Amending Pension Act of 2004,By Issa Aremu



Aremu2013Both the Senate Committee on Establishment and the House Committee on Pensions just concluded a Joint Public Hearing on the proposed amendments of the Pension Reform Act of 2013 (PRA13). The public hearing held on Wednesday 26th and Thursday 27th of June. The Bill has since passed the Second (2nd) Reading of both the Senate and the House.

The hope is that the public hearing will promote better conversation about the Pension Act of 2004 and the proposed amendments. The public hearing must lift all stakeholders out of the polarisation of the pension discourse of the recent times to some greater common sense about income adequacy for working men and women after retirement. And above the proceeding must come out with improved Pension Reform Act. The truth is that ultimately every working woman and working man must get fatigued one day; senility must eventually replace today’s abundant energy. Hence the need to prepare for the proverbial raining days by setting aside some funds that will at least meet the subsistence needs of the aged workers. The above constitutes the main principle that informs the establishment of any pension scheme.

The principle of income adequacy for retiree is ever valid whether the scheme takes the form of publicly funded/administered pay-go defined benefit (DB) or privately administered mandatory individual defined contributions (DC). The point cannot be overstated that hundreds and even thousands of pensioners have died due to lack of money to fend for themselves. Paradoxically this tragedy takes place almost simultaneously the prosecuted and convicted pension directors (read; pension thieves) with billions of stolen pension funds are being granted judicial cover with fines and sentences that are inversely rated to their respective crimes. If public retired employees are so much humiliated and invariably being
turned into destitutes, then the plights of some retirees in the private sector, (haven of exploitation) is better imagined. The public hearing must be conducted against the background of the need for reform, reform and reform of pension.
Indeed we need pension revolution, not just reform. Happily the notable drivers of this week public hearing are already converted to reform agenda. In fact, the Chairman of the Senate Joint Committee on Public Service and Establishment and State and Local Government Administration, Senator Aloysius Etok (PDP, Akwa Ibom North-West) that investigated the pension scam last year truly distinguished himself for his singular sense of purpose , courage and commitment in the face of intimidation and threats of the pension thieves. It was to his credit and his committee that it was revealed that a total of N273.9billion pension funds had
been misappropriated between 2005 and 2011. All these revelations about the public sector pension scam show that we must urgently think outside the box of unfunded, crime-prone defined benefit (DB). The future lies in the mandatory individual defined contributions (DC) which the Pension reform Act represents.
Pension is a legitimate right of workers. It is a deferred payment, which both the workers and employers must set aside so that workers at old age will not be living on some charity as if they are destitute. The challenge lies in how to make this principle work in Nigeria. The bane of public sector pension lies in its non-contributory character as well as sheer corruption and diversion of funds even allegedly for partisan political purposes. The pension scheme is still regulated by obsolete Pensions Act of 1979 with all its amended provisions. NLC protest over pension is legitimately directed against this much abused public pension scheme NOT the 2004 contributory scheme which less than 10 years has proven to be viable and sustainable. With almost 3. 8 trillion Naira contributed by as many as 5 million workers, the Pension Reform Act represents a progressive labour legislation because it attempts to address the naughty issue of reserve compensation fund after work. Pension Act rightly legitimises a sustainable contributory scheme compared to the moribund non-contributory scheme. The
challenge lies in further widening the scope of coverage to include more states, private sector establishments as well as the informal sector. Thus the new review should curtail exemptions and withdrawals. On the contrary, the new amendments must promote more inclusions. The pension Act is also strong on corporate governance arrangements ; National Pension Commission supervises the Pension Fund Administrators totalling 20 today. There is the urgent need to review the Penalties and Sanctions for non-compliance by some employers, who either deduct but do not remit to the PFAs . Stiffer penalties that are certainly desirable
against mismanagement or diversion of pension funds assets. The rates of contributions are also due for a review equitably with employers paying more than the workers. All these and other critical issues that will deepen the pension reform must dominate the public hearings. The 5 million workers already captured under the reform are commendable. But this number is a far cry from 80 million potential work force in Nigeria. The 3 trillion Naira funds contributed so far can hardly meet the future income adequacy of retirees, which underscores the need for more reform and not less. Lastly the obvious absence of any position by all
political parties on the pension law review underscores the dearth of policy focused politics in Nigeria. In Europe and America it would be unthinkable that a law of this social and economic significance would be reviewed without active contestations along party line! Wither Nigerian politicians without politics!

ISSA AREMU mni ([email protected])

No tags for this post.