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INSURANCE & PENSIONS

Nigeria @56 and the 65 year old pension system

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How Buhari’s Chief of Staff installed his cousin PenCom DG

 

Introduction

Life expectancy over the years in Nigeria has continued to go down but the beauty of life lived is your savings for tomorrow (pension).

Nigeria being a former colony of Britain, it’s been argued, received a pension tradition into her public sector that is entirely modelled after the British structure.

The Country’s pension scheme had started in 1951 when the colonial British administration established a scheme through an instrument called Pension Ordinance. It, however, had a retroactive effective from 1946 and applied only to United Kingdom officials posted to Nigeria.

Over the years of pension system, it has witnessed various legislations which has increased from Decree No. 42, 1975 to Military Pension Act Cap (Chapter or No.) 119; Pensions Act Cap (Chapter or No) 147; War Pension Act Cap (chapter or no) 212; Pension (special pensions) Act 1961 (chapter or no) 1961 no. 15; Widows and orphans pension Act Cap 220; Pensions (Statutory Corporation Service) Act 1961 no. 61; Pension (Transferred Services) Act 1965 no. 28; Special Constables Decree 1966 no. 7; Police Pension Decree 1966 no. 60; Pensions (Federal Fire Service etc) Decree 1966 no. 74; Pensions gratuities (war service) Decree 1966 no. 49; Transferred offices and pension liability 1971 no. 8; Military pensions (Amendments) Decree 1975 no. 13 by Mohammed, head of the Federal Military Government, Commander-in-Chief of the Armed Forces FRON 20/12/75.

The other decrees include Pensions Act of 1979 Decree No. 102, which awarded and united all pensions, acts; Public services the recommendation review 1974; Armed forces pension act no. 103 of 1974; The pension rights judges Act no. 5 of 1985 and the amendment Act no. 51 of 1988, 29 of 1991 and 62 of 1991.

The whole of the ordinance acts and Decree is capped up in the Decree No. 102 of 1979, which took effect from April 1, 1974. It consolidated all enactments on pensions and in corporate pension and gratuities seals devised for public officers by the Udorji Public Service Review Concision in 1974.

In the same way, Pension Act No. 103 of 1979 like its counterpart Decree No. 102, of 1979, on the other hand, dealt with pension benefits, liabilities and seals devised for the agreed forces.

In the past, civil servants bore no direct responsibility, by way of payroll tax, for the provision of pension; instead pension benefits were paid through budgetary allocations to be kept in the Consolidated Revenue Fund. Thus, in most cases, the amount released usually fell short of the actual appropriation for pension payment. But the passage and operation of Contributory Pension Scheme (CPS) in 2004 ends retirees’ suffering in having access to their sweat at the end of their working life.

Pension reform in Nigeria

Before the enactment of the Pension Reform Act 2004, which establishes a contributory pension scheme for all employees in Nigeria, the country had operated a Defined Benefit (DB) pension scheme, which was largely unfunded and non-contributory.

The Scheme led to a massive accumulation of pension debt and became unsustainable largely due to a lack of adequate and timely budgetary provisions, as well as increases in salaries and pensions. The administration of the scheme was very weak, inefficient, less transparent and cumbersome, leading to bureaucracy and highly liable to corrupt practices.

Also, lack of reliable records of pensioners, placed huge amount of resources on what became yearly verification exercises were expended which did not result into the timely and efficient payment of pension.

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.

It is worthy of note that the CPS only cater for workers in the formal sector which comprises of public and private sectors leaving the informal sector which includes the SMEs but a new initiative has been birthed titled Micro Pension Scheme.

Throwing up the new opportunity for every Nigerian to become a pensioner, the National Pension Commission (PenCom) supported by Pension Operators Association of Nigeria (PenOp) has began in a new initiative to launch all Nigerians into the Pension Scheme.

The Micro Pension Scheme whose guideline is about to be unveiled will bring into the fold, Akara sellers, Okada/Keke riders, highway sweepers, food vendors and other category of self-employed persons in the country.

The Micro Pension operates under the same principle of the CPS which initially embraces the Public Servants and the Organised Informal Sector having 3 employees and above.

With the new initiative, individuals would now have the rare opportunity to become pensioners that was exclusive of public officers and lately informal sector.

PenOp chairman, Mr. Eguarekhide Longe, recently at a retreat for journalists in Lagos described the initiative as a strategy to lift the status of Nigerian entrepreneurs and keep them living their normal life even when age has incapacitated them.

Longe said Pension Fund administrators (PFAs) who are key operators in the industry would invest in the strategy and keenly support PenCom to realise the objectives of the scheme.

Nkem Oni-Egboma managing director Zenith Pensions Custodian Limited corroborated Longe’s assertion that the scheme when fully operational will deal with old age associated poverty.

Oni-Egboma described the scheme as a key social welfare system that will eliminate disease and painful exit of those who laboured during their active and youthful age but could not fend for themselves as a result of absence of family support.

Managing director AXA Mansard Pensions Limited, Dapo Akisanya expressed the hope that the scheme will boost life expectancy of Nigerians.

Micro Pension Plan

Giving insight into the scheme at the forum, head Micro Pensions Department of PenCom, Polycarp Anyanwu said the scheme is expected to attract 20 million Nigerians by 2019 and 30 million by the year 2024.

Anyanwu who was represented by Mrs Chioma Orjiakor explained that it is a Pension Industry strategic initiative designed to have inclusive and expanded coverage.

“It is a long term voluntary financial plan for the provision of pension and coverage to self-employed persons working for organisation with less than 3 employees and informal sector workers” Anyanwa noted.

Under the law, the Pension Reform Act (PRA) 2014 expanded coverage of the CPS to the self-employed and persons working in organizations with less than three employees.

As this category of workers constitute the larger percentage of the working population in the country, there is no doubt that to achieve the Pension Industry strategic objective of covering 30% of the working population in Nigeria under the CPS by the end of 2024, all efforts are now on deck to extend coverage to this important segment of the Nigerian economy.

According to the director general of the PenCom, Chinelo Anohu-Amazu, due to their widely dispersed nature and generally low and irregular incomes, there is need to provide a pension plan that would meet their special characteristics. In this regard, the Micro Pension Plan initiative has been conceived within the context of an industry wide strategy to bring this class of workers on board.

In implementing this initiative, the informal sector has been segmented into three broad categories namely, the low income earners, the high income earners and the SMEs.

Each of these categories is going to be targeted with appropriate pension products and sensitisation programmes that meet their peculiarities.

However, it is evident that a robust technological platform that would support the provision of customer services is necessary to effectively and efficiently register, collect contributions, provide Retirement Savings Account support, pay benefits and provide financial advisory services to this class of workers.

Coincidently, special mobile phone applications had been successfully implemented in some jurisdictions for financial transactions including provision of pension services to the self-employed and informal sector workers. The success stories of these applications drives the confidence that similar platform can be designed and implemented in Nigeria.

Consequently, the Commission had already commenced the sensitization of service providers and relevant regulators as well as the targeted workers in the informal sector with a view of creating the enabling environment and buy-in.

In addition, special function has been established in the Commission to drive the implementation of the Micro Pension Plan.

 

Published in The Daily Times Newspaper on October 3, 2016

Kayode Adelowokan

NEWSVERGE, published by The Verge Communications is an online community of international news portal and social advocates dedicated to bringing you commentaries, features, news reports from a Nigerian-African perspective.The Verge Communications (NEWSVERGE) is fully registered with the Corporate Affairs Commission of the Federal Republic of Nigeria as a corporate organization.