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Pension funds: Hurdles of compliance with new contributory rate

The Pension Reform Act, 2014 which repealed that of 2004 in July when it was signed into law provided in section 4 subsections 1 that…

The Pension Reform Act, 2014 which repealed that of 2004 in July when it was signed into law provided in section 4 subsections 1 that the employer would henceforth contribute a minimum of 10 percent of the employee’s monthly emolument and the employee would in turn contribute the remaining eight percent.
This is an increase when compared with the repealed Act which had provided that the employer and the employee contributed 7.5 percent each of the employee’s monthly Basic, Housing and Transport (BHT) to arrive at the initial 15 percent that went into the employee’s Retirement Savings Account (RSA).
While this may be deemed as an increased financial burden on some employers, experts in the pension sector have lauded the development, indicating that it would increase investments being carried out by Pension Fund Administrators (PFAs).
The increase “from an average of 15 per cent to 18 per cent means more money coming into the pension sector,” said the Managing Director, Pensions Alliance Limited, Mr. Dave Uduanu, in a recent interview.
One aspect that is worth noting is the transition from calculating the rate from the employee’s BHT to the gross, thereby providing more fund for the employee to enjoy life at retirement.
However, investigations revealed that some employers are yet to comply with the new provision even as the National Pensions Commission (PenCom) is tightening its enforcement rope against the necks of non-compliers.
Although PenCom has not made a formal statement on the development, some PFAs based in Abuja confirmed on condition of anonymity that some employers have not started complying, adding however that some have since complied.
Findings also showed that some employers had not fully complied with the former rate of contribution before the introduction of the new one and this prompted PenCom to set up a team of recovery agents to track down defaulters.

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