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Low contributions deny retirees pension payment

By on April 15, 2015

Some retired workers are being denied the payment of monthly pension stipends even though they made contributions into their Retirement Savings Accounts while still on active service.

Instead of being paid monthly stipends, their respective Pension Fund Administrators have returned all the contributions of the affected retirees to them because of insufficient balances in the RSAs that would have entitled them to pension payment.

The concerned retirees are those with less than N550,000 in their RSAs when they retired.

Despite the fact that the Pension Reform Act made provision for extra funding to augment the ex-workers’ savings to enable them to qualify for pensions, 11 years after the Act was promulgated, the funding to support it has not been established.

The Chairman, Pension Fund Operators Association of Nigeria, Mr. Misbahu Yola, said the minimum pension guarantee was imputed into PRA but it required funding to make it work.

According to him, the law states that it should be funded by the government, National Pension Commission and the pension operators, but the ratio of PenCom and the operators’ contributions have not been fixed.

Yola said that before the enactment of the PRA, only a few private workers had pensions, but with the commencement of the Contributory Pension Scheme, more workers now had pension accounts.

“If your total pension is N550,000, you cannot be paid pensions because everything will be given to you. A lot of workers have not accumulated enough money to get proper pensions and that is one of the reasons why the minimum pension guarantee was introduced,” he explained.

He added that the fund would enable the contributors with low balances to get pensions no matter how small.

The PRA states that PenCom should establish and maintain a fund to be known as the Pension Protection Fund for the benefits of eligible pensioners covered by any pension scheme established, approved and recognised by the Act.

The fund is meant to guarantee minimum pensions that retirees will be getting, like the minimum wage for workers.

According to the commission, part of the funding 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 is also to 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, and from income from investment of the Pension Protection Fund.

PenCom said it would utilise the PPF for the funding of the minimum guaranteed pension for all RSA holders who had contributed to a PFA for a minimum number of years to be specified by it.

The commission added that the PPF 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 governing the operations of the PPF, fund management and custody, 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 private sector’s contribution should be.