutory reserve funds as contingency fund to meet claims for which it may be liable as may be determined by National Pension Commission.

Who can I complain to if I have a problem with a PFA?

The Pension Act 2014 allows any employee to complain about any PFA to the National Pension Commission.

What is the role of the government in the new pension scheme?

The federal Government has established the National Pension Commission and charged it with the responsibility of regulating and supervising new pension scheme.

Can the government take or use the money in my RSA for any purpose?

The Government cannot temper with the pension funds in you RSA, because the Government cannot have access to the account. Besides, the Government is primarily concerned with ensuring the safety of the money in your RSA through the enforcement of strict rules and regulations.

Will inflation and devaluation of the naira not erode the value of the pension contributions?

It is the duty of the PFAs to administer the contributions and invest in such a way that will ensure safe and reasonable returns on investment. The reserve fund created by the PFAs under the Act would compensate for any erosion of the value of the contributions.

How compulsory or voluntary is retirement especially in the armed forces to be handled under the new scheme, if this happens before the age of 50 years?

Under the Pension Reform Act 2004 as amended in 2014 a person can voluntarily retire or be compulsorily retired before the age of 50 years on the ground of medical advice, permanent disability or due to particular terms and conditions of employment. If any person retires under any of the foregoing circumstances, he is entitled to withdraw from his RSA even though he was under the age of 50 at such retirement; provided that, in the case of retirement due to particular terms and conditions of employment, the contributor does not secure another employment after four months from the last employment.

What is the minimum of pension guaranteed under the new scheme?

The minimum pension guarantee shall be determined from time to time by the National Pension Commission.

Is there adequate representation of all stakeholders on the board of the commission, or is it dominated by government appointees?

There is adequate representation of relevant stakeholders in the board of the National Pension Commission, which comprises of Representatives of the Government, Nigeria Labour Congress, The Nigerian Union of Pensioners and The Nigerian Employers Consultative Association.

Does the pension reform act reflect the application of the principles of transparency and accountability?

Yes. The new pension scheme entrenches the principles of transparency and accountability as reflected in the reporting requirement of the PFAs and PFCs to both the contributor and the National Pension Commission. An employee has the right to choose who manages his RSA and the right to receive statements of his account on quarterly basis with details of contributions made and returns on investments.

What is the minimum period required by an employee to qualify for pension under the new pension scheme?

There is no qualifying period for pension. If an employee works for an employer for one month, his pension contribution will be paid by the employer into the employee’s retirement savings account for that month. If the employee moves on the work for another employer for another year, his pension contribution will be paid by the second employer for another 1 year and it goes on and on like that.

When will I have access to money in my RSA?

Access to the RSA will only be allowed upon retirement. If an employee retires at the age of 50 years or more he/she can have immediate access to the RSA. similarly, if an employee retires before the age of 50 years due to mental or physical incapacity, he or she can have immediate access to his/her RSA. Whereas an employee who retires under the age of 50 years in accordance with the terms and conditions of employment will not access the RSA until after four months of such retirement if he/she does not secure another employment.

Will gratuity be paid under the new scheme?

Upon retirement, an employee can withdraw a lump sum (by whatever name called) from the balance standing to the credit of his/her RSA provided the balance after the withdrawal could provide an annuity or fund monthly payment that would not be less than 50 percent of his monthly pay as at the date of his retirement. However, an employer may choose to pay any other severance benefits (by whatever name called) over and above the retirement benefits payable to the employee subject to the terms and conditions of his employment.

Should gratuity be included in the actuarial valuation for purposes of determining accrued pension rights to be transferred from the old scheme into the RSA?

If at the commencement of the Pension Reform Act 2004, the employee is entitled to gratuity (if he were to retire on that date), the gratuity shall be computed and included in the actuarial valuation as part of the accrued pension rights of such employee.