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Revisit Contributory Pension Scheme

Two bills before the House of Representatives for the amendment of the Contributory Pension Scheme, sponsored by the Nigeria Police Force, are a loud outcry…

Two bills before the House of Representatives for the amendment of the Contributory Pension Scheme, sponsored by the Nigeria Police Force, are a loud outcry over the silent pains pensioners in Nigeria endure under the current Pension Reform Act 2014. In the bills, the police are seeking several reviews to the act to exempt the Nigeria Police Force from the CPS and other related matters, including the payment of 75 per cent of their retirement benefits immediately officers exit the force, and the criminalisation of any delay in the payment of such retirement benefits.  The Inspector-General of Police, Usman Baba Alkali, is solidly behind the new moves, as he was represented by a top official at the hearing on the bills last week.

Lamenting how the CPS has negatively affected retired police officers, a Deputy Inspector General of Police, Sanusi Lemu, told the hearing, chaired by the Speaker of the House, Femi Gbajabiamila, why the police should exit the scheme. Using comparative analysis to press home his argument, the DIG said, “The highest retirement benefit of a Deputy Superintendent of Police under this obnoxious pension scheme is N2.5m and that of an Assistant Superintendent of Police is N1.5m, while their equivalent in Army (captain) and DSS are paid N12.8m and N10.3m respectively. Upon retirement, the monthly take-home of a retired police DSP is just N31,600, while that of a captain, an equivalent in the army, is N180,000. While for a Police Inspector it is N15,000, a Warrant Officer, the Army equivalent of a Police Inspector, takes home N120,000.”

Pension is designed to provide workers with a means of securing, on retirement, a standard of living, reasonably consistent with that which they enjoyed while in service. However, what many retirees earn cannot achieve this objective. Though the Pension Reform Act (2014) is an improvement on the old, fraud-ridden pension scheme, on implementation, the Contributory Pension Scheme thrust retirees into such penury that was not envisaged. It is unrealistic for a retired police inspector and his family to survive on N15,000 under the current economic condition.

The old pension scheme for civil and public servants, inherited from the colonial era, depended on 100 per cent funding by the government through annual budgetary allocations. Apart from inadequate funding, the system was wrought with poor documentation and filing processes, cumbersome clearance procedures, the incompetence and inexperience of pension staff, poor human relations, corruption and embezzlement that necessitated the intervention of the Economic and Financial Crimes Commission (EFCC), and other sundry problems. The Contributory Pension Scheme under the PRA (2014), in which employers and employees contributed about 15 per cent to the fund, was seen as a relief to the government and a more realistic funding strategy.

However, pension regulatory agencies have played the ostrich in dealing with the besetting problems under the scheme. First, there is disparity in the administration of the scheme, as employees of some government institutions and Government Owned Enterprises (GoEs) receive multimillion naira gratuities, and robust monthly pensions, while many others, including retirees in many public sectors, take home a very tiny amount of money or nothing as gratuities, and receive laughable sums of money as monthly pensions. This problem can be traced to the poor salaries earned by many public and civil servants, which make it impossible for them to contribute meaningful sums of money to their pension fund.

Furthermore, apart from the fact that Pension Fund Administrators (PFAs) create bottlenecks that delay the payment of the initial lump sum to retirees, they invoke diverse technicalities that prevent retirees from accessing their funds immediately after retirement. At the end, life in retirement under the PRA 2014 is not too different from what it was under the old scheme.

We insist that all the institutions involved in the administration of the new pension scheme must come up with transparent and realistic measures that will tackle these problems. PenCom, the regulatory body, must step in without delay. PenCom opposed the bill for the removal of the police from the CPS, but that is not the answer to the question raised by the police. A deliberate attempt should be made to ensure that retirees receive living pensions. The first step may be a drastic review of wages and salaries paid to workers in the country, as the weaker the monthly emoluments, the weaker the monthly pension upon retirement. In addition, we must evolve a realistic social welfare scheme; the minimum should include free medical care, education, housing, water, electricity, and the like, for retirees and their family members. When such burdens are taken off them, retirees could use their pension to feed and live longer.

Instead of passing an amendment bill to the PRA 2014 to address issues raised only by the police, the National Assembly must take a holistic look at pension administration in Nigeria and make necessary adjustments to their principles and practice. If this is not done, other institutions of government, and even the private sector, would also approach the lawmakers for amendments to the PRA 2014 in areas that negatively affect them.