FG’s Liabilities to Retirees Under Contributory Pension Scheme Hits N314.58bn

*PenCom seeks 28% increase in pension rates under defined benefits scheme

*Expresses ‘serious concerns’ over exclusion of retirees under CPS in new review

James Emejo in Abuja

The National Pension Commission (PenCom) has disclosed that the federal government’s total liability from the implementation of the pension increases in 2007 and 2010 as well as the 2019 consequential adjustment for retirees under the Contributory Pension Scheme (CPS) stood at N314.58 billion in 2023.
This came as PenCom has further sought approval for an increase in pension rates for pensioners under the Defined Benefits Scheme (DBS), following the recent increase in salaries for employees of treasury-funded Ministries, Departments and Agencies (MDAs).

The request for approval for the implementation of new pension template was conveyed in a correspondence by the Director General/Chief Executive, PenCom, Aisha Dahir-Umar to the Minister of Finance and Coordinating Minister of the Economy, Mr. Mr. Wale Edun, which was dated May 3, 2024.
The commission is seeking to raise the new pension rates under the DBS by between 20 per cent and 28 per cent in 2024.
Dahiru-Umar, while urging the minister to approve the new rates, however, drew attention to the omission of pensioners under the CPS in the current rates review.

She said the exclusion of pensioners under the scheme from the implementation of the new and previous pension increases remained a “cause for serious concern”, adding that it would amount to a fundamental breach and denial of their constitutional rights as enshrined in Section 173 (3) of the 1999 Constitution, adding that such action would undermine the pension reform of the federal government.
The PenCom boss also noted that previously approved pension increases of 15 per cent in 2007 and 33 per cent in 2010 respectively, following salary reviews in the public service as well as the consequential adjustment of 2019 were yet to be effected for retirees under the CPS.
She stated that the commission had submitted a letter on the matter dated February 21, 2024 to the Tripartite Committee of the National Salaries, Incomes and Wages Commission (NWSC) on the national minimum wage.

Dahiru-Umar said, “Indeed, this fundamental omission is contrary to both Section 173 (3) of the 1999 Constitution of the Federal Republic of Nigeria (as amended) and Section 15 (4) of the Pension Reform Act (PRA) 2014.”
“It is, perhaps, apposite to state at the onset that, following the 2004 pension reform, retirement benefits under the CPS consist of both the monthly pension contributions accumulated from the commencement of the scheme in 2004 and the Accrued Pension Rights for past service rendered prior to the commencement of the scheme.

“The two components together with accrued investment income are consolidated at the point of retirement in the Retirement Savings Account (RSA) and accessed as retirement benefits through programmed withdrawal or annuity for life.
“Thus, part of the arrangements for persons transiting from the DBS to the CPS is to recognise their rights under the defunct scheme, including the constitutional right to pension increases protected under Section 173 (3) of the 1999 Constitution (as amended).”

Continuing, she said the commission had noted that the circular in question was issued pursuant to Section 173 (3) of the 1999 Constitution (as amended) which provides that “Pensions shall be reviewed every five years or together with any federal civil service salary reviews, whichever is earlier”.
According to her, the circular was a fall-out of the recent salary increment to employees of treasury-funded MDAs aimed at enhancing the ability of retirees under the DBS to live comfortably, in furtherance of the afore-cited constitutional provision.
She however, pointed out that both the PRA 2004 and the PRA 2014 have not invalidated the constitutional rights to pension increment for retirees under the CPS.

She said, “On the contrary, the constitutional provision is actually reiterated in Section 15(4) of the PRA 2014 which provides, amongst other things, that the accrued pension rights and entitlements of employees of the Public Service of the Federation shall be reviewed by the Federal Government of Nigeria from time to time in line with the provision of Section 173(3) of the 1999 Constitution (as amended).
“The implication of Section 15 (4) of the PRA 2014 is that the right to pension increment applies to retirees under the CPS on their Accrued Pension Rights portion of the retirement benefits.”

However, Dahiru-Umar said the federal government’s current indebtedness to retirees under the CPS was expected to rise upon the implementation of the recent salary increase which had further alienated the retirees under the scheme.
According to her, the implementation of past pension increases, and consequential adjustment for retirees under the CPS and latest increases, would have enhanced the quantum of retirement benefits of retirees under the scheme, thereby addressing the pension adequacy concerns advanced in support of the agitations for exemption from the CPS.

She said, “The PRA 2014 has stipulated the procedure to ensure the implementation of Section 173(3) of the 1999 Constitution and Section 15(4) of the PRA 2014. Accordingly, Section 39(3) of the PRA 2014 mandates the Commission to, at the end of every calendar year, determine the adequacy of the Retirement Benefit Bond Redemption Fund against the projected pension liability of Government arising from voluntary and mandatory retirements, death of employees in service and the right of pensioners to pension review in line with section 173(3) of the 1999 Constitution, and advise the Budget Office of the Federation of shortfall, if any.

“Furthermore, Section 39(4) of the PRA 2014 mandates the Budget Office of the Federation to, on receipt of advice from the Commission, ensure adequate appropriation for the shortfall and subsequent payment.
“The Commission wishes to submit that it has been discharging these functions consistently and has, over
the years, been engaging and submitting reports to the relevant government agencies, and the National Assembly, regarding the matter.
“The federal government had, pursuant to Section 173(3) of the Constitution, approved pension increases of 15 per cent in 2007 and 33 per cent in 2010 respectively, following salary reviews in the Public Service. There was also a subsequent consequential adjustment in the pension benefits of FGN retirees, following the Federal Government’s approval of N30,000.00 minimum wage in 2019.

“Accordingly, the Commission had, in line with Section 39(3) of the PRA 2014, submitted to the Budget Office of the Federation on an annual basis, the financial implications for the implementation of the pension increases for retirees under the CPS.
“It is, however, worthy of note that the necessary appropriation and release of funds for the implementation of the pension increases and the consequential adjustment is yet to be effected.”

“Consequently, while the pension increases of 2007 and 2010 and the consequential adjustment of 2019 have been implemented for retirees under the Defined Benefits Scheme, the same are yet to be extended to retirees under the CPS.”

Continuing, she said, “This was brought to the attention of the Head of the Civil Service of the Federation and the Chief of Staff to the President, vide letters dated 28 November 2023 and 22 March 2024 (copies attached as Appendix 4(a) and 4(b)), respectively.

“It would, therefore, appear that the present circular issued by the National Salaries, Income and Wages Commission is a continuation of this non-implementation of the constitutional and legal rights of retirees under the CPS.”