Reconsidering the objectives of the pension reform act 2014

BY ADEBAYO ADEKOLA

Nigerian workers are a particularly vulnerable group of people due to a decline in job security and social security: physical, and mental strength that comes with old age. The evolving social security systems have not been very effective owing in the main, to administrative negligence, poor planning, and poor policy implementation. To stem this tide, the Nigerian government introduced pensions through the Pension Reform Act 2004.

The Pension Reform Act 2004, after a few years of its implementation, was discovered to be inadequate in the light of the provisions of some laws, and the experience garnered in its implementation. This necessitated the review and subsequent amendment of the act in 2014. Pension Reform Act 2014 is the most current and principal law on pensions in Nigeria. It has exactly four objectives as contained in sections 1(a) to (d) of the act. In the past, it was common in Nigeria for companies to have a divergent standard for administration and payment of retirement benefits for employees. This practice was without government control. Many employers did not have any retirement plans and benefits for their employees.

Section 1(a) of the act explicitly addressed this divergence and uniformized standard for the administration and payment of retirement benefits. The section also spelt out those whom the uniform standard covers. This includes public service of the federation, public service of the federal capital territory and public service of the state government and public service of the local government councils and the private sectors.

Since public services are considered the highest employer of labour in Nigeria, it is expected that more than 50% of workers in Nigeria would be covered under the contributory pension scheme. If the private sectors are added, the figure would be more, However, according to the Retirement Savings Account (RSA) Membership Distribution Report by the National Bureau of Statistics, National Pension Commission retirement savings account (RSA) membership distribution data for Q4 2016 reflected 7,348,028 workers are registered under the pension scheme out of a total working population of 69,470,091. This represents 10.8% of the total working population.

The report also confirmed that the Nigerian labour force is largely informal with about 50% of the current workforce engaged in subsistence agriculture and informal trading. Microbusinesses for example account for over 90% of total micro, small and medium-scale enterprises in Nigeria. This obvious gap and exposure of more than 90.2% of Nigerians not covered by the scheme and exposed to social insecurity in their old age can be addressed by formalizing the Nigerian labour force and capturing the micro-businesses. The scope and coverage of the scheme, given the low level of contributors, should be reviewed.

Section 1(b) focus on making necessary provision for the smooth operations of the contributory pension scheme, addressing the various challenges usually associated with the various divergent retirement arrangements prior to 2004, thereafter, and before 2014. Employees continue to have the right to choose their pension fund administrator. Where an employee fails to open a Retirement Savings Account (RSA) within six months after assumption of duty, his employer can now request a PFA to open a nominal RSA for such employee for the remittance of his pension contribution.

Opening an RSA is a lot easier and quicker than accessing the funds. A standard requirement and timeline should be introduced for the processing and release of pension funds by PFAs to employees. Also, the pension commission has over the years released guidelines to address some issues that materialized over the years while implementing the Act, it has failed in ensuring compliance. It is considered a sitting dog waiting for it to be feed complaints by employees rather than watching for compliance gaps by all stakeholders.

Section 1(c) provides that the Act aims to ensure every person who works in Public Service of the Federation, Public Service of the Federal Capital Territory and Public Service of the state government and Public Service of the Local Government Councils and the Private Sectors receives his benefits as at when due. This may not be totally true, as some employers fail to remit contributions making it difficult for funds to be available to PFAs to release to employees. Many states have arrears of pension to pay. The Act and the Pension Commission must have a way of coercing states and other contributors to pay pension arrears.

In addition, the pension fund administrators have funds to play with and many scopes of investments the commission may approve to invest pension funds in. Some have argued that the overt focus on the investment is one of the reasons why it is hard to access funds by the pensioners and expressed fair security of the funds.

This consideration of the objectives, section 1 of the Pension Reform Act 2014 is to open discussion and direct reforms toward a pension scheme that is more amiable to all stakeholders, particularly the pensioners who deserve the funds.

Adekola is a legal practitioner with a niche in labour, employment, probate, estate administration, property, and debt recovery. He can be reached via 08165299774 or 09097066504