News Column

As Jonathan Moves to Rescue Pensioners

July 15, 2014

Last week, President Goodluck Jonathan took the bull by the horn by appending his signature on the Pension Bill which was recently passed into law by the two chambers of the National Assembly, the House of Representatives and the Senate.

Nigeria has in recent times witnessed large scale fraud among pension administrators in the country. The law before now was not strong enough to protect workers who had served the country meritoriously as there were loopholes where those saddled with the responsibility to oversee the pension scheme had cashed-in on the lacuna created by the law to milk the pensioners.

Even efforts of the interim management of the Pension Commission, PENCOM, led by the Acting DG, Mrs. Chinelo Anohu-Amazu, to block all the loopholes were not enough as there was no stiff penalty against the pension thieves.

It was actually her leadership, through the support and approval of the President that escalated reforms in the pension industry. It seemed everybody was afraid of the pension thieves.

The provisions for the Pension Transition Arrangement Directorates, PTADs, were there all the while, but nobody activated the PTADs because it literally meant nobody could have had access to the pension funds of those who retired before the coming into force of the PENSION REFORM ACT 2004.

It took Jonathan's administration, through the advice of the Acting DG, to activate it and appoint a DG for the Directorate of PTADs. That was actually the main reason some powerful interests worked assiduously to make sure the Bill did not succeed under various disguises.

Although there have been many Bills passed into law by the National Assembly which are awaiting the signature of the President Jonathan, it was heartwarming he did not waste time to append his signature on this all important law. There were myriads of challenges before President Jonathan came into power but his administration has made efforts to address these problems and these efforts of the administration in rescuing pensioners by repositioning the system is commendable.

Besides, the National Assembly has not left anybody in doubt since the scam in the pension administration was exposed that it was ready to reposition the system.

Before now also, nobody wanted to do something serious about expanding what constitutes offences in the pension industry and setting stringent penalties against this man's inhumanity to fellow man until Jonathan came.

One of the challenges facing the pension system was also the judiciary and that is why the National President of the Federal Universities Pensioners Association, FUPA, Dr. Ayuba Kura, in a recent statement where he commended the Federal Government, the National Assembly and the acting management of the PENCOM, called the judiciary to come up with stiffer penalties for pension thieves.

The main thrusts of the Pension Reform (Amendment) Act 2014 which has been signed into law, are to enhance the powers of the National Pension Commission, PENCOM, in the institution's regulatory and enforcement activities and to enhance the protection of pension fund assets.

It also strives to unlock the opportunities for the deployment of pension assets for national development, review the sanctions regime to reflect current realities, provide for the participation of the informal sector and also provide the framework for the adoption of the Contributory Pension Scheme, CPS, by states and local governments.

It is a product of the joint effort of the Goodluck Jonathan administration and the National Assembly to put an end to the era of impunity and in some instances widespread corruption in the various pension departments. The Act has enhanced the regulatory authority and efficiency of the Commission to provide greater oversight on, and reposition the PTADs for greater efficiency and accountability in the administration and payment of pensions under the Defined Benefits Scheme.

Some of the major amendments by the Act are to restructure the System of Administration of Pensions under the Defined Benefits Scheme, PTAD: (Sections: 42-49 of the Bill)

The implementation of the provisions of the Pension Reform Act 2004 dealing with the establishment of PTADs for the administration of pensions for pensioners under Defined Benefits Scheme has been challenging due to many ambiguities in the law and widespread corruption.

While the number of pensioners under this Defined Pension Scheme or old pension scheme (that is those who retired before the Pension Reform Act 2004 came into being) were supposed to be dropping since no new people are joining and those under it are growing ripe in age and passing on, the number has been increasing.

Various Pension Departments inflate the numbers with ghost pensioners (those who never existed and those who existed, but had died and were not declared dead to the government by the Pension Departments). It is under the scheme that all the heavy lootings happen unlike the Contributory Pension Scheme.

