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N12bn fraud: New pension scheme not affected – PENCOM

By on April 7, 2011

The National Pension Commission (PenCom) has declared that there is no incidence of fraud in the new Contributory Pension Scheme, CPS, stating that the new scheme has a large number of safeguard to prevent occurrences of such nature.

PenCom in a statement, Tuesday, signed by Mr. Emeka Onuora, Head, Corporate Affairs,PENCOM,noted that the widely reported N12 billion scam perpetrated by staff of the Civil Service Pension Department in the Office of the Head of Civil Service of the Federation, is a pointer to the numerous irregularities and fraud that beset the defunct Pay As You Go (PAYG) pension system.

According to Onuora, the fraud only affected certain pensioners covered in the old scheme before the introduction of the Pension Reform Act 2004, which brought about the contributory pension scheme.

“Such allegations”, he said, “No doubt, points to the problems of the old pension system, which was fraught with irregularities and fraud and that led to the non-payment of benefits to pensioners who had hitherto served the nation meritiously.”

He continued, “There are two different pension schemes existing in the public service of the Federation today. These are the defunct Pay As You Go (PAYG) and the Contributory Pension Scheme (CPS).

The old pension scheme covered pensioners existing before the pension Reform Act 2004 and those workers exempted from the Defined Contributory Pension Scheme.

“The scheme is being administered by the six pension departments namely; the Civil Service Pension department, the Military Pension Department, the Police Pension Department, the Customs, Immigration and Prison Pension Department, the Security Agencies Pension Department and the Federal Capital Pension Department. Funding for these pension departments comes from the budgetary provisions by the Federal Government.

“On the other hand, the Defined Contributory Pension ~cheme is based on individu2/ Retirement Savings Account (RSA) that is managed by Pension Fund Administrators and funding for this scheme is on monthly deductions from the employees’ salaries and the equivalent contribution by the employer.

“The alleged fraud in the Civilian Pension Department as widely reported by the media is very unlikely to occur under the quate in-built control mechanism to prevent such occurrences.

“Under the new system pension funds are not left with the employers but are credited abinitio directly to the individual retirement Savings Accounts (RSAs) of the beneficiaries and neither the ‘ employer, the Commission. nor even the Pension Fund Administrator (PFA) has access to the money.

“The CPS has inbuilt safeguards to protect the pension fund from all forms of misappropriation with the functions of custody and administration of the funds clearly delineated. While the pension fund custodians handle custody of the pension funds, the pension fund administrators handle the administration. Furthermore the PFAs and PFCs are mandated by the Commission to maintain high levels of transparency and accountability, such that enable individual RSA holders to have full access to any information relating to their pension contributions.

“The Commission has also put in place, strict regimes for investments and pay-outs from the pension fund. Such regimes, which include daily monitoring of the investment activities of PFAs by the Commission, and the institution of strict payout authorization requirements, ensure that the PFAs are not reckless in their investment decisions and that only bona-fide beneficiaries have access to the pension funds.

“It is pertinent to note that there are enough safeguards for contributors’ fund under the Contributory Pension Scheme which PenCom directly regulates and supervises. The Commission has taken the pain to explain the issues at stake and further educate the public as well as assure them of the institutional framework established to ensure the safety of pension assets under the Contributory Pension Scheme.”

source : Vanquard