CPS: Sad Retirement for State Employees

Recently, the Lagos State Government said pension arrears stands at N10 billion. This is what is obtainable in many states of the federation. Ebere Nwoji in this report captures attitude of some state government towards their employees’ retirement plan and their level of involvement in Contributory Pension Scheme.

The news that Lagos State Government owes N10 billion pension arrears to about 10,000 retirees who worked for the state is a pointer to the fact that the contributory Pension Scheme (CPS) thought to have brought a perpetual end to the problem of arrears of pension and plight of pensioners, is still far from performing the much expected magic.

This is so because, Lagos State, among the 36 states of the federation and FCT, by every parameter of measurement is a pace setter to other states on the issue of pension and other retirement plans for employees and retiring workers.

At the 95th Retirement Benefit Bond Certificates Presentation for retirees in Lagos state, the Director General of the Lagos State Pension Commission (LASPEC), Mr Babalola Obilana revealed that despite the efforts to clear arrears of its retirees pension, Lagos still owing as much as N10 billion to 10,000 retirees.

This goes to explain the plight of retirees in other poorer states.

Indeed, Lagos State and FCT top the list of states that have adopted good retirement plan for their workers.

The quantum of benefits paid to retirees by the state on regular basis makes headline in many news media even as it has pledged to see to the settlement of this outstanding pension before the expiration of first tenure of the present governor Babajide Sanwo Olu.

When THISDAY peeped through the pension planning of some other states, it was discovered that though the CPS regime has lasted for 18 years and the National Pension Commission (PenCom) has been encouraging states to key into the scheme as a means of retirement planning for their workers, not many states have and are willing to key into the scheme.

Meanwhile, many retirees from states are owed years of pension arrears.

Status of the states

For instance, looking at status of implementation of the contributory pension scheme as retirement planning by some states in the north eastern part of the country, PenCom said states like Adamawa as at March 31st 2022 has not done much in its efforts to fully key in the contributory pension scheme. The state had in 2013 enacted its CPS law and drafted the Adamawa State Contributory Pension Scheme through its CPS bill 2020, which seeks to establish a scheme similar to Contributory Defined Benefits Scheme (CDBS) in the state.

According to PenCom, the 2013 law does not provide for the appointment of PFAs, which is the key actor in the CPS while the 2020 bill proposed the custody of pension funds by a board of trustees instead of PFCs.

Also the state is yet to establish a pension bureau and is yet to commence remittances of pension contributions for the employees and yet to conduct actuarial valuation to determine the employees’ Accrued Pension Rights.

PenCom said the state is also yet to open Retirement Benefits Bond Redemption fund account and is yet to commence funding of Accrued Pension Rights and yet to institute a group life Insurance policy for its workers.

Analysts said with this, the state is still far from adequate pension planning for its retiring workers.

Bauchi state as at the same period March 31st, 2022, though has drafted a bill on Contributory Defined Benefits Scheme (CDBS) in 2015, constituted committee to guide the process of implementing the CPS, and other reforms needed  in pension administration in the state.

It only drafted a bill in 2022 but is yet to enact law on the CPS to guide implementation of the scheme and yet to establish a pension bureau.

The state is also yet to register the employee with PFAs

It is equally yet to commence remittance of pension contributions for the employees and has not conducted an Actuarial Valuation to determine the employees’ Accrued Pension Rights. Also the state is yet to open a Retirement Benefits Bond Redemption Fund Account for its workers and is yet to commence funding of Accrued Pension Rights and is yet to institute a Group Life Insurance Policy.

The same status is maintained by other states in the north east such as Gombe, which enacted its own law in 2008 but has not made any other progress, Taraba enacted its law in 2009 and has remained dormant as far as CPS implementation is concerned, Yobe state only inaugurated  a committee on CPS in 2020,  drafted a bill on CPS and remained dormant.

Borno seems to be the worst as it drafted a bill on CPS in 2012, forwarded it to PenCom, which in turn communicated its observation to the stat but up till now has not seen any response regarding its adoption of CPS.

These states equally do not have any plan on group life insurance for their workers.

For states in south east, according to PenCom, as at 31st December 2021, 

Abia state enacted law on CPS in 2017. But is yet to establish a pension bureau, yet to register the employees with PFA, yet to commence remittance of pension contributions yet to conduct an actuarial valuation to determine the employees’ Accrued Pension Rights.

Anambra state enacted its CPS Law in 2013, amended some sections in 2014, registered the employees with PFAs, stopped remittance of government’s 10 per cent and employees’ five percent contributions for local government employees since August 2018, remitted 10 per cent employer pension contributions up to December 2017 and 5 per cent employee pension contributions up to May 2021.

But for some state employees, it opened a retirement Benefit Bond Redemption fund account with a PFA for the local government  employees in line with the state law.

But the state is yet to conduct an Actuarial Valuation to determine the employees’ Accrued Rights.

There is also irregularity in its funding of accrued rights for local government employees.

