About two years after the Pension Fund Administrators started funding the Pension Protection Fund meant for financing minimum pension payment to retirees under the Contributory Pension Scheme, the Federal Government has yet to fulfil its own side of the funding arrangement.
Figures obtained from the National Pension Commission showed that the Federal Government had borrowed N5.5tn of the total pension contribution, which stood at N7.79tn as of the end of February this year.
According to the commission, the funds are invested in the FGN bonds and treasury bills.
An official of one of the PFAs, who spoke with our correspondent, said that the firms had commenced the funding of the minimum guarantee fund, but the Federal Government had not yet started its share of the funding.
He stated, “On the minimum pension guarantee, one of the key requirements is that the Federal Government must be making contributions as well, but it is not doing so yet. That is one of the challenges that we are facing, but the Pension Protection Fund has started receiving funding from the operators.
“I think this should be the second year of making the contributions and I know that PenCom has been engaging the government to start making its own counterpart funds but when that will start, we are not sure.”
According to him, this is a major issue that the operators are still grappling with.
A source in PenCom stated that the industry might review upward the initial stipulated minimum pension of N14,400, which it had not been able to implement for two years.
According to him, the operators of the CPS have been making significant profits from the investment of pension funds.
The PFAs have made a profit of N2.2tn from the investment of pension funds over a period of 11 years.
The Pension Reform Act, 2014 provided that the National Pension Commission should establish and maintain a fund to be known as the Pension Protection Fund in respect of the guaranteed minimum pension.
According to the Act, funding of the minimum guaranteed pension will be partly obtained from an annual subvention of one per cent of the total monthly wage bill payable to employees in the public service of the federation and returns from pension fund investments.
It will also be funded from the annual Pension Protection Levy paid by PenCom and all licensed pension operators at a rate to be determined by the commission from time to time.
Section 84 (1) of the PRA, 2014 provides that all Retirement Savings Account holders who have contributed to a licensed PFA for a number of years to be specified by the commission shall be entitled to a guaranteed minimum pension as may be specified from time to time by PenCom.
PenCom stated that the minimum pension was the lowest benchmark of stipend that an eligible retiree under the CPS could receive on monthly basis.
“It is an absolute amount, which is equivalent to a certain percentage (to be determined by the commission from time to time) of the national minimum wage,” it stated.
According to the commission, the minimum pension will cover the RSA holders who contributed and retired under the CPS.
It stated that retirees solely on programmed withdrawal, whose RSA balances could only provide a stream of income lower than the minimum pension at the point of retirement, and whose RSA balances at the point of retirement could provide a stream of income equal or higher than the minimum pension, could benefit from it.
According to the guidelines on minimum pension, only workers who have contributed for a minimum of 15 years into their RSAs will enjoy the minimum pension payment.
It added that the informal sector and casual workers must have contributed to their RSAs for 120 and 135 months, respectively before they could enjoy this privilege.
The initiative, according to the operators, will bring an end to the situation where retirees are paid abysmally low pensions or nothing at all when the balances in their RSAs are very low.
The President, Pension Fund Operators Association of Nigeria, Mrs. Aderonke Adedeji, said the operators could not just be spending the pension funds on road construction and any project.
“We will make sure there is a more systematic and structured way of using the funds for the benefit of our customers and our nation,” she said.
According to her, the operators are already considering other classes of alternative investment structures that will improve the returns on the funds.
She also said that PenOp would continue to develop its relationship and work closely with PenCom, the regulator.