Ageing in Agony: FG’s Pension Delays Deepen Retirees’ Despair

In what looks like a case of robbing Peter to pay Paul, the federal government has been funding governance through the efforts of its civil servants but defaulting in the payment of pension benefits otherwise known as accrued pension rights of pensioners since 2022, thereby compounding the problem of ex-civil servants and imperiling the future of those still in the service, writes Festus Akanbi

In a country where living standards are falling daily, one understands the fear of an average civil servant over a life of uncertainty awaiting him at his retirement.

This is why financial analysts will continue to advise those still in the service to prepare for life at old age when monthly salary will cease. That is why in Nigeria today, almost every worker sees a deduction on his payslip every month which is classed as a ‘pension contribution.’

Apprehension

Unfortunately, Nigerian civil servants have had reasons to doubt the government’s sincerity in managing their pensions. This development recently fuelled the speculation that the federal government was planning to borrow N20trillion from the pension funds to support infrastructure development.

The federal government in May was compelled to deny the speculation openly. The rebuttal came after organised labour threatened to plunge the nation into a serious industrial crisis should the government go ahead to tamper with the pensions. 

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, in a statement in Abuja, said the government would comply with the established rules and regulations governing the pension fund. 

Unfortunately, observers said the situation on the ground does not portray the administration as one with the love of its civil servants at heart as far as the issue of pension fund management is concerned.

Last year, the House of Representatives resolved to recover N10 trillion pension funds “borrowed” by the federal government.

The lawmakers passed the resolution during the plenary session after adopting a motion sponsored by Aliyu Misau, a lawmaker representing the Misau/Dambam federal constituency of Bauchi.

While moving the motion, Misau said most pensioners are unable to access their retirement funds despite complying with the requirements of the contributory pension scheme.

He said the National Pension Commission (PenCom) and the pension fund administrators (PFAs) have not been able to ensure prompt payment of pensioners’ entitlements.

The legislator noted that the N10 trillion pension funds borrowed by the federal government have exposed the contributors to “unnecessary volatility”.

Analysts said that even if the government has yet to borrow from the pension funds, the fact is that the dream of many pensioners appears shattered by their inability to access their pension at the point of retirement as a result of the federal government’s failure to pay their accrued pension rights.

Pressure on PFAs

This abnormality has put pressure on Pension Managers, also known as Pension Fund Administrators (PFAs) since they are the points of contact for pensioners.

Reports said that the federal government last paid accrued pensions in 2022 when it released N13.89 billion covering a four-month payment period.

This implies that most of the federal government’s employees who retired in 2022 and 2023 have yet to access their pensions to date.

Many have to rely on their families to cater for their feeding, accommodation, and medicare while unfortunate ones among them have died while waiting for their pensions.

Many of the affected retirees are however putting pressure on their PFAs to pay pensions, but they are being turned back because their accrued rights from the federal government– who was their employer – have yet to be paid.

Accrued rights refer to the pension benefits that employees of the federal government’s treasury-funded Ministries, Departments, and Agencies (MDAs) are entitled to, based on their service years before the commencement of the Contributory Pension Scheme (CPS) in 2004.

Apart from the government’s being irresponsible with the payment of pensions, there are reports that the pension staff members are immersed in corruption and feed fat on pensions by substituting names and introducing ghost pensioners. 

They make the payroll look monstrous such that cash-strapped governments are forced to keep away from making immediate payments. To avoid the perennial problems associated with the payment of pensions to retirees, the federal government under President Olusegun Obasanjo reformed the pension system in which the workers and employers engage in a contributory payment system and implemented through Pension Fund Administrators. The system was expected to work seamlessly if everyone played their role.

The Managing director/CEO, of Nigerian University Pension Management Company Limited (NUPEMCO) Ugwu Oluwakemi, who raised the alarm over the failure of the government to do the needful, disclosure said that PFAs are unable to compute and pay retirement benefits immediately after retirement because of unpaid accrued rights of affected employees.

“Despite the balances in the Retirement Savings Account (RSA) of the retirees, the PFAs are unable to pay because of Section 2.3 of the Revised Regulation on the Administration of Retirement/Terminal Benefits.”

The regulation, she noted, states that the components of an RSA at retirement shall include accrued pension rights or pre-act benefits (if any) for employees who were in employment before the commencement of the Contributory Pension Scheme (CPS).

She noted that employer/employee pension contributions, returns on investment, and the fixed portion of voluntary contributions (if any) must also be included.

Oluwakemi said, “This is giving bad publicity to the industry since retirees are not fully aware of Section 2.3. They assume the PFAs intentionally do not want to pay them.”

She said this could also increase crime rates because the children of the affected people may decide to ‘help’ themselves and their parents.

“One of the major purposes of the CPS is to ensure that retirees are paid as at when due, and if retirees have to wait for an average of one year to be paid, then this purpose is defeated,” Oluwakemi said.

Need for Urgent Intervention

On what could be done to salvage the situation, the NUPEMCO Chief Executive officer, recommends that the government should establish a dedicated pension reserve fund specifically for accrued rights payments.

“This fund should be insulated from other government budgetary constraints and competing priorities,” she advised.

She stressed the need for the implementation of multi-year budgeting practices to better forecast and allocate funds for pension obligations over several fiscal years as well as ensure that budget allocations for pension payments are ring-fenced.

Misplaced Priority

Analysts described the development as unfortunate, saying the failure of the affected agencies to make the necessary payment of accrued rights of affected employees.

According to a financial analyst, Mr. Goke Adeniji what it means is that the government is not giving the welfare of its workers the priority it deserves. “The situation is already bad for the Nigerian people. There is no way the loyalty and dedication of the Nigerian workers cannot be guaranteed since they are faced with an uncertain future.”

Speaking in the same, an Abuja-based, Mrs. Janet Atufe expressed disappointment in the way retirees are being treated in Nigeria. “These are people who have served their fatherland. Unfortunately, this category of people is made to suffer as a result of the insensitivity of the government.

“I still don’t understand what is going on in the minds of those who are supposed to ensure pensioners are adequately settled. They don’t behave as if they realise they will one day join this group of people. One day, it will be their turn to queue up endlessly for their pensions.

“There is a need for government to bail pensioners out before their death,” she stated.

A pension is a regular payment made during a person’s retirement from an investment fund or account to which that person and their employer(s) contributed during their time as an active member of the labour force.

In Nigeria, the Pension Reform Act 2014 ((PRA) governs the framework and procedure for pensions, and this establishes a Contributory Pension Scheme whereby the employers and the employees contribute minimum percentages of the employee’s salary to the scheme every month.