By ODIANOSEN EJAS
All over the world, pension is considered as a volatile and delicate matter. And to that extent, it is always topical and passionately treated as such. However, in Nigeria, the need to improve the old defined retirement benefits, absolutely gave rise to the Pension Reform Act, 2004. The urgent need to address the perceived and obvious inadequacies of the former pension regime that depended on unremitted budgetary allocation to cater for pension services became the most important part.
The 2004 reform therefore gave the new pension scheme a paradigm appeal. While the responsibility for providing fund for pension payment in the old regime rested solely on government or its agencies; the new regime mandates government and Labour to co-operate in the form of a shared partnership to accumulate pension assets in advance to accommodate emerging pension liabilities.
In this contributory variant, workers are transparently allowed a say in their retirement incomes not only in contributing percentage, but also to chose whoever it pleases them to be their fund managers. This arrangement as it is designed, allows each worker to elect a fund administrator with whom he/she maintains an individual account to which contributions are channelled with regular alerts. The pension, for each worker, becomes the sum of the accumulated contributions and the accrued investment incomes.
To this end, the Pension Reform Act, 2004 and Section 210 of the 1999 Constitution of the Federal Republic of Nigeria strongly guarantees protection of pension rights. It therefore provides that the right of a person in the public service of the Federation to receive pension and gratuity shall be regulated by law and that any benefit to which a person is entitled in accordance with or under such law shall not be withheld or altered to his/her disadvantage.
This therefore implies that pension matters, must as a necessity, follow the recommendation of the constitution and also involves the enactment of regulating laws (not retroactive bills), for both public and private sector workers. In any case, no good is ever enacted and implemented in the instant unlike what is happening very right now in Edo State. It is therefore a constitutional right to be defended by organized labour at all times. This is particularly necessary because, over the years in Nigeria, governments and politicians are known to display shocking perfidy in handling issues concerning public servants, their promotions, other welfare and retirements.
Herein embed the challenges of pensions and gratuities in Nigeria. The solutions to these and many other pension challenges do not necessarily rest in the forceful implementation of the Contributory Pension Scheme (CPS) as we are made to believe by the current Edo State government. There are so many other laws, privileges, rights and obligations such as promotions, salary relativity, weighing allowance, etc that ought to attract Governor Obaseki’s attention at the moment. Why, or so it seems, the desperation without due process, to unlawfully compel every worker in Edo State to enrol with government recommended fund managers? If as reported that Edo State Government can afford to make available N6b every year to service pension matters in the State, the fear and burden of pension liabilities as painted by the government would soon be a thing of the past. How sincere and compliant can Edo State Government be in setting aside the budgeted N6billion every year?
In other words, the general lack of compliance by government to deduct and remit same to the appropriate quarters and respect the rules guiding the pension operation whether old or new is the greatest challenge.
For the avoidance of doubt, CPS is not immune to secret agenda, corrupt tendencies and ineffective implementation. We should not forget in a hurry the Pension scams and other capitalists’ connivance and conspiracies against the regular people in Nigeria, where pension and other public funds were stolen by government functionaries and diverted to personal estates. It is equally possible under contributory Pension Scheme.
Even in advanced countries, insolvency of multinationals and Pension Fund managers has made old age to be very miserable for some retired officers. For instance, in 2001, poor corporate governance led to the collapse of ENRON, an energy company based in U.S.A. Following ENRON’s collapse, about US$2.1 billion in retirement savings were all sacrificed to oblivion.
It is also true that Government have always had problems of meeting its pension obligations, because, politicians have consistently refused to remit pension benefits provided for in annual budgetary allocations to Consolidated Revenue Fund meant to service pension liabilities. This is the bane of pension management and not workers share contribution.
Another area of challenge that had militated against the any pension scheme is the Political control of the public sector. It can be argued that social security pensions are subject to political risks. Every regime by its existence is transitory and tenured. The tendency of some politicians to want be popular have made many to offer fabulous initiatives that they are either not going to be committed to or may fall on regimes not disposed to their philosophies and ideologies. In the event of any clash of interest for instance, between a state government and any fund manager, the future of the workers affected would be a eternal risk.
