by Nweke Innocent Obi

Accordingly, literature is replete with accusations and counter-accusations of pension fund mismanagement by the Pension Fund Administrators, Custodians and non-remittances by employers of contributions to the Retirement Savings Account.

The privilege of receiving gratuity and pension appears the greatest manifestation of the victory of labour in his fight with the employer over his exploitation. For stability of the employment contract, labour had to look forward to the enjoyment of a favourable welfare package when he leaves employment due to old age or disability. With the institutionalization of pensionable employment, the attractiveness of any employment contract is being judged in terms of whether it is pensionable or not. Pensionable jobs pay less current salaries/wages while non-pensionable jobs pay more. Individuals do not usually have a choice whether to take a pensionable job or not but they struggle to pick available jobs. This is the case in Nigeria presently. If the salary premium of unpensionable jobs over pensionable ones is high enough, individual workers can save, invest and make provision for old age and accidental disability. With successful investments of their savings, workers on non-pensionable employments would, on retirement, be as well off as those on pensionable jobs. Economic theory would thus predict as high a premium of non-pensionable over pensionable jobs in a market economy to permit individuals to undertake the level of savings and investments that would make both kinds of job equally attractive in the long run.

The rational individual entering the labour market and in a position to choose between pensionable and non-pensionable jobs has a set of parameters that he needs to make some assumptions about their future values. These include changes in the remuneration for the jobs, the rate of inflation, the level of interest rates, the size, survival probability and future solvency of the employer, and the probability of major external destabilizing forces. For the risk-averse individual in an inherently unstable economy, a consideration of these factors would favour a career in a pensionable organization.

For a variety of reasons, governments all over the world get involved in pension matters in the form of laying down the legal framework, pension funds management and regulation of pension schemes. In Nigeria, the situation is not different.

The pension system was introduced into Nigeria by the Colonial Administration. The first legislative document on pension in Nigeria was the 1951 Pension Ordinance which has retroactive effect from January 1, 1946. The Ordinance provided public servants with both pension and gratuity. This provided the bases for the first private sector pension scheme in Nigeria set up for the employees of the Nigerian Breweries was in 1954.The United African Company (UAC) scheme followed in 1957. The National Provident Fund (NPF) scheme established in 1961 was the first legislation to address pension matters of private organizations in Nigeria. This was the first social protection scheme for the non- pensionable private sector employees in Nigeria. It was mainly a saving scheme where both employee and employer contributed the sum of N4 each on monthly basis. The scheme provided for only one-off lump sum benefit.

The NPF was followed by Armed Forces Pension Acts No 103 also of 1972 and by the Pension Acts No. 102 of 1979, 18 years later .The Pension Acts N 102 of 1976 which commenced on 1st April, 1974 encompassed the recommendation of Udoji Commission which included all consolidated enactments and circulars on pension as well as repealing existing 113 pension laws hitherto in force. Other Pension Acts included: Pension Rights of Judges Act No 5 of 1985, the Police and other Government Agencies Pension Scheme enacted under Pension Acts No.75 of 1987 and the Local Government Pension edict which culminated in the setting of the Local Government Staff Pension Board of 1987.

In 1993, the National Social Insurance Trust Fund (NSITF) scheme was set up by Decree No. 73 of 1993 to replace the defunct NPF scheme with effect from 1st July 1994 to cater for employees in private sector of the economy against laws of employing men in old age, invalidity or death. In 1997, parastatals were allowed to have individual pension arrangements for their staff and appoint Boards of Trustees (BOT) to administer their pension plans as specified in the Standard Trust Deed and Rules prepared by the Office of Head of Service of the Federation. Each BOT was free to decide on whether to mention an insured scheme or self-administered arrangement. The Federal Government of Nigeria (FGN) overhauled the legal framework for pension administration in Nigeria by promulgating the Pension Reform Act 2004 (PRA’04). The PRA’04 was passed into Law on June 23, 2004 by the National Assembly and assented to by President Obasanjo on June 25, 2004. The PRA’04 embodies the policies of the FGN to solve the pension problem in Nigeria, both in the short and the long run.

The Pension Reform Act 2004 is a paradigm shift in the management and administration of pensions in Nigeria. Unlike The policy framework of pension payments in the past based on the Pension Act 1979 which was based on the Defined Benefit scheme where government took the responsibility of providing totally for the pensions of her employees. However, the Pension Reform Act of 2004 policy’s framework is based on the Defined Contribution scheme which makes employers and employees contribute monthly a certain amount towards the pensions of the employees (Section 9(1) Pension Reform Act, 2004, prescribes a minimum mandatory contribution rate of 7.5% of an employee’s annual salary by the employer and an equal sum by the employee for all organisations that employ five or more persons except the military where the minimum contribution rates are 12.5% by the employer and 2.5% by the employee. These monies are paid into an account held by the worker called “the Retirement Savings Account” from which he shall not withdraw from unless he is 50 years or above, or in the case of retirement, or disabled by permanent impairment. The monies so contributed are referred to as “pension fund”. When a worker leaves an employment, he or she must retain his or her Retirement Savings Account and shall continue the operation in their next employment.

Apart from the technical issues of how the new pension is to be administered as contained in the Act, the Pension Reform Act 2004 in section 14 (1) established a regulatory body to oversee the implementation of the provisions of the Act. The section states that: There is established a body to be known as the National Pension Commission (in this Act referred to as “the Commission”). This Commission, which is also referred to as PenCom for short, is empowered by the Act to undertake various responsibilities. The principal object of the Commission shall be to regulate, supervise and ensure the effective administration of pension matters in Nigeria.

