Safeguarding the Interest of Pensioners

Jonathan during the signing of the new pension law

The new Pension Reform Act 2014 recently signed into law by President Goodluck Jonathan stipulates harsher punishments for any individual or organisation that henceforth embezzles or mismanages pension funds

By Vincent Nzemeke  |  Jul. 28, 2014 @ 01:00 GMT

WHEN, in 2013, the Nigerian Union of Pensioners, NUP, raised an alarm that no fewer than 500 retired staff of the Delta Steel Company Limited, DSCL, had died since 2005 while awaiting their pensions and entitlements, that revelation generated angry reactions from various quarters.  The NUP’s allegation was not completely strange to many Nigerians. Long before the NUP’s alarm, the media had been awash with news of pensioners who served the country in various capacities in their primes wallowing in poverty and squalor.

In Lagos, for instance, it was reported that some pensioners had died while waiting to receive their pensions at the Nigerian Railways Corporation where they worked before their retirements. To make matters worse, the money allocated for their payment of pensioners was embezzled by some government officials.

In 2013, an Abuja high court convicted Yakubu Yusuf for stealing N27 billion police pension fund. He was handed a two-year jail term with an option to pay a fine. He regained his freedom later after pleading guilty and paying a fine N750, 000.

This scandalous judgment was greeted with hues and cries across the nation thereby prompting renewed calls for a reform of Nigeria’s pension laws. The agitation for a new pension law finally came to fruition on Tuesday July 2, 2014 when President Goodluck Jonathan assented to the Pension Reform Act 2014 which was passed by the Senate on April 9, 2014  and by the House of Representatives the next day.

Protest by Nigeria Union of Pensioners Lagosstate
Protest by Nigeria Union of Pensioners Lagosstate

The new pension law phases out the method of pension payment known as defined benefits scheme and, instead, provides for the existence of pension administrators who will serve as custodians of pensions through the opening of a retirement savings account, RSA, for senior citizens and every current employee in both the public and private sectors.

An essential feature of the Act is the provision for the creation of pension transition arrangement departments, PTADs, which  are empowered by the bill to take over the payment of pensions to pre-pension reform retirees in government departments such as Police Pension Office; Customs and Immigration Pension Office as well as the Civil Service Pension Department. Events of the past decades have only shown the notoriety of these departments for pension fraud.

Against this background, the PTADs will ensure that senior citizens who retired under the old pension scheme before the first enactment of Pension Reform Act 2004, which the National Assembly has just amended, have their pensions transmitted directly into their bank accounts and no longer through a third-party, that is, pension departments, as had been the case over the years.

Although Section 30 (2a) of the 2004 Pension Reform Act had provided for the existence of PTADs, there was no move to bring it into fruition until the coming of Chinelo Anohu-Amazu as acting director-general of Pension Commission, PenCom. Her initiative prompted the recent appointment of the first director-general of PTAD by the president.

Another aspect of the pension reform is the contributory pension scheme. A pension administrator will be duty-bound to operate under the contributory pension scheme involving both the employer and employee by remitting such contributions into the latter’s accounts. Under this scheme, both the employer and employee will contribute 20 per cent. While the employer will contribute 12 percent, the employee will contribute 8 percent of his earnings. This provision is an upward review from the 15 percent contribution in the repealed Act in which both the employer and the employee contributed 7.5 percent each.

But just as pension is payable only after retirement, even so an employee under the reform, will be denied access to his or her pension until he or she retires or attains the age of 50. The only exception allowable is when there is a job loss. The Act grants every contributor access to his or her RSA after four months in the labour market with unsuccessful attempts to secure another job.

To safeguard the interest of prospective pensioners therefore, the Act provides for years of imprisonment as penalty for any pension administrator who misappropriates or diverts pension funds. It also stipulates that anyone found guilty of embezzling pension funds will pay thrice the value of what he has embezzled.

The Act also provides for five years imprisonment or N10 million fine for any pension administrator who fails to remit profits earned from an investment made with the fund of a contributor.  It also provides for a fine of N500,000 daily for any agency administering pension affairs which fails to abide by the provisions of the law.

The enactment of the Pension Reform Act (Amendment) 2014, which among others, seeks to put paid to the era of impunity and widespread corruption in various pension departments, is expected to enhance the operations of PenCom as the sole regulatory authority and as well  foster the efficiency of the commission to provide greater oversight on PTADs. It has also repositioned it for greater efficiency and accountability in the administration and payment of pensions under the old pension scheme otherwise known as Defined Benefits Scheme.

Following the passage of the bill with the intention to entrenching the desired reform in pension administration in Nigeria, stakeholders have hailed the federal lawmakers for their patriotic move.

Muhammed Ahmad, DG of PenCom
Muhammed Ahmad, DG of PenCom

Notable among such stakeholders is the Federal Universities Pensioners Association,   FUPA, which said the reformed law was long overdue, “especially given the diligent and eye-opening investigation by the legislature into sharp practices in various pension departments,” adding: “Such lootings have brought untold hardships and untimely deaths upon pensioners.”

The group was quoted as saying through its president, Ayuba Kura, that the move to reposition the pension system through an executive bill by the Jonathan administration was a notable move to reform pension management in Nigeria. It also praised the legislature for evolving harsh penalties against pension culprits.

“In particular, we commend the Senate for providing for the creation of new offences and for harsher penalties against the infractions on pension law and all forms of mismanagement or diversion of pension funds and assets under any guise. Those who steal pension funds do not have mercy on the elderly and the weak and deserve harsher punishment which this law has tried to entrench.

“We commend the Senate for endorsing the move to properly establish the Pension Transition Arrangement Departments to now take over the payment of benefits to pensioners who retired under the old or Defined Benefits Scheme from the various Pension Departments. This will enable pensioners under this arrangement to now receive their pensions directly without the funds passing through third parties, being the various Pensions Departments,” the group said.

Another notable feature of the reform is the qualification of the director general of PenCom. The reforms specifically states the minimum years of experience which anyone seeking appointment as the director-general of PenCom must possess. From the initial 20 years provided in the repealed bill, the National Assembly has reviewed it downwards to 15 years.

The new pension Act also has stiff penalties for the likes of Yusuf who perpetuate pension fraud. Specifically, Section 101 of the Act stipulates that any pension custodian who contravenes the provisions of the Act commits an offence and shall be liable on conviction to a fine of not less than N10 million with each of its directors or principal officers also liable to a fine of not less than N5 million or to a term of not less than 5 years imprisonment or to both fine and imprisonment.

The 2014 Act also empowers PenCom, subject to the fiat of the Attorney General of the Federation, to institute criminal proceedings against employers who persistently fail to deduct or remit pension contributions of their employees within the stipulated time. This was not provided for by the 2004 Act.

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