Wednesday, November 6, 2013

Issues in Pension Reform Bill 2013




Jide Ojo
Pension matters are dear to my heart. My father taught for 40 years and retired as a school headmaster. The unfortunate thing is that he neither got his pension nor his gratuity till he died three years into retirement. He was not alone. Many senior citizens of this country suffered a similar fate as they languished in pains, ailments and died miserably while waiting to be paid their retirement benefits. My office is at present enrolled in the contributory pension scheme and over the years, I have been able to accrue some reasonable pension savings under this scheme. I hope not to suffer the same upshot as my dad when my retirement comes.
It is for these reasons that I have taken more than a cursory interest in pension matters. The administration of ex-president Olusegun Obasanjo, in a bid to reform pension management in the country in 2004, got the National Assembly to pass the Pension Reform bill through which the National Pension Commission was established. Giving historical background to some of the issues necessitating the establishment of PenCom, the Commission on its website stated as follows:
“Prior to the enactment of the Pension Reform Act 2004, pension schemes in Nigeria had been bedevilled by many problems. The Public Service operated an unfunded Defined Benefits Scheme and the payment of retirement benefits were budgeted annually. The annual budgetary allocation for pension was often one of the most vulnerable items in budget implementation in the light of resource constraints. In many cases, even where budgetary provisions were made, inadequate and untimely release of funds resulted in delays and accumulation of arrears of payment of pension rights. It was obvious therefore that the Defined Benefits Scheme could not be sustained.
“In the private sector on the other hand, many employees were not covered by the pension schemes put in place by their employers and many of these schemes were not funded. Besides, where the schemes were funded, the management of the pension funds was full of malpractices between the fund managers and the Trustees of the pension funds”.
There are five cardinal objectives and features of the Pension Reform Act 2004. Namely: to ensure that every person who worked in either the public service of the Federation, the Federal Capital Territory or the private sector receives his retirement benefits as and when due; to assist individuals by ensuring that they save to cater for their livelihood during old age and thereby reducing old age poverty; to ensure that pensioners are not subjected to untold suffering due to inefficient and cumbersome process of pension payment; to establish a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the Public Service of the Federation, Federal Capital Territory and the Private Sector; and to stem the growth of outstanding pension liabilities.
Almost a decade after the establishment of PenCom and licensing of scores of Pension Fund Administrators, Pension Fund Custodians and Closed Pension Fund Administrators, the woes of Nigerian workers have yet to be over. There are still issues with the management of pension fund. For instance, the state and local governments’ employees are not covered by the PRA 2004.   Even the federal workers and the private sector that are compelled to operate contributory pension scheme are still having challenges. Just last January 28, an Assistant Director in the Police Pension Office,  John Yakubu Yusuf was  sentenced  to two years’ imprisonment with an option of N750,000 fine for conniving with others to defraud  the Police Pension Office and pensioners of N27.2bn. Several other persons have been arrested and currently being prosecuted for diverting, embezzling or misappropriating the pension funds of workers.
According to a report in The Nation, Monday, November 4, 2013, titled, ‘Can Pension Reform Bill end pensioners’ agony?’, “The action and inaction of some pension administrators laid the unfortunate foundation for the scandalous deeds trailing the country pension sector. Barefaced lies and confounding falsehood, ever blossoming thievery of pension funds and activities of rapacious pension administrators more than anything made the repeal and re-enactment of the Pension Act 2004 more urgent than ever”. Senate President David Mark described those prowling pension funds as stealing blood money.
In response to the general outcry for further reform of Nigeria’s Pension industry, President Goodluck Jonathan in April 2013 forwarded an executive bill to the National Assembly to tighten the nuts and bolts of the PRA 2004. Highlights of the Pension Reform Amendment Bill 2013 are as follows:  To enhance the powers of the Pension Commission in its regulatory and enforcement activities as well as to enhance the protection of pension fund assets; to unlock the opportunities for the deployment of pension assets for national development; to review the sanctions regime to reflect current realities; and to provide for the participation of the Informal Sector.
The PRAB 2013 also seeks to provide the framework for the adoption of the Contributory Pension Scheme by States and Local Governments. This is long overdue.  The bill also aims to create new offences and provide for stiffer penalties that will serve as a deterrent against mismanagement or diversion of pension funds assets under any guise, as well as other infractions of the provisions of the Act. The bill equally seeks an upward review of minimum rate of pension contribution from the current 15 per cent. The proposed minimum rate is 20 per cent of the monthly emolument payable as 12 per cent by the employer and 8 per cent by the employee.
The PRAB 2013 scrutinised the provision of the 2004 Act with respect to qualifying years of experience for the Director-General such that the requirement is graduated in descending order from that of the Chairman at 20 years to that of the Director-General at 15 years. This particular clause in the bill has been most contentious. Opinions are divided on the justification for the reduction in the number of years of experience the DG of PenCom needs to have from 20 years to 15 years. A section of the media believes that the request is self serving and uncalled for.  This alteration being proposed by the President is supposedly meant to pave the way for the acting Director General of National Pension Commission, Chinelo Anohu-Amazu, to be confirmed as substantive chief executive. She was appointed acting DG in December 2012 at a time she was allegedly due to retire having served for eight years as Company Secretary on the level of director and possessing only 15 years experience in the industry.
The Joint National Assembly Committees on Pension and Establishment Matters led by Senator Aloysius Etok and Rep. Ibrahim Bawa Kamba has recommended that a person to be appointed to the office of DG PenCom does not even need to have the 15 years being recommended by the executive bill but  should only be a ‘fit and proper person with adequate cognate experience in pension matters’.
The Committee while submitting its report on October 29 said it recommended the removal of 20 years of experience and replaced it with competency just as is the case with other financial regulatory agencies such as the Central Bank of Nigeria Act, Nigeria Deposit Insurance Corporation Act 2006, Securities and Exchange Commission, National Insurance Commission and Corporate Affairs Commission Acts. I do hope the intention of the committee in making this recommendation is altruistic and not in order to satisfy the whim and caprice of the president. As observed by The PUNCH in its editorial of August 22, 2013, “Appointing a pension fund chief regulator should not be reduced to contemptible patronage or despicable cronyism”. I couldn’t agree more.