The Pension Reform Act states that there shall be pension fund administrators who are licenced by the Commission to manage the pension fund on behalf of the worker. The pension fund administrator shall be chosen by the worker (not the employer as many has complained of late) and can be changed at a time the worker deems fit (not more than once a year). The pension fund administrator invests to earn dividends to the worker, thereby increasing the retirement savings account and ultimately the retirement hopes of the worker. The Pension Reform Act also recognises the pension fund custodian who is licenced by the Commission which receives the pension funds to be operated by the pension fund administrator.

In addition, the Pension Reform Act stipulates that all employees in public service of the federation and the federal capital territory shall be covered by the scheme; and in the case of the private sector, any organization that is into employment and has 5 or more employee shall be covered by the said scheme. This, in effect, means that; road-side restaurants; type-setting outlets; transportation companies both private and public; an advertising firm; construction companies; Banks; Home security outfits; and all other establishments that have employed 5 or more staff shall ensure that these staff are pensionable and in the strict orders of the Pension Reform Act.

However, with litany of literature and public speeches maligning the pension scheme and its operation, little have devoted attention to the most pertinent issue concerning pension in Nigeria. The PEN-SHUN- this is the general attitude of the public towards strange public policy. This requires a total re-orientation and sensitization of the public. This is public awareness on the operations of the pension scheme. How does the pension scheme operate? Who is entitled to be part of this scheme? What do we do to be part of it? In other climes, when public policies are made, the agency for orientation is called into action. As a matter of evidences, public awareness pre-lives public policies in more privileged countries. This awareness process involves opinion leaders, rural and community sensitization programmes, engages public figures and role-models in ensuring that such policy achieves acceptance and participation. As one of the many public policies in Nigeria that has been denied the prerequisite of awareness, the Pension Reform Act was, literally, forced down on the people. Since, of course, the Act empowers the employer to deduct, at source, the contributions of both the employer and the worker, before the worker’s salary is paid. This deduction that is not accompanied by detailed explanation by the employer leaves the worker bemused, discontented and annoyed. More so, workers are disposed to a vague explanation enthusiastically offered by a less knowledgeable “emergency counselor”- who takes full advantage of the ignorance space created lack of awareness on the policy to create more confusions and disenchantment towards the scheme. The general attitude of the public towards the pension scheme is less admirable. Not only has the National Orientation Agency failed in its statutory responsibility of sanitation and public awareness on public policies, the PenCom has also failed to enforce section 20(f) of the Pension Reform Act which states inter alia that the commission shall “Carry out public awareness and education on the establishment and management of the Scheme.”

Furthermore, questions are failed to be asked about the level of compliance to the provisions of the Pension Reform Act. How many employers of labour with staffers numbering 5 and above enroll their staff in the pension programme? Nigerians are hardworking people employed in several companies and mostly without a retirement plan. Sometimes, the employers are accused of purposefully threatening the workers with their job, should anyone attempt to press discussion beyond remuneration into pension. Though, the Act empowers private sectors to maintain a separate pension policy outside the provisions of the Act, but such policy should be additional to the pension Reform Act. The implication of this is that private sector employers should, no matter how temporal the work is, ensure that their employees are covered by the pension scheme. This is because; the Retirement Savings account is transferable from one employment to another. Also, the attention of PenCom is drawn to section 20 (a) of the Pension Reform Act which states that the commission shall “Regulate and supervise the Scheme established under this Act”.

Accordingly, literature is replete with accusations and counter-accusations of pension fund mismanagement by the Pension Fund Administrators, Custodians and non-remittances by employers of contributions to the Retirement Savings Account. These hullabaloos are perceived to have fallen on deaf ears and the authority is yet to respond, by actions, that these appalling remarks are unfound, making more people to wonder whether silence is truly golden. PenCom, apparently, are in dearth need of a legal advice on the provisions of the Act in section 20(h) which was rather more explicit that the commission shall “Receive and investigate complaints of impropriety levelled against any pension fund administrator, custodian or employer or any of their staff or agent”.

Finally, nothing lasts forever, employment status, strength, age, salaries etc. all drift away with time. When the time is against a worker and retirement sets-in, the worker should be safe in the knowledge of having a properly managed retirement benefits. Those who retire without pensions are worse off because they will solely depend on their savings and given the poor saving and investment culture in Nigeria, a worker who retires without pension is retiring to farmland, or reside within the urban centres and to become alms-beggars, destitute and ultimately another social problem.

The National Pension Commission should rise up to its billings in order to ensure that the aged and the dependent constituents of the Nigerian population are protected from the hazards of old age without adequate retirement security. This will discourage the contemptuous tradition of age-renewal and retirement at an age older than the official age. The most critical of all is the sensitization of the Nigerian people to accept, understand and participate in the pension scheme. This can take the form of local programmes targeted at a clientele delivered in local flavour for easy grasping and acceptance. When explanations are offered in ambiguous terms; disdainful and condescending manners without recourse to the level of literacy in Nigeria which constantly reminds the people of their pen-shun status, little achievements are bound to be recorded. Everyone must retire someday, either from active employment or from human race, one question remains; how satisfied will we be, as individuals and as a nation, upon retirement? Let this question replay in the mind of pension authorities and Nigerians.

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Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija