PenCom Urges States to Implement Contributory Pension Scheme

•Says Imo, Kano, Gombe, others have enacted laws without implementation

•A’Ibom, Borno, Kwara, others yet to pass relevant legislation for commencement

James Emejo in Abuja

The National Pension Commission (PenCom), yesterday, urged all states and local governments to implement the Contributory Pension Scheme (CPS) for a “pension-secure Nigeria”.

The commission stated that about 20 states had enacted laws to adopt the CPS, but without significant steps towards its implementation.

The states included Abia, Adamawa, Bauchi, Bayelsa, Ebonyi, Enugu, Gombe, Imo, Kano, and Katsina.

Others were Kebbi, Kogi, Nasarawa, Niger, Ogun, Oyo, Rivers, Sokoto, Taraba, and Zamfara.

PenCom also observed that Akwa Ibom, Borno, Kwara, Plateau, Cross River, and Yobe were yet to pass enabling laws to commence implementation of the CPS.

The Pension Reform Act (PRA) 2014, in Section 2(1), stipulates that the CPS applies to all public sector employees across the federation, including the Federal Capital Territory, states, and local governments, as well as the private sector.

However, in line with the 1999 Constitution of the Federal Republic of Nigeria (as amended), state governments have the constitutional right to legislate on pension matters within their jurisdictions.

State governments are required to domesticate the CPS by enacting appropriate pension laws within their states.

In a statement, PenCom commended Lagos, Federal Capital Territory (FCT), Osun, Kaduna, Ekiti, Edo, Ondo, Delta, Benue, Anambra, and Jigawa for their exemplary implementation of the CPS as at December 31, 2024.

The commission said, “These states have set the benchmark for sustainable pension administration by ensuring that retirees receive their entitlements promptly. They are consistently remitting both employer and employee pension contributions under the CPS.”

It added that Jigawa State remitted contributions under the Contributory Defined Benefits Scheme (CDBS).

In August 2006, the National Council of States adopted the CPS for all states and local governments.

To support the adoption, PenCom developed a Model State Pension Law, enabling state governments to modify it according to their unique needs.

PenCom reviewes draft state pension laws and guides states throughout the implementation process.

It further stated, “So far, many states are yet to implement the CPS. For a state to implement the CPS in full, the state is required to enact a law on CPS, establish a Pension Bureau, register its employees with Pension Fund Administrators (PFAs) and commence remittance of pension contributions.

“The state is also required to carry out Actuarial Valuation, commence funding of Accrued Pension Rights, procure Group Life Insurance for its employees, and open and fund a Retirement Benefits Bond Redemption Fund Account with the Central Bank of Nigeria (CBN) or PFA.”

PenCom urged the states to accelerate their efforts toward full implementation of the CPS, including timely remittance of both employer and employee pension contributions.

It stated that by taking decisive action, the states could align with the pacesetters in ensuring a secure and sustainable retirement scheme for their workforce.

The statement added, “PenCom strongly encourages these states to expedite the enactment of their CPS laws and take immediate steps toward full implementation to ensure a secure and sustainable pension system for their workforce.

“The transition from the Defined Benefits Scheme (DBS) to the CPS at the state and local government levels is both a significant and inevitable step. Even states that have not transitioned will ultimately need to adopt the CPS.

“The scheme is designed to ensure that all retirees receive their benefits in a timely manner, providing a sustainable and secure retirement for all public sector employees.”

The commission stressed that the CPS offered a long-term solution to the pension liabilities that many states currently faced. By failing to address pension arrears, states were inadvertently creating a financial burden for future generations, as these liabilities will continue to grow, it stated.

It said, “Adopting the CPS now will help states avoid these escalating costs and provide a more secure financial future for both retirees and taxpayers.

“Moreover, the CPS ensures fiscal discipline by accurately determining and systematically settling pension obligations while also making funds available at the point of retirement for the prompt payment of benefits.

“This prevents the accumulation of pension arrears, contributing to the financial stability of the public sector.

“PenCom remains steadfast in its commitment to driving nationwide compliance with the CPS.”

The commission reaffirmed its commitment to continue to engage with non-compliant states, providing necessary guidance, advisory support, and technical expertise to facilitate their transition.

It emphasised that a “pension-secure Nigeria is not just a vision but an achievable reality.

“However, this can only be realised when all states demonstrate commitment by fully embracing the CPS.

“PenCom remains fully committed to the effective regulation and supervision of the pension industry.”