The Act as amended has now therefore repositioned the PTADs to ensure greater efficiency and accountability in the administration of the Defined Benefits Scheme in a way that payment of pensions would be made by the Accountant General of the Federation directly into pensioners' bank accounts in line with the current policy of the Federal Government rather than channeling the benefits through the various Pension Departments that reek with embezzlement and impunity.

Also Section 4(1) of the Act makes provision for the upward review of minimum rate of pension contribution from a minimum 15 percent (a minimum of 7-5 percent each by employer and employee).

This means that the contribution for any employee to which this Bill applies shall be made in the following rates relating to his monthly emoluments:

(a) a minimum of ten percent by the employer; and

(b) a minimum of eight per cent by the employee

Subsection (2): The rates of contribution mentioned in subsection (1) of this section may, upon agreement between any employer and employee be revised upwards, from time to time, and the Commission shall be notified of such revision.

Section 3 of the Law states that any employee to whom this Bill applies may, in addition to the total contributions being made by him and his employee, make voluntary contributions to his Retirement Savings Account.

It is believed that with the present Pension Law and the efficient management in PENCOM, pensioners will no longer groan in tears.

It was observed that the minimum pension contribution of 15% of employee's monthly emolument was not adequate to generate the required retirement benefits for the worker. It has also been argued that the equality of the 7.5% rate of contribution payable by both the employer and the employee is not equitable especially because the employer has a stronger financial muscle. Consequently, the Pension Reform Act (Amendment) Bill 2013 proposed an upward review of a minimum rate of 20% of the monthly emolument: 12% by the employer and 8% by the employee.

However, the National Assembly after due consultations with stakeholders approved a minimum of 18% (10% by employer and 8% by employee). What this means is that both employers and employees can voluntarily exceed their minimum ceiling based on mutual agreements and understanding.

The inclusion of the Trade Union Congress on the Board of PENCOM- is also a good development. Before now, Nigerian workers under the TUC were not represented on the board of the PENCOM, which is the driver of the pension system. This injustice and lacuna has now been addressed.

Besides, Section 20(a) of the law has been specific on the tenure of the board members. Now, the Chairman and the Director-General shall hold office for a term of five years in the first instance and may be re-appointed for another term of five years and no more.

Subsection (b): A member of the Board other than the Chairman and the Director-General shall hold office for a term of four years in the first instance and may be reappointed for another term of four years and no more... .

The initial term of office was four years for all the members of the board. This scenario in the Pension Reform Act 2004 did not provide for continuity and transition from one regime to the other as all the Members of Board, including the DG and Chairman had all to leave at the same time. But with five years for the Chairman and the DG, there is not total vacuum, transition is smoother, and institutional memory is guaranteed.

Also important in the law is the decision on 'qualification for membership of the governing board of the Commission' which was based on sober consideration of (1) the Constitutional provisions for the appointments of some of the top-notch judicial officers and public servants, and (2) of other comparative finance and investment regulators like the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Commission (NDIC), and the Federal Inland Revenue Services (FIRS) as well as global best practices.

The concept of "Fit and Proper Person" is applied all over the world- from Europe, Asia to America, etc, to select those that will run sensitive financial institutions like PENCOM. From the 1860's when the British colonial administration introduced the English legal system in Nigeria, one of the criteria for being admitted as a lawyer, solicitor and advocate of the Supreme Court of Nigeria, beyond having academic qualification, is that you must be a "Fit and proper person". This requirement has been sustained and held sacred over the years by the Council of Legal Education and the Nigerian Bar Association.

"Fit and proper" means that you must maintain standards of honesty, integrity and professionalism, and must not pose a risk to the public. The aim of the fit and proper test is to prevent unsuitable people from running a Financial Service Business or a Trust.

It is believed that with the present Pension Law and the efficient management in PENCOM, pensioners will no longer groan in tears.

JOHNBOSCO AGBAKWURU is a staff of Vanguard Newspapers.

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Source: AllAfrica

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