AN ASSESMENT OF CONTRIBUTORY PENSION IN NIGERIA

A CRITICAL LOOK AT CONTRIBUTORY PENSION IN NIGERIA

The main objective of the new pension scheme that came into operation in 2004 is to ensure that every person that work in Nigeria in either public or private sector of the economy receives his/her retirement benefits as and when due. The new scheme covers all employees in the public service of the Federation, the Federal Capital Territory and the private sector.
The characteristic of the scheme is that; it should be fully funded (contributions from both employer and employee); it should be privately managed (management by Pension Fund Administrator) and third party custody of Funds and assets (pension Fund Custodian).
The import of this paper therefore is to critically examine how far the scheme has fared 6years after its commencement. I feel 6years is enough a time to asses and evaluate its success or otherwise. In so doing I intend to look at the roles played by the major stakeholders of the scheme, i.e. The National Pension Commission (Pencom), The Pension Fund Administrators (PFAs) and the contributors.
My candid assessment in this regard is that the three stakeholders enumerated above have failed to leave to expectation and if things are allowed to continue the way they are now the objective of the contributory scheme will be a mirage, as some of the problems associated with the former pension plans have started to manifest in the new regime while other problems are abound.
The main functions of Pencom; is to issue licenses to the Pension Fund Administrators and Custodians, regulates their actions and generally formulates, direct and oversee the overall policy guidelines on Pension matters in Nigeria. While it can be conceded that the Supervising organ of the pension matters in the country has performed well in terms of issuance of licenses to PFA’ and Custodians but it is kilometers away from regulating their activities. The failure of the commission to provide for biometric machine to detect multiple registrations has allowed the Administrators to perpetrate this act with impunity. The consequence of this singular act is so devastating and if concerted effort is not made to remedy it will only leave the contributor in a state of confusion as to which of the numbers he would use before eventually get paid. Another area where Pencom is found wanting is in the area of enforcing full compliance on the provisions of the legislation. It is the responsibility of Pencom to do everything possible to ensure that the scheme does not suffer or run into problems and to sustain willful compliance this it can do by decentralizing its operations by establishing zonal/regional offices or at best branch offices. The excesses of the PFAs and employers can only be checked when these offices are established. I can not see how Pencom can operate from Abuja and expect to monitor the activities of the PFAs and the employers that are not ready to comply with the legislation, even those that are complying need to be checked once in a while to verify contributions deductions and remittances. Sometime ago Pencom published in the national dailies a list of employers that did not comply with the legislation apparently reported by the Pension Fund Administrators but several months after the publication nothing came out of it and am sure nothing will come out of it as long as Pencom remains indifferent to issues of enforcement. For Pencom to generate Personal Identification Numbers (PINS) takes several weeks now instead of 24hours, to process benefit claims takes about a month or even more is some instances. The issue of transfer of accounts from one PFA to the other by contributors is yet to commence 4 years after the market is supposed to have opened, this is a right of the contributor, when he is not satisfied with the services of his Administrator he can transfer his account to another as stipulated in the extant legislation. The issue is even more poignant when you consider those who contributed under the NSITF scheme as they can’t move their NSITF contributions to their PFAs largely because the transfer market has not yet opened. I think Pencom has not really appreciated the enormity of this problem until a contributor realizes that his right has been infringed by this obvious laxity and takes the matter to court.
If Pencon has had very little to cheer about in the last 6years, some Pension Fund Administrators have got nothing to cheer as they failed to clearly meet up with the expectations of their contributors as very little effort is put on Education and customer care, the resultant effect is gross disenchantment on the part of the contributors. The role of Pension Fund Administrators in this dispensation cannot be overemphasized, the success or otherwise of this pension plan can be tied up to a large extent with the Administrators. The ‘I don’t care attitude’ put up by some Pension Fund Administrators couple with the attitude of contributors towards pension, what you get in the end is a below average performance. Experience has shown us that workers generally develop apathy in deductions; they abhor deductions of their salaries for any purpose. They don’t like talking about life after retirement when they are in active service but the issue becomes relevant when they retire. To print this picture very clearly, you need to visit any public or private establishment that is complying with the New Pension regime and take a census of 5-10 staff and ask them the following questions; Have you registered with any PFA?; What is the name of your PFA?; Do you have a PIN?; When last did you receive statement of account from your PFA?; and, Are you satisfied with the services rendered to you by the PFA?. The answers to these questions and many more will give an insight as to the performance of these PFAs.
Failure by the PFAs to be alive to the needs of the contributors is a great indication that collection of one’s entitlements after retiring as and when due will be a Herculean task. Contributors are under continuous pressure from PFAs as regards to having to submit the same records/attachments several times even after earlier submissions were receipted and these attachments are a prerequisite for the issuance of PINS and without them nothing can be done. Too much noise has been made about Information Technology as a veritable tool for easing the problems of the new Pension plan but a cursory look at the activities of the PFAs in this regard indicates a huge disappointment as you can not easily hook up with the website of your PFA and get the desired result. Of course you can not register with any PFA on line, you cannot obtain your statement of account, and neither can you process your claims. Infact, the whole situation in the Pension Industry is chaotic and it looks as if it is grinding to a halt.
Finally, it is instructive to note that pension funds are as vulnerable as any public funds in Nigeria. What happened during the stock market crisis a couple of years ago where shares worth billions of Naira belonging to Pension Funds were washed away is an eye opener. Popular concern over pension is an issue well founded it therefore behoves the operators of scheme to do whