•Exit to cost FG N1.80trn, jeopardise existing investments in securities, says Dahir-Umar
The Director General, National Pension Commission (PenCom), Mrs. Aisha Dahir-Umar, yesterday said the clamour by the Nigeria Police Force to exit the Contributory Pension Scheme (CPS) was ill-advised.
She said the commission already had provisions that could address whatever grievances and challenges being faced by the police personnel and other federal government agencies on the administration of their retirement benefits.
Speaking at a public hearing on a bill for an Act to amend the Pension Reform Act, 2014, to Provide for Exemption of the Nigeria Police Force from the Contributory Pension Scheme and for Related Matters, the PenCom boss said if allowed, the exit of the police from CPS to the Defined Benefit Scheme (DBS) could further impose an additional N1.84 trillion pension liabilities on the federal government.
The hearing further considered a bill for an Act to Amend Sections 1 (c), 7 (2), 8 (1), 18, 24 and 99 of the Pension Reform Act Cap 50 LFN 2014 by providing that a pensioner shall receive at least 75 per cent of his retirement benefits immediately upon retirement and criminalise the undue delay in payment of pension.
But Dahir-Umar, told the House of Representatives Committee on Pensions, chaired by Hon. Kabiru Alhassan Rurum, that while the primary objective of the Pension Reforms Act (PRA) 2014 was to ensure that everyone who works receives his/her retirement benefits as and when due, the proposed bills basically sought to undermine the essence of pensions and social security cover as enshrined in the 1999 (as amended) as both would ultimately deny retirees an adequate periodic income in retirement.
She stressed that the exemption of the police, if allowed, could unsettle the federal government’s fiscal policy and financial system stability adding that to date, about 63.17 per cent of the N13.4 trillion pension assets are invested in federal government securities.
As a result, she said, “Exempting the NPF would lead to material divestment from FGN securities before maturity, which would have ripple negative effects on not only the finances of government but on the entire financial system.”
She added: “We, therefore, have a collective responsibility as Nigerians to ensure that the CPS remains sustainable in order to achieve this objective.”
She, however argued that the absence of other social security benefits in the country was partly responsible for the clamour by the retirees for exemption or to access substantial amounts as lump sum from their RSA balance.
She added that there is an imperative need for the country to institute a Zero Pillar Pensions in the form of social security benefit, which is recognised and provided for in the 1999 Constitution (as amended).
The PenCom DG further said: “If implemented, it will go a long way to alleviate the sufferings of all Nigerians irrespective of whether or not they had a formal employment. It will also augment earnings from occupational pensions.
“Accordingly, the Commission respectfully urges the Honourable House Committee on Pensions to disregard the Bills and, instead, seek to institute sustainable pension system and social security scheme in Nigeria.”
Essentially, the police had been pushing for an exemption from the scheme because they are unable to access lump sums of benefits at retirement, citing the military as an institution that had exited the scheme and now access lump sums on retirement.
However, the PenCom boss said exiting the scheme was not the best option for the police as the quantum of entitlements is only a function of salary.
She added that the federal government, which is the police employer, had since realised that the resolution of the challenges of the police under the CPS was surmountable without recourse to abandoning the programme.
She said one of the ways to resolve the problem was for the police to get the federal government to increase their salary, a move that cannot be influenced by the commission on their behalf.
She added: “The solution to the pension challenges of the personnel of the Nigeria Police does not reside in their exemption from Contributory Pension Scheme and reversion to the Defined Benefits Scheme, which is clearly unsustainable.”
According to her, “Exemption of the personnel of the NPF would imply additional financial burden on the federal government by way of unsustainable pension obligations. For instance, as at September 2021, there were 304,963 Police personnel based on IPPIS data.
“An actuarial valuation revealed that the retirement benefits (pension and gratuity) liability of these personnel under the defunct Defined Benefits Scheme would amount to about N1.84 trillion.”
On the other hand, the liability under the CPS for the same NPF personnel is made up of N213.4 billion as accrued pension rights and monthly employer pension contributions of about N2.2 billion.
The DG noted that to address the concerns of police personnel on pension, the employer could review upwards its current contribution rate of 10 per cent adding that the PRA 2014 further provides that notwithstanding the pension contributions made by employer and employee into the employee’s RSA, the employer may agree on the payment of additional benefits to the employee upon retirement.
She added that the federal government may also wish to provide additional benefits in the form of gratuity to police personnel upon their retirement, stating that the exemption of the NPF and any other agency from the CPS would erode the pool of long-term investible funds accumulated under the scheme. (THISDAY)
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