Again, the easiness for government to dip hands into pension funds (by way of secret or open bonds) to cushion up temporary fiscal shocks is another challenge against the success of any pension scheme. This is done with tardiness and socio- political indifference to the plight of pensioners, thereby treating those who have given almost all their lives and their services with indignity.
Even in the most ICT compliant establishments in Nigeria, Pension records, disbursements, and payment create avoidable problems. In some establishments no accurate record of actual pensioners exists. As regimented and organised as the Nigeria Army is perceived to be, a thorough verification of military pension account in the past led to the discovery of over 23,000 fake pensioners on the Army pension roll. It was discovered that Pension liabilities were corruptly inflated through insertion of fictitious names and phony accounts on the list of pensioners.
In addition to the above, JP Morgan (Global Risk Assessor) has advised investors to be cautious of the vulnerability of their investments and assets to inflation, devaluation and bankruptcy. The company warned against over value of Nigeria Banks and Pension Fund Managers as well as the persistent slide in price that has adversely affected investment in equity. JP Morgan claimed that more than 56% of Nigeria banks including the Pension Administrators are overvalued in relation to risk factors; thereby disposing the savings of cumulative pension funds and assets under CPS to inflation, devaluation as well as the viral effect of fraud and corruption. It is these same banks and Fund managers the Edo government has promised to invest pension savings and want the workers to invest their future.
In the event of pension Funds Managers or administrators becoming insolvent or bankrupt, what is the safety net that would take care of any short fall of the CPS in Edo State. What is the guarantee that workers would get their Accruals at the end of their services to government? Due to these numerous inherent risks in the CPS, some workers may want to voluntary leave the service right away with their accrued benefits and chose not to be part of the Contributory Pension Scheme.
To this end and if the CPS is to be considered by any worker, the government therefore ought to recognised and promptly too, made available the accruals due to individual workers who may be willing to be part of the Contributory Pension Scheme or to those who may want to voluntary retire from the service due to the danger inherent in the scheme. The Government need to obey this demand in other not to encourage despondency, heighten corruption in the service and dampen the morale of government employees.
It is no longer secret that some government institutions in the past who were compelled to initially enrol in the CPS are not only regretting, there is also the fact is that some institutions have already divested their interest by resorting to the old pension scheme that has a permanent guarantee by government, irrespective of the political party in power.
This has become very reasonable because, unlike the politicians, who earn outrageous spoils of office, and even gets severance benefits of over N200,000,000.00 (two hundred million Naira) for at most eight years in office, the regular Nigeria worker who puts in 35 years of their prime with low income, may not be able to take up to a minimum of 25% lump sum as gratuity from the Contributory Pension Scheme (CPS) to put a roof over his head and still be able to maintain the balance that would guarantee periodic meaningful pension as well as a dignified life in retirement.
In Chile and United Kingdom for example, which we are trying to copy from, pension operations enjoys minimum pension guarantee as a permanent cost to the government. Their governments ensure that retirees do not live below a certain amount and standard in retirement. This is known as the minimum income guarantee. If for instance a worker cumulative income benefit is less than a certain standard, then he/she is entitled to receive income support from the government. In Nigeria today, this is not possible, because, many governments’ institutions have collapsed and even depend on bail outs to be able to pay salaries of workers. A government that cannot conveniently pay workers’ salary would obviously not think of supporting pensioners, fund managers and other sectors of the economy.
In Nigeria, where standard of living has become terrible and remained on the downward trend, economy out of control and unpredictable, inconsistent policies of government that encourages capital flight and portfolio investments, there are many issues to be passionately sorted out before considering the implementation of Contributory Pension Scheme as a permanent offer. In other words, there is need to tarry and be thorough. While there is need for government to tarry on the CPS, the workers on their part also need to be thorough because pension under the contribution pension scheme can be exhausted within ten years of retirement; especially considering the great disparity between what a pensioner with old pension scheme earn and that of the contributory pension. While a pensioner with the pay as you go system may be earning N100,000.00 as pension for example, the one with Contribution Pension Scheme are forced to earn about N20,000.00, even though they may retire on the same grade level and with the same government. This is what makes the CPS completely a bad scheme.
About Author
