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New pension scheme as albatross?

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New pension scheme as albatross?

, News Agency of Nigeria

The Contributory Pension Scheme (CPS) was introduced via the Pension Reform Act, 2004, in order to address the problem of late payment of pensions and gratuities to retires. Public and private sector workers were accommodated in the new scheme.

However, the problems associated with the old scheme have started to rear its ugly head.

Ideally, under the CPS, retirees are supposed to be paid their entitlements, three months after retirement. That was so at the incipient stage, but not now.

In addition, the monthly pension is nothing to write home about, which had ignited the call for a review of the scheme.

An unsigned article, being circulated in the social media also drew attention to the exploitation of retires by Pension Fund Administrators (PFAs).

They gave an example of what they said should be addressed.

The document titled Pension Fund Administrators Are Exploiting Us, states inter alia:  “After attaining the age of 60 or spending 35  years in service, gathering all types of experiences, PFAs still term you as novice; you don’t know how to handle your hard earned entitlements.

“I will make a simple illustration here: MR A retires at 60  and has N20million as his savings. He accesses 50 per of the N20million which equals N10million.

“The balance of N10million is to be spread over 180 months (15years) and MR A earns N55,555 monthly for 15years and he stops earning anything because he is expected to die at 75.

“If MR A will be allowed to have his total sum of N20 million, ceteris paribus (all things being equal), he could invest in the money market or government treasury bills.

“Currently and authoritatively, N20 million can fetch up to a maximum of 15 per cent per annum on a span of four consecutive 90 days tenor.

“Meaning N20 million gives about N3million per annum.

“Divide N3 million by 365 days and multiply by 30 days, gives MR A, a monthly earning of N246,575 without depleting his capital of N20million.

“The sum given to an average pensioner is not up to the interest the administrators make on his/her savings.

“This manipulation/exploitation made PFA among the most lucrative businesses in Nigeria.’’

During a recent protest by pensioners in Ibadan, under the aegis of  Nigeria Union of Pensioners/Federal Contributory Pension Retirees, they drew attention to the plight of retirees, especially those who retired under the CPS.

Chairman of the group, Mr Samuel Kojusola, urged the Federal Government to address the challenges inherent in the Contributory Pension Scheme.

He stressed that the Pension Reform Act 2014 as amended, directed that retirement benefits should be paid not later than three months after retirement.

He expressed dismay that many members had not been paid their retirement benefits for months and appealed to the Pension Commission to facilitate the payment without delay.

The Federal Government is aware about the delay in the payment of entitlements to retirees under the Contributory Pension Scheme.

The delay is as a result of non-release of money (to fund the accrued right) to cover the period before the commencement of the Contributory Pension Scheme.

Accrued right is a term used to describe what the Federal Government owes its workers who have been in service before the commencement of the Pension Reform Act, 2004 (which was reviewed and re-enacted in 2014).

This means that there are two components of benefits paid to Federal Government retirees who transited to the CPS: the contributions accumulated in their RSAs and the retirees’ accrued pension rights earned before they transited to the CPS.

For a Federal Government retiree entitled to accrued pension rights to have access to his or her RSA, the Federal Government must pay the accrued rights and same is consolidated with the contributed savings in the RSA before access is granted to the retiree.

Put simply, accrued rights are the benefits which the workers who had worked for the government prior to 2004 when the CPS was introduced are entitled to. Thus, in addition to the retirees’ contributions from 2004 to date, the Federal Government must pay the retirees their accrued rights before the total benefits can be paid out.

To redress the problem of delay in the payment of entitlements to retirees, President Muhammadu Buhari, had  directed the Minister of Finance, Budget and National Planning, to appropriate and release in full N62.83 billion to clear backlog of accrued pension rights of retirees in the next three years.

He directed the Budget Office of the Federation to include N12.83 billion, N25 billion and another N25 billion in the budgets of 2020, 2021 and 2022 respectively, to settle the outstanding accrued pension rights of Federal Government employees.

The president also further directed the finance minister to ensure that the funds are fully released upon passage of the relevant Appropriation Bills.

He also directed the minister to ensure  that “adequate provisions are made in the annual appropriation for accrued pension rights and funds are fully released upon approval of the budget.”

Stakeholders say that the recent presidential directives, if implemented would help solve the problems associated with delay in the payment of retirement benefits to retirees.

When achieved, it will make for seamless payment of retirement benefits to Federal Government retirees under the Contributory Pension Scheme.

But this delay in the payment of pensions and gratuities is already taking its toil on retirees.

Payment of workers who retired since 2019 under the CPS have not commenced. The reason is obvious. The money appropriated for the payment has not been released.

But retirees under the CPS, said that it would be wrong to `starve senior citizens’ because of default on the part of government when they could easily be given lifeline from their savings.

Mr Morayo Omolade, who retired from the Federal Public Service on Aug. 25, 2019, said he has not been paid any pension or gratuity.

According to him, for the past 10 months I have not been paid anything, “ it is not easy.’’

Omolade said that he has over N6million in his Retirement Savings Account.

He said that delay in remitting money due to retirees from the accrued rights should not stop commencement of any action.

Omolade said that the retirees should be given momentary lifeline from their personal savings, pending release of funds by the government.

He said that since the Pension Act did not envisage this delay, the law should be amended to reflect the reality.

“ My colleague who also retired from the Federal Public Service in February 2019 has not been paid either pension or gratuity.

“ The information I gathered from my Pension Fund Administrator, indicated that payment for 2019 retirees has not commenced.

“ The situation is precarious; you know for state workers that had not joined the CPS, they start receiving pension immediately, while payment of gratuity commence later.

“Something should be done to check delay in the payment of entitlements under the CPS.

“After all, the CPS was introduced by the Olusegun Obasanjo administration to solve the problem associated with the old pension scheme, characterised by endless wait by retirees for the payment of their retirement benefits.’’   (NANFeatures)

**If used, please credit the writer as well as News Agency of Nigeria

 

 

 

 

 

 

 

https://nnn.ng/new-pension-scheme-as-albatross/

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