How some states are stalling pension

How some states are stalling pension

Several years after the PRA 2014 was introduced, many state governments are yet to implement it, thereby creating problems for their retired employees, Omobola Tolu-Kusimo writes

The adage that rest is sweet after labour may after all not hold for employees of most state and local governments.

The adage holds sway only for employees who have got their  retirement planned for them by their employers during their service.

Unfortunately for employees of most states and local governments, this plan is alien to their managers.

The woes of the state and local governments’employees started with the lacuna in the Pension Reform Act (PRA) 2004 that left them without pension laws.

According to the Director, Centre for Pension Rights Advocacy, Ivor Takor, in a paper entitled: “State governments and the pension rights of their employees”, the exclusion was not an oversight by the First National Assembly Committee on Pension, that carried out the reform but a ploy by governors during former President Olusegun Obasanjo’s administration to avoid paying pension.

Shedding light on the issue, he explained that employees of state and local governments were initially covered in the Executive Bill sent by the President to the National Assembly.

He said on reaching the National Assembly, some governors mobilised representatives of their states in both chambers of the National Assembly to remove employees of state and local governments from the Bill before it was passed into law.

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Their reason, he said, was that the country was under civil rule; therefore, there must be the practice of true federalism, which does not allow the National Assembly to make laws for the states on an issue, such as pension, that does not fall in the exclusive legislative list of the constitution.

Takor categorised the 36 states of the Federation as follows: flagship, hibernating states and those that have adopted Contributory Defined Benefits Schemes (CDBS) and the red flag states.

He explained that the flagship states have adopted the Contributory Pension Scheme (CPS) and are fully complying with their laws; hibernating states have stopped at enacting laws while the most dangerous ones; the red flag states don’t intend to do anything about pension laws.

He added that some states have adopted CDBs.

He listed the red flag states as Akwa Ibom, Bauchi, Borno, Cross River, Katsina, Kwara, Plateau and Yobe.

On the other hand, he listed the flagship states as Kaduna, Federal Capital Territory (FCT), Ondo. Edo, Lagos, Ekiti, Delta and Osun.

He said hibernating states have laws but not are fully compliant. They include Kebbi, Anambra, Rivers, Benue, Nasarawa, Sokoto, Ogun, Oyo, Abia, Ebonyi, Enugu, Imo, Taraba, Bayelsa, Adamawa, Kogi and Niger while the states that adopted CDBs are Jigawa, Kano, Gombe and Zamfara.

He said the categorisation gives a view to the public, state employees, their unions and labour centres on the old age life styles, the governors that are preparing their workers for pension.

He said steps had been taken to remove the lacuna in the law by the National Pension Commission (PenCom) in the Pension Reform Act (PRA) 2014.

Takor said: “Years into the implementation of the PRA 2004 and the CPS, no state government enacted a law to protect the pension rights of its workers. Disturbed by this lacuna, in 2006 or thereabouts, PenCom Board approached the National Council of State on the issue, presenting the Council a draft Bill that can be adopted by States. The Council agreed to and adopted the CPS for employees of state governments. It decided that state governments should get their  assemblies to enact their pension laws, guided by the draft bill that was presented to Council by PenCom.

“The mischief that found its way into the PRA 2004 as highlighted was cured in the PRA 2014. Section 2(1) of the Act provides that the provisions of this Act shall apply to any employment in Public Service of the Federation, the Public Service of the Federal Capital Territory, the Public Service of states and the Public Service of Local Governments and the Private Sector. However, no state has adopted the Pension Reform Act 2014 for implementation.

“The CPS, unlike the old Defined Benefit Scheme, has inbuilt safeguards meant to protect the fund from mismanagement and fraudulent practices.The scheme is fully funded through monthly contributions, which are put into Retirement Saving Accounts (RSAs) owned by employees. Employers cannot access the funds.The funds are warehoused by Pension Fund Custodians and managed by Pension Fund Administrators.The law established PenCom, among other objectives, to regulate, supervise and ensure the effective administration of pension matters and retirement benefits.’’

He warned that governors who failed to implement the CPS would make their workers retire into penury and unrest.

He stated that a time would come  when  a worker would no longer be fit for active economic activities and earn regular income through work. However, it is a period of rest, for those who have planned for it and a period of poverty and destitution for those who have failed to plan for it.

Organisations plan for their employees’old age by putting in place pension schemes for them. Pension is a retirement plan that provides monthly income in retirement, he added.

Pricewaterhousecoopers (PWC), in a document entitled: “Pension at State Government Level: The New Era”, said state governments could no longer ignore the need to implement pension schemes even amid rising recurrent expenditure and the economic climate.

Chief Economist, Dr. Andrew Nevin, PWC said this is because the long-term cost savings greatly outweigh the initial implementation costs.

He said they hoped that state governments would be stimulated in the right direction.

“We encourage them to partner  PenCom as well as relevant stakeholders like our firm in the implementation of their contributory pension schemes.

“Partnering PenCom and relevant stakeholders is critical in achieving full implementation of the state pension schemes. The current situation shows poor management of pension funds; unwieldy growth of pension liabilities; retirees not paid their retirement benefits as and when due.

“Amid the current situation, state governments can no longer ignore the need to implement a pension scheme for its employees, as the CPS set up is mandatory for the state governments. In addition to complying with the law, state governments need to take advantage of the various opportunities that abound within the pension industry to secure the future of its greatest asset – the Civil Service – and harness the benefits of implementing a CPS,’’ he added.

Meanwhile, the Acting Director- General, PenCom, Mrs Aisha Dahir-Umar said the Commission has been engaging state governments on the implementation of the CPS, by holding meetings with the officials.