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Uncertainty surrounds new pension law implementation

By on July 19, 2014

Despite the signing of the Pension Reform Act, 2014 into law by President Goodluck Jonathan, there are uncertainties regarding its implementation.

The uncertainties stem from the fact the operators have yet to get a clear direction on how to get employers of labour to increase their financial obligations to the employees’ Retirement Savings Accounts under the Contributory Pension Scheme.

The PRA 2014 had increased the contribution to 18 per cent from the previous 15 per cent, with the employer’s share increasing from 7.5 per cent to 10 per cent of the worker’s total monthly emolument, while that of the employee will now contribute eight per cent instead of the previous 7.5 per cent.

There are also fears that employers may be reluctant to increase their contributions to the workers’ RSAs, thereby frustrating the implementation of the law.

Seventeen days after the President signed the PRA 2014 into law to repeal the 2004 version and regulate the administration of the uniform CPS for both the public and private sectors in the country, our correspondents gathered that the law had not been gazetted.

The development, it was further gathered, had thrown the National Pension Commission, Pension Fund Administrators, Pension Fund Custodians, Closed Pension Fund Administrators and Approved Existing Schemes into a quandary as regards the implementation of the law, which ought to have been effective on July 1, 2014.

At a meeting between the chief executive officers of all the pension offices and the PenCom in Lagos on Thursday, it was gathered that the operators could not come to a conclusion on how to commence the implementation of the new minimum contribution.

The Managing Director, NLPC Pension Fund Administrator, Mr. Wale Kolawole, said the operators decided to wait until the gazetted copy of the PRA 2014 was made available so that they could take decisions on the implementation of the law.

“We know that at the drafting stage, the minimum pension contribution was supposed to be 20 per cent of the workers’ monthly emolument, but what we are hearing now is that 18 per cent was approved as the final position,” he said.

According to him, the essence of the increment in contribution is to ensure that workers have more funds in their RSAs so as to increase the benefit that will accrue to them.

Kolawole said the operators would have more funds to invest and the employees’ RSA balance would be significant and serve useful purposes upon their retirement.

The Managing Director, ARM Pension Managers Limited, Mr. Sadiq Mohammed, said, “It also means greater benefit for the employees because they will now be getting wider contributions, and if this is done for many years, it means there will be larger accumulation for sustainability at the point of retirement.”

The Director-General, Nigerian Insurers Association, Mr. Sunday Thomas, said though the increase in contribution might be an additional responsibility for the employers, it would translate to more money being reserved for the employees.

Thomas said the development was good for the Nigerian labour market even though the employer and employee would be required to increase their monthly contributions.

“At the end of the day, people can retire more comfortably than how it used to be, because if that should continue for another 10 years, people will have enough contributions to be able to take care of themselves after retirement,” he said.

The President, Nigeria Labour Congress, Mr. Abdulwaheed Omar, expressed satisfaction with the provision of the new pension law, saying it would benefit the workers.

“Since it is called contributory, the expected thing is that the employers contribute and the employees also contribute. If the government comes in, it is there to complement and sustain the scheme generally. We have gone through the provisions of the Act and we are satisfied that this is something that is coming to improve the pension system and we welcome it,” he said.

 

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