Cynthia Ezekwe
Nigeria’s Pension Fund Administrators (PFAs) are caught in a pressure cooker as retirees demand urgent action over the federal government’s prolonged delay in releasing accrued pension rights. For months, the federal government’s continued reluctance to release accrued pension rights has left PFAs in a holding pattern, creating a ripple effect that has left newly retired citizens in limbo, unable to access their hard-earned savings despite years of dedicated service to their professions.
Business a.m. gathered that the federal government last paid accrued pensions in 2022 when it released N13.89 billion covering a four-month payment period. This implies that most of the federal government’s employees that retired in 2022 and 2023 are yet to access their pensions till date.
Accrued rights refer to the pension benefits that employees of the federal government’s treasury-funded Ministries, Departments and Agencies (MDAs) are entitled to, based on their service years before the commencement of the Contributory Pension Scheme (CPS) in 2004.
Ugwu Oluwakemi, the CEO of Nigerian University Pension Management Company Limited (NUPEMCO), a firm entrusted with safeguarding the pensions of Nigeria’s university staff, spoke out against the growing malaise afflicting the pension system. In a candid video chat, she shed light on the systemic failure at play, asserting that PFAs are crippled by the spectre of unpaid accrued rights owed to government retirees. This inescapable reality, she contended, prevents PFAs from performing their most crucial duty — providing timely and accurate retirement benefits to those who have dedicated their lives to service.
“Despite the balances in the Retirement Savings Account (RSA) of the retirees, the PFAs are unable to pay because of Section 2.3 of the Revised Regulation on the Administration of Retirement/Terminal Benefits,’’ Oluwakemi said.
According to the NUPEMCO CEO, the regulation mandates that the components of an RSA at retirement shall include accrued pension rights or pre-act benefits (if any) for employees who were in employment before the commencement of the Contributory Pension Scheme (CPS). She noted that employer/employee pension contributions, returns on investment, and the fixed portion of voluntary contributions (if any) must also be included.
However, she noted that a lot of retirees are not aware of Section 2.3, as they assume PFAs intentionally do not want to pay them, which is portraying pension fund administrators in a negative light.
“This is very obvious in the university system where professors retire at 70 years. Life expectancy in Nigeria is less than 70 years, which means they have cheated death. Yet, they wait for an average of one year before they access their funds. This is very pathetic,’’ she stated.
According to Oluwakemi, the delay in pension payments is having devastating consequences, including a surge in preventable deaths. Retirees who would have otherwise had access to essential healthcare are being denied it, leading to premature mortality. She explained that this delay may also contribute to a rise in crime rates, as desperate family members may turn to illegal means to support themselves and their loved ones.
Oluwakemi noted that the Contributory Pension Scheme’s primary objective is to ensure timely payments to retirees, and the current average wait time of one year is a clear failure to meet this goal.
To address the logjam, the CEO of NUPEMCO, urged the government to establish a dedicated pension reserve fund, shielded from budgetary constraints and competing priorities, adding the need for sustainable and diverse funding sources for the reserved fund such as a portion of tax revenues, investment income, or special levies.
She recommended strategies the government can employ to ensure timely payments to retirees and restore the integrity of the pension system, including:
– Introducing dedicated taxes or levies for pension funding
– Enacting legislation that ensures regular contributions to the reserve fund
– Establishing clear rules for pension fund management and disbursement
– Implementing multi-year budgeting to forecast and allocate funds for pension obligations.
Oluwakemi urged the government to establish a joint task force comprising representatives from PFAs, PenCom, and relevant government agencies to monitor and resolve issues related to RSA consolidation and the timely disbursement of retirement benefits. She also suggested that a five-year bond be issued, specifically tailored to provide for employees retiring within that time frame. This, she argued, could be a recurring strategy, implemented every five years to ensure that no retiree is left in limbo.
Olumide Lateef, a member of the house of representatives committee on pensions, while speaking at a recent retreat convened by the Pension Fund Operators Association of Nigeria, stressed the need for issues around pensions’ accrued rights to be resolved to ensure success of the scheme.
Matthew Ike, a United States-based pensions expert, stressed the need to separate the entire pensions industry from government excesses through legislation.
“It is important to have legislation that mandates all entities to pay their contributions conformably. It won’t matter whether you are a government or the private sector. Any failure must attract some sanctions,” he noted.
