In realisation of the fact that there is no perfect law anywhere in the world, few months after both the
Upward review of rate of pension contribution
The Pension Reform Act 2014 reviewed upwards, the minimum rate of pension contribution from 15 per cent to 18 per cent of monthly emolument, where 8 per cent will be contributed by employee and 10 per cent by the employer. Under the old law, it was 7.5 per cent contribution each by both the employee and the employer. This upward review of rate of pension contribution is aimed at providing additional benefits to workers' Retirement Savings Accounts (RSAs) and thereby enhance their monthly pension benefits at retirement.
This provision is commendable especially as the aims of pension scheme are to ensure that every retiree is financially independent to enjoy pleasurable retirement as well as assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age, among other things.
Enhanced coverage of the Contributory Pension Scheme
Unlike under the old law where only private sectors employers with a minimum of five employees were mandated to join the Contributory Pension Scheme (CPS), the new Act expanded the coverage of the CPS in the private sector as organisations with a minimum of three employees are now required to ensure that their employees are registered under the CPS. This is in line with the drive towards informal sector participation.
It will be helpful to point out that more than 10 years after the CPS was introduced in the country, the Pension Fund Administrators (PFAs) managing the scheme have registered only 6.4 employees in spite of the fact that the nation's working population is estimated at more than 80 million people. This new provision of the Pension Act is therefore desirous as it will assist in capturing more employees in the private sector bearing in mind that majority of Nigerians are employed in this sector.
Opening of Temporary RSA for employees who failed to do so
The Pension Reform Act 2014 makes provision that would compel an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee who failed to open an RSA within three months of assumption of duty. This was not required under 2004 Act.
The provision became necessary in view of the fact that some employers who are complying with the provisions of the Pension Act still have unremitted pension contributions due to the failure of some of their employees to open RSAs)
Although the TRSA shall be a stop gap measure pending the opening of an RSA by the employee, the importance of this provision is that employers no longer have any excuse to hold on to workers' pension contributions on the ground that such employees have not open RSAs with the PFAs of their choice. This is a welcome development, as it will ensure no employee is shortchanged and that no employer is sanctioned unduly.
Access to benefits in event of loss of job
The Pension Act 2014 has reduced the waiting period for accessing benefits in the event of loss of job by employees from six months to four months. This is done in order to identify with the yearning of contributors and labour.
As provided for in section 4(2) of the Pension Act 2004 that where an employee retires before the age of 50 years in accordance with the terms and conditions of his employment, the employee may, on request, withdraw a lump sum of money not more than 25 per cent of the amount standing to the credit of the retirement savings account; provided that such withdrawals shall only be made after six months of such retirement, it gladdens the heart to note that Pension Reform Act 2014 has reduced the waiting period for accessing benefits in the event of loss of job from six months to four months. This provision is commendable.
Upward review of the penalties and sanctions
The sanctions provided under the Pension Reform Act 2004 were no longer sufficient deterrents against infractions of the law. Furthermore, there are currently more sophisticated mode of diversion of pension assets, such as diversion and/or non-disclosure of interests and commissions accruable to pension fund assets, which were not addressed by the Pension Act 2004. Consequently, the Pension Reform Act 2014 has created new offences and provided for stiffer penalties that will serve as deterrence against mismanagement or diversion of pension funds assets under any guise. Thus, operators who mismanage pension fund is now liable, on conviction, to not less than 10 years imprisonment or fine of an amount equal to three-times the amount so misappropriated or diverted or both imprisonment and fine.
Employers' refusal to remit pension contributions now serious offence
In spite of the fact that the Pension Act 2004 mandates employers to deduct at source pension contributions and remit the contributions not later than seven working days from the day the employee is paid his salary, observations have shown that many employers have been found wanting in this regard.
It is therefore heartwarming to note that the Pension Act 2014 also empowers the
Corrective actions on failing licensed operators
The Pension Reform Act 2004 only allowed
Restructuring of pensions under the Defined Benefits Scheme
The Pension Reform Act 2014 makes provisions for the repositioning of the
Utilisation of pension funds for national development
The Pension Reform Act 2014 also makes provisions that will enable the creation of additional permissible investment instruments to accommodate initiatives for national development, such as investment in the real sector, including infrastructure and real estate development. This is provided without compromising the paramount principle of ensuring the safety of pension fund assets.
After operating the contributory pension scheme for more than 10 years, the total value of pension industry assets presently stands at N4.3 trillion. Be that as it may, this pool of funds will only be meaningful if it is being used for national development. It is therefore gratifying to note that the lawmakers at the
Consolidation of previous legislations amending the Pension Act 2004
The Pension Reform Act 2014 has consolidated earlier amendments to the 2004 Act, which were passed by the
A look at the provisions of the Pension Reform Act 2014 reveals that it is a beautiful piece of legislation, the
Granted that the military was exempted from making contribution to the pension scheme in order to align with the global trend, some paramilitary organisations have been requesting to be exempted from the scheme too even without justifiable reasons.
The government is urged to avoid policy reversals, as this would send wrong signals to employers of labour, employees and stakeholders of the contributory pension scheme. Policy reversals at this critical juncture when all efforts should be directed towards institutional consolidation would be unrealistic and counterproductive.
Again, we must not lose sight of the fact that pension reform became necessary in the country because the administration of past pension schemes was very weak, inefficient, less transparent and cumbersome, leading to bureaucracy and highly liable to corrupt practices.
It means all hands must be on the deck to ensure that such ugly situations where pensioners died on the queue while corrupt officials kept enriching themselves with pension funds do not repeat itself.
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