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PenCom to establish pension protection fund

By on October 22, 2014

The National Pension Commission plans to establish and maintain a pension protection fund for the benefits of retirees registered with any of the pension schemes established, approved and recognised by the Pension Reform Act, 2014, investigation has revealed.

Sources at PenCom, who spoke to our correspondent on Monday, said the fund would be used to guarantee the minimum monthly pension stipends that retirees would be getting, just the way workers in both the public and private sectors were enjoying the minimum wage.

According to the commission, part of the funds for the minimum guaranteed pension will be obtained through an annual subvention of one per cent of the total monthly wage bill payable to employees in the public service of the federation.

It will also be funded from the annual pension protection levy paid by the commission and all licensed pension operators at a rate to be determined by PenCom from time to time.

The sources told our correspondent that the pension protection fund would also be funded from income realised from the investment of the fund.

An official of PenCom said the commission would utilise the pension protection fund for the minimum guaranteed pension for all Retirement Savings Account holders who had done business with a licensed Pension Fund Administrator for a minimum number of years to be specified by the commission.

The official told our correspondent that the fund would also be used for the payment of compensation to eligible pensioners for shortfall of financial losses arising from investment activities.

PenCom is to make regulations to govern the operations of the pension protection fund, fund management and custody, set eligibility criteria and related matters.

While the PRA 2014 states that subvention of one per cent of the total monthly wage bill should be deducted from the public service of the federation, operators are, however, worried that the law is silent on what the contribution of the private sector should be.

The Chairman, Pension Fund Operators Association of Nigeria, Mr. Misbahu Yola, said the fund was supposed to work in tandem with the minimum pension guarantee, but not to enhance every contributor’s pensions.

“It is supposed to primarily give people minimum pension, but PenCom has not yet determined what the minimum pension will be and when its implementation will commence,” he said.

According to him, if the minimum pension is N10,000 and the contributor can only have N8,000 from his contributions after getting the lump sum, the pension protection fund will supply the balance of N2,000 for the retiree.

He explained that the pension stipends of retirees with significant amounts would not be augmented by the fund.

“In due time, PenCom will come out with the regulation on the pension protection fund, which is to ensure that people get some decent pension to live on,” Yola said.