Recent reports indicate that 25 states of the federation are yet to remit the pension contributions of their respective workers under the Contributory Pension Scheme (CPS). Sadly, most of them are now battling to pay a backlog of pension arrears amounting to four hundred billion naira (N400 billion).
The reports also reveal that while seventeen (17) of the affected states have enacted the pension law in their respective domains, eight have proposed pension laws which are going through the legislative process.
However, findings reveal that due to the inability to contribute both the employees’ and employers’ remittances into the Retirement Savings Accounts (RSAs) of workers, the 25 states are now in dire need of over N400 billion to offset all pension arrears as each of them owes N16 billion in arrears.
The most offensive aspect of the situation is the revelation that some states already owe workers’ pension arrears of between 1 to 13 years.
To address and eliminate the problems associated with such schemes in the country, the federal government enacted into law the Pension Reform Act No 2 of 2004. Under the Act (Contributory Pension Scheme), an employee compulsorily pays a fraction of his/her monthly salary into the scheme.
On 1st July 2014, then President Goodluck Jonathan signed into law, the new Pension Reform Act 2014.
It repealed the Pension Reform Act of 2004 and clearly states that any interests, profits, dividends, investments, and other income accruable to pension funds or assets are not taxable.
However, checks have revealed that the Pension Reforms Act (PRA) 2014, which originally applied to any employee in public service of the federation, Federal Capital Territory, states, local governments and the private sector when it was in the bill stage, was tampered with.
Before being passed into law, state governors mobilised representatives of their states in both chambers of the National Assembly to remove employees of states and local governments from the bill before it was passed into law.
The above makes it difficult for the affected states to be charged for contravening the PRA 2014, which requires that employees should remit eight per cent of their monthly salaries as monthly pension contributions.
Their employers were expected to add 10 per cent, thereby making 18 per cent joint monthly pension contributions that are expected to be remitted into the Retirement Savings Account (RSA) of the workers, not later than a week after their salaries have been paid.
The non-remittance of workers’ pension contributory deductions is worrisome as the future plans of workers are being subjected to uncertainty by some employers.
This undoubtedly is impacting negatively on the growth of the employees’ RSAs. We call on the employers including states that have withdrawn the employees’ contribution from their respective salaries, and have failed to remit the same into their RSAs, thereby shortchanging the workers, to promptly do so.
Failure to do these contradicts the provisions of the PRA 2014 which state in Section 11 subsection 3(b) that “the employer shall not later than seven working days from the day the employee is paid his salary remit an amount comprising the employee’s contribution under paragraph (a) of this subsection and the employer’s contribution to the Pension Fund Custodian specified by the Pension Fund Administrator of the employee.”
We urge the states that are yet to join the CPS to speed up the process of domesticating the PRA 2014 in their respective state laws for easy transition to the new scheme.
We call on the Centre for Pension Right Advocacy (CPRA) and the unions in the public sector to rise to the plight of the workers by compelling the defaulting state governments to remit the monthly pension contributions of their employees promptly as non-remittance of pension funds is a crime against the rights and privileges of Nigerian labourers in all sectors.
We urge the federal government to emulate other countries like South Africa and Ghana where workers’ pensions and gratuity are paid promptly within 15 days after retirement from service.
This is unlike what obtains in Nigeria where retirees must wait for more than twelve months to access part of their pension.
We call on the National Assembly to amend the National Pension Act to allow retirees to access up to 80 per cent of their savings after retirement.
The National Assembly Committee on Pension should be alive to its responsibilities in oversight functions to states in making sure that workers deductions are promptly paid to CPS.
Finally, we urge the Federal Government to know that it is criminal to borrow money from workers’ pension scheme without making efforts to repay the loan. It puts the future of retirees in jeopardy.