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Pension Insight: The path to full CPS implementation at state and local levels

PenCom commences online enrolment exercise for prospective retirees The National Pension Commission (PenCom) says it has commenced the online verification and enrolment exercise for prospective retirees in ministries, departments and agencies (MDAs) of the federal government. The commission said the exercise is for those who are due to retire in 2025. Omolola Oloworaran, acting director-general (DG), PenCom, spoke at a workshop on the online enrolment application for pension desk officers (PDOs) of treasury-funded ministries, departments and agencies (MDA) of the federal government, on Monday in Abuja. Oloworaran said the commission is working effortlessly to ensure that challenges such as application downtimes are resolved. She also said a new and more efficient enrolment application that will provide a user-friendly and seamless experience for users has been developed. “At the National Pension Commission (PenCom), we hold firmly to our statutory responsibility of ensuring a seamless pre-retirement verification and enrolment process for employees of federal government treasury-funded MDAs,” Oloworaran said  “Each year, we embark on this exercise to gather accurate data for determining the Accrued Pension Rights of prospective retirees, so that the federal government can make the necessary budgetary provisions. “Today’s session is not just a routine gathering; it is part of PenCom’s commitment to building the capacity of stakeholders, specifically you, the Pension Desk Officers, whose roles are indispensable in this process. “This workshop aims to equip you with the skills and knowledge needed to effectively use the application and address any challenges that arise during the enrolment process. “We are also here to confront the issues of the past head-on.” 'THERE WERE GAPS IN PREVIOUS ENROLMENT' She further said in previous enrolment exercises, gaps and challenges were observed. The PenCom DG added that the workshop will provide practical solutions and clarity on the modalities for the upcoming 2025 enrollment.  “We understand that some challenges, like application downtimes, have occasionally hindered the process, particularly during last-minute rushes,” she said. “I am pleased to inform you that we are actively working on developing a new, more efficient enrolment application that will provide a user-friendly and seamless experience for all stakeholders." Oloworaran also reassured that the commission is committed to continuously improving service delivery across the pension industry. The PenCom boss said despite some setbacks, including delays in the release of funds for retirees’ accrued rights, she’s confident that these issues will soon be resolved.  “Today is not just about resolving technical issues; it is also about reaffirming our shared responsibility to Nigeria’s retirees, who deserve timely and seamless access to their benefits,” she added. Oloworaran also said significant progress has been made by all critical stakeholders to clear the outstanding pension liabilities and put in place long-term solutions that will prevent future delays in funding. PenCom commences online enrolment exercise for prospective retirees The National Pension Commission (PenCom) says it has commenced the online verification and enrolment exercise for prospective retirees in ministries, departments and agencies (MDAs) of the federal government. The commission said the exercise is for those who are due to retire in 2025. Omolola Oloworaran, acting director-general (DG), PenCom, spoke at a workshop on the online enrolment application for pension desk officers (PDOs) of treasury-funded ministries, departments and agencies (MDA) of the federal government, on Monday in Abuja. Oloworaran said the commission is working effortlessly to ensure that challenges such as application downtimes are resolved. She also said a new and more efficient enrolment application that will provide a user-friendly and seamless experience for users has been developed. “At the National Pension Commission (PenCom), we hold firmly to our statutory responsibility of ensuring a seamless pre-retirement verification and enrolment process for employees of federal government treasury-funded MDAs,” Oloworaran said  “Each year, we embark on this exercise to gather accurate data for determining the Accrued Pension Rights of prospective retirees, so that the federal government can make the necessary budgetary provisions. “Today’s session is not just a routine gathering; it is part of PenCom’s commitment to building the capacity of stakeholders, specifically you, the Pension Desk Officers, whose roles are indispensable in this process. “This workshop aims to equip you with the skills and knowledge needed to effectively use the application and address any challenges that arise during the enrolment process. “We are also here to confront the issues of the past head-on.” 'THERE WERE GAPS IN PREVIOUS ENROLMENT' She further said in previous enrolment exercises, gaps and challenges were observed. The PenCom DG added that the workshop will provide practical solutions and clarity on the modalities for the upcoming 2025 enrollment.  “We understand that some challenges, like application downtimes, have occasionally hindered the process, particularly during last-minute rushes,” she said. “I am pleased to inform you that we are actively working on developing a new, more efficient enrolment application that will provide a user-friendly and seamless experience for all stakeholders." Oloworaran also reassured that the commission is committed to continuously improving service delivery across the pension industry. The PenCom boss said despite some setbacks, including delays in the release of funds for retirees’ accrued rights, she’s confident that these issues will soon be resolved.  “Today is not just about resolving technical issues; it is also about reaffirming our shared responsibility to Nigeria’s retirees, who deserve timely and seamless access to their benefits,” she added. Oloworaran also said significant progress has been made by all critical stakeholders to clear the outstanding pension liabilities and put in place long-term solutions that will prevent future delays in funding.

