Most employers in Nigeria have adopted the Contributory Pension Scheme (CPS), and are complying fully or partially with the Pension Reformed Act, 2014 (PRA, 2014).
The Act made provision for an apex regulator, the National Pension Commission (PenCom) to ensure full compliance in order for contributors to have their retirement benefits when they exit active service.
The implementation of the CPS in over 15 years now has led to the transition from years of billions of pension deficits to over N10 trillion pension assets as at the end of 2019.
However, many employers are in default in the implementation of the CPS and employees, unknown to many, have roles to play to ensure better compliance not only by their employers, but by their Pension Fund Administrators (PFAs) as well.
Below are five key responsibilities of employees in the implementation of the CPS:
Insist on periodic statements of your RSA from your PFA
PFAs are mandated by PenCom to issue Retirement Savings Account (RSA) statements to contributors at least once every quarter.
This is important considering that pension contributors monitor their accounts through periodic statements issued by their PFAs.
The statement of account clearly states the holder’s monthly pension remittances, returns on investments and fees deducted from the accounts.
An RSA holder can file a complaint with PenCom if his or her PFA is not issuing periodic accounts statement.
Check the performance of the fund
Note that it is important for pension contributors to monitor the performance of their funds and the returns on investments posted by PFAs and communicated through statement of accounts.
While the Pension Reform Act, 2014 (PRA, 2014) does not allow a pension contributor to suggest or mandate the PFA on how to invest pension funds, the Act allows the contributor to switch PFAs if he or she considers that the PFA is underperforming.
At the moment, PenCom is yet to open the transfer window to allow RSA holders switch PFAs based on their fund performances and satisfactory customer service, but there is hope that this may happen soon.
RSA holders who are unsatisfied with the performance of their funds can complain to PenCom in writing and in future, may have the opportunity to port from their underperforming PFAs to better performing ones.
Confirm and report non-remittance or incomplete remittance
Note that the minimum rate of contributions is 18 per cent of the employee’s monthly emoluments where 10 per cent is contributed by the employer and 8 per cent is contributed by the employee.
For clarity, the PRA, 2014, explains that monthly emolument means total monthly basic salary, housing allowance and transport allowance.
The pension law provides that employers who deduct employees’ pension contributions and fail to remit same shall, in addition to making the remittance already due, be liable to a penalty to be stipulated by PenCom, which will be paid to the employees, provided that the penalty shall not be less than 2 per cent of the total contribution that remains unpaid for each month while the default continues.
The Act mandates all employers to remit all pension contributions deducted from salaries and/or contributed by employers to the Pension Fund Custodian (PFC) not later than seven working days from the date of payment of their salaries.
It is in the interest of employees to monitor compliance by their employers as the gap from when they receive salary alert and pension remittance alert from their PFAs can show if their employers are complying with this requirement.
This is important considering that pension contributions deducted from employees’ salaries without remittance to PFCs and credited into owners’ RSAs lose value. If remitted, such pension contributions are invested in financial securities which eventually yield returns for the contributors.
Employees who observe that their employers are not remitting their pension contributions on time or are remitting incomplete amount have a duty to raise alarms on the development.
Do not open more than one RSA
It is important that pension contributors know that it is not allowed for employees to open more than one RSA.
PenCom advises that in the event of change of employment, the contributor is required to provide the same RSA details to his new employer who now assumes the responsibility of remitting the monthly pension contributions into the same RSA.
“An RSA holder should not, under any circumstance, have more than one account. Multiple registration results in delayed, incorrect remittances into the RSA account. It also causes undue delay in benefit payments since it is not possible for any contributor to be paid from two RSAs,” PenCom warned.
Verify that your employer subscribed to a Group Life Insurance Policy
Section 4(5) of the PRA 2014 mandates all employers of labour to subscribe to Life Insurance Policy on behalf by their employees for an insured amount of not less than three times their annual total emolument.
Such employers are to obtain Insurance Certificates which shall state that all employees are covered up to an amount not less than three times their respective Annual Total Emoluments (ATE).
As evidence of compliance, PenCom requires employers to place the certificate of compliance with the Group Life Policy in a conspicuous place within their organisations.
PenCom has given employers up to March 31, 2020 to comply with the PRA, 2014 with regards to subscribing to Group Life Insurance Policy and submitting evidence of compliance to the Commission.
It is in the interest of employees to ensure that their employers comply as in the case of death, the Group Life Insurance Policy will ensure that the employees’ next of kins have some financial support to fall back on.
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