It has not established pension bureau, yet to open Retirement Benefit Bond redemption fund account for the state employees, has not started funding its workers’ accrued pension rights as well as has not set up  its group life insurance plan for the workers.

Ebonyi State only enacted law on CPS in 2017 and has not done any other thing regarding migration to CPS and other forms of retirement planning for its workers as stipulated by law.

The story is the same with Enugu State, which stopped at just enacting the CPS law in 2014.

The case is the same with Imo state as the state only enacted the CPS law in 2008 and has failed to make further effort.

For states in southwest, Ekiti state as at June 2021 has Enacted a Law on the CPS in 2010. Amended the pension law in 2017, established a Pension Bureau, registered its employees with PFAs, remitted 10 percent employer and 8 percent employee Pension Contributions up to September 2020 carried out an actuarial valuation, opened a Retirement Benefits Bond Redemption Fund Account with the CBN, but is yet to commence funding of Accrued Pension Rights and yet to institute Group Life Insurance for its workers.

Status of South Western states

Lagos state enacted a Law on CPS in 2007, amended some sections of the Principal Law in 2019; established Pension Bureau, registered employees with PFAs. Remitting 10 percent of employer 8 percent of employee Pension Contributions, conducted an Actuarial Valuation and is funding the employees’ Accrued Pension Rights but has arrears. 

It recently opened Retirement Benefits Bond Redemption Fund Account with two PFAs for the state and local governments with valid Group Life Insurance Policy.

Ogun State enacted a law on the CPS in 2008 amended the Law in 2013 to extend its transition period to 2025, established two pension bureaus state and local government, registered employees with PFAs.

The state is currently deducting 7.5 percent employer and 7.5 percent employee Pension Contributions but stopped remitting it since 2015.

It is yet to resume remittance of pension contributions into the state and local government councils’ employees; despite effecting deductions from the employees’ salaries. The State has arrears of Accrued Pension Rights, is yet to conduct an Actuarial Valuation.

The state is yet to open a Retirement Benefits Bond Redemption Fund Account. It is yet to commence funding of the Accrued Pension Rights and yet to institute a Group Life Insurance Policy.

Ondo state enacted a law on the CPS in 2014. It established a Pension Bureau, registered its employees with PFAs.

The state is remitting 10 percent of employer and 8 percent employee pension contributions up to January 2021.

Has valid Group Life Insurance Policy but has no Actuarial Valuation for employees’ accrued pension rights.

Osun state enacted a law on the CPS in 2008. It established two Pension Bureaus state local governments, registered its employees with PFAs.

Remitting 7.5 percent employer and 7.5 percent employee Pension Contributions up to December 2020 for the State employees. 

However, there is backlog of pension contributions from May 2019 to July 2020. Conducted an Actuarial Valuation Has valid Group Life Insurance Policy.

Opened Retirement Benefits Bond Redemption Fund Account with the CBN but has inadequate funding of Accrued Pension Rights.

The State has a backlog of unremitted pension contributions and huge arrears of Accrued Pension Rights.

Oyo State enacted a Law on the CPS in 2010. Forwarded a bill in 2018 to amend the Principal Law and the Commission had since communicated its observations on the review of the draft amendments to the State.

The state is yet to establish a Pension Bureau, yet to register its employees with PFAs and yet to commence remittance of pension contributions and yet to conduct an Actuarial Valuation.

Oyo state is also yet to open a Retirement Benefits Bond Redemption Fund Account and yet to commence funding of the Accrued Pension Rights as well as instituting a Group Life Insurance Policy for its workers.

Looking at this and other states not mentioned it is obvious that aside Lagos, no other state is up to date in its implementation of CPS and maintenance of its retirees.

Analysts have said that if Lagos state is owing retirees N10 billion, one wanders the quantum of debt owed to pensioners by these other states which are far from pension planning for their retirees.

It further reinforces the need for PenCom to push every employer in the country into the contributory Pension scheme.

PenCom can do this in the proposed amendment of the 2014 act by making CPS participation compulsory for state government.

The present situation where it is optional creates room for some state governments and their agents to play with pension planning of their retiring workers.

The Pension Reform Act

Section 4(5) of the PRA 2014 mandates all employers of labour to subscribe to Life Insurance Policy on behalf by their employees for an insured amount of not less than three times their annual total emolument.

Section 3 of the Act spells the right of every worker to have pension account into which he and his employer contributes to save for his retirement at the rate of 10 percent savings from his employer and 8 percent deducted from his monthly salary making a total of 18 percent.

In the view of pension industry observers, for these states, which do not have pension plan for their workers and with out Group life insurance what it means is that the worker will have no compensation in case of eventuality.

At the 95th Retirement Benefit Bond Certificates Presentation For Retirees in Lagos state recently, Obilana stated that the outstanding N10 billion pension would be settled before the end of the first tenure of Gov. Babajide Sanwo-Olu in May 2023, adding that the governor has promised this.

The state government paid over N1.5 billion to 487 retirees for the month of June recently.