A key objective of the Pension Reform Act (PRA) is to establish a uniform set of rules, regulations, and standards for administering and paying retirement benefits for the public and private sectors at the national and sub-national levels.

Specifically, section 2(1) of the PRA 2014 provides that the contributory pension scheme (CPS) applies to any employment in the public service of the federation, the federal capital territory, the states, and local government, as well as the private sector.

However, by the provisions of the 1999 Constitution of the Federal Republic of Nigeria (as amended), state governments can legislate on pension matters; consequently, state governments have to domesticate the CPS within their various jurisdictions by enacting a state pension law.

REGULATION AND PROGRESS SO FAR

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The National Council of States, in its meeting of August 2006, adopted the CPS for all states and local governments. Following the scheme’s adoption, a Model State Pension Law was developed for the state governments to adopt and modify based on their peculiarities. The National Pension Commission (PenCom) reviews draft state pension laws and supports states in implementation.

At the end of September 2023, 25 states, including the federal capital territory (FCT), had enacted laws on the CPS, while six states were at the bill stage. The enacted laws, which are substantially in tandem with the provisions of the PRA 2014, are the first significant step towards the domestication of the CPS at the sub-national level. Six states have laws on the Contributory Defined Benefits Scheme (CDBS). Commendably, 16 states have established Pension Bureau/Board, and 11 are remitting employer and employee pension contributions in line with the CPS. Seven states have started paying pensions to retirees under the CPS.

BENEFITS OF CPS TO STATES

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The transition from the Defined Benefits Scheme (DBS) to the CPS or even the CDBS at the state and local government levels is significant in several ways and inevitable eventually, even for the states yet to do away with the DBS. The CPS is structured to ensure that all retired employees receive retirement benefits as and when due.

The benefits of the CPS are enormous. The CPS is the best solution for pension liabilities, which many states are grappling with. States that fail to offset pension arrears now are creating a financial burden on future generations as these pension benefits will continue to grow. States can avoid this trap by adopting the CPS.

The CPS will stem further growth of pension liabilities and provide fiscal discipline in the budgetary process because pension obligations would be accurately determined and settled systematically. Importantly, assets are available at the exit of a retiree for payment of pension benefits promptly. Thus, no accumulation of pension arrears.

The CPS provides safeguards to enable states to combat corruption in the pension sector. The pension contributions are received and held by custodians in the name of the retirement savings account (RSA) holder. The RSA holder can only access the funds at retirement or under specific conditions. Licensed pension fund administrators (PFAs) invest the funds to ensure safety and earn fair returns for the contributors.

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Pension assets cannot be used to meet the claims of creditors of pension operators. They cannot be seized or subject to execution of judgment debt or sold, granted as a loan or used as collateral.

Due to the contributory nature of the CPS, employers no longer need to bear the burden of making provisions for retirement benefits for their employees. Unlike the DB scheme, employees under the CPS are also responsible for contributing towards their retirement benefits, thus reducing the financial burden on the employer.

In addition, the scheme has provisions for employers to pay monthly pension contributions. This provision alleviates the burden on employers to make bulk payments to settle pension liabilities.

‘CPS BETTER OPTION TO FINANCE GOVERNMENTS’ BORROWING NEEDS’

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The CPS is a more efficient avenue for financing state governments’ long-term borrowing needs via investible instruments such as infrastructural bonds. States that implement the CPS derive the benefits of generating long-term savings, which can promote the growth of their real sector as PFAs invest in bonds issued by such states. PFAs are not allowed to invest in the bonds of states yet to implement the CPS.

Meanwhile, PenCom’s regulatory oversight of states and local governments’ pension schemes is guided by the provisions of the enabling laws in the states. Section 23 (i) of the PRA 2014 clearly emphasised that PenCom’s role regarding the CPS at the sub-national levels shall be to promote and offer technical assistance to states in line with the scheme’s objectives. Despite the enormous benefits of the CPS, it would be contrary to constitutional provisions for PenCom to enforce the requirements of the PRA 2014 on the states without recourse to the states’ extant laws and prevailing economic limitations at every material point. PenCom has continued to adopt the persuasive approach to drive full implementation of the CPS at the states and local governments.

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In conclusion, PenCom, as the apex regulator of the pension industry in Nigeria, has intensified the drive to implement the CPS by states and local governments. PenCom remains committed to the effective regulation and supervision of the pension industry.


Based on information by the National Pension Commission (PenCom).

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