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FG’s annual pension liabilities may exceed N474.12bn

By on September 4, 2017

The Federal Government’s annual pension liabilities will rise above N474.12bn if the Nigeria Police Force and other paramilitary organisations are allowed to exit the Contributory Pension Scheme, findings have revealed.

A bill to amend the Pension Reform Act 2014 that will lead to the exclusion of members of the NPF, the Nigerian Security and Civil Defence Corps, Nigeria Customs Service, Nigerian Prison Service, Nigeria Immigration Service and the Economic and Financial Crimes Commission from the Contributory Pension Scheme and other related matters, which has passed the second reading and referred to the relevant committee of the House of Representatives for further action, is generating concerns in the pension industry.

The police and paramilitary have made serious moves to exit the CPS and return to the Defined Benefits Scheme because of their displeasure over the low pension package provided for them in the CPS compared to what is obtainable in the DBS among other agitations.

Pension operators have said that the allocation is still insufficient to fund the pension liabilities of the Federal Government.

The 2016 Pension Transitional Arrangement Directorate’s budget proposal indicated a total annual pension liability of N388.32bn constituted unfunded liability, which was inherited by PTAD mostly due to outstanding payments for 33 per cent pension arrears to pensioners under the DBS.

PTAD had indicated that there had been no provision for the unfunded liabilities in the past, which now forms part of its core pension obligation.

According to the National Pension Commission, the Federal Government’s pension liability burden under the DBS is much higher than the PTAD proposals in view of the provision of about N74.5bn for the Military Pension Board, N7.4bn for the State Security Service and N3.7bn for the National Intelligence Agency.

Operators noted that the exit of the military, the Department of State Security and the NIA from the CPS has resulted in very high allocation of resources to fund their retirement benefits because their payment is not sustainable under the DBS.

According to the operators, if the police and other paramilitary, who are more in number than the three exempt agencies exit the CPS, the Federal Government’s pension liabilities will be staggering and clearly unsustainable.