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Business News of Sunday, 6 March 2022


PenCom, Police at daggers drawn over contributory pension scheme

National Pension Commission (PenCom) National Pension Commission (PenCom)

The National Pension Commission (PenCom) is in a quandary over plans by the Police high command to exempt its rank and file from the Contributory Pension Scheme, which is applicable employers at both the public and organised private sectors.

Franca Ochigbo in this report examines the backlash that has trailed the decision.

This is not the best of times for the management of the National Pension Commission (PenCom) as the Commission is currently at daggers drawn with the Police Command over plans by the latter to exempt its staff from the now famous Contributory Pension Scheme.

At issue is that the Nigerian Police Force says it wants staff removed from the Contributory Pension Scheme. With the Police arguing that they force should be put on equal contributory payment scale with other Nigerian Armed forces, but PenCom is saying the work with what NPF puts into the contribution scheme.

During the public hearing where the issue was hotly debated, the Director General, Aisha Dahiru while arguing her point on the Pension Related Bills by House Committee on Pension, stated that the scheme has the provisions that can address the challenges being faced by the personnel of the Nigeria Police and other government agencies on the administration of their retirement benefits.

She said there are Bill for an Act to exempt the Nigeria Police Force from the CPS and a Bill for an Act to further Amend the Pension Reform Act 2014 to, among other things, provide for a retiree to withdraw a lump sum of at least 75% from the Retirement Savings Account (RSA) and to criminalise undue delay in the payment of pension and for related matters. 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. Again the absence of other social security benefits in Nigeria is partly responsible for the clamour by the retirees for exemption or to access substantial amounts as lump sum from their RSA balance.

IG supports Police exit from CPS

The Inspector General of Police, Usman Alkali Baba is all for the exit of the NPF from the CPS, said a Bill for the Act to amend the special reform Act 2014, and another Bill for an Act to amend section 1,6,7,2, 8, 1,1824 and 99 on special reform Act. In the year 2004 the contribution pension scheme was enacted by the National Assembly, since the inception of the CPS the dream for an improved pension scheme for the Nigerian police remains a mirage. There are a lot of challenges with the CPS, it is because of the challenges that the NPF wants to exit the CPS.

The justification is that NPF is the lead agency saddled with the responsibility of maintaining internal security, law and order in the country attended risk and sacrifices including the supreme sacrifice by virtue of the statutory responsibility as such should get equal treatment with the Armed Forces and other intelligent service.

Meanwhile the unpleasant experiences of the present police officers under the present scheme has the tendencies to de-motivate officers and men and also serve as incentive for corrupt practices in a bit to avert similar bait upon the veteran retirement in the light of the above, while calling for the need to review the pension scheme under the NPF.

The NPF leadership is convinced that the amended Bill proposed will not only significantly address the age long challenge associated with the pension administration, it will be in the overall interest of the entire men of the force, both retired and serving Police officers. It is therefore suggested that the Bill should be passed as proposed since it contains the opportunity for addressing the age long imbalance. All hands should be on deck for the Bill to be passed before the end of the end of this current legislative assembly.

Dahiru has also argued that the exemption of the NPF from the CPS would result in the dismantling of the institutions, systems and processes that Government had put in place in the last few years towards the implementation of the pension reform programme, this she said would imply additional financial burden on the 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,” she said.

On the other hand, she said that 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, to address the concerns of Police Personnel on pension, the employer can review upwards its current contribution rate of 10%. In addition, 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.

The Chief Executive Officer of the Pension Fund Operators Association of Nigeria (PENOP), Oguche Agudah, maintained that the exemption of the Nigeria Police Force from the CPS would take Nigeria back to the dark ages before the pension reforms. This was a time when retirees had to depend on a defined benefit system; where the federal government paid monthly pensions to retirees directly from its coffers. He noted that at the time of the reform, it was estimated that the Federal Government had a pension liability of over NGN 2 trillion. Past experiences have proven that this system puts a lot of burden on the federal government, making it unsustainable. The sustainability of moving the police back to the pay – as – you – go Defined benefit scheme under their proposal is near impossible, given the Federal government’s struggling finances at the moment.

Aguda recommended that from the rank of Assistant Inspector General of Police (AIG) upwards, their pensions should be treated under the category of political appointees who retire with full benefits as stated in the PRA 2014 as their appointments are political in nature. On the Bill to allow contributors take at least 75% of their RSA balance at retirement, the PENOP’s CEO said the people that have issues with the lump sum that they collect at the moment are those who have not been able to accumulate enough funds in their RSAs prior to retirement.

He said what the 75% essentially is looking to achieve is a gratuity type payment to retirees, adding that the PRA in its current form does not preclude the payment of gratuities by employers as many Department and Agencies of the Government already pay gratuity to their staff on retirement. What we suggest is that employers should be encouraged to pay gratuities at retirement and/or increase their level of monthly contributions in order to boost the balances and subsequent pension payout of their staff,” he said.

Meanwhile, regarding the 75% lump sum payment, the PenCom DG said the amendment, if approved, would be contrary to the provision of Section173 of the 1999 Constitution of the Federal Republic of Nigeria (as amended), which guarantees the right to pensions for all public officers as the payment of “at least 75% of the balance of the RSA” as lump sum at retirement. She added that this will significantly deplete the pension savings such that the contributions will not be sufficient to provide meaningful pensions during retirement. That converts the pensions into a provident fund and leaves such a retiree with no periodic pensions, which is contrary to the requirement of Section 173 of the 1999 Constitution,” she said. The Director General said the proposal is based on a misunderstanding of the concept of pension payment under the CPS.

Police officers expressed their grievances during the hearing arguing that there is need for them to be on equal pedestal with other forces, but PenCom is asking what their input is to the scheme, it is what you pay in that you get at the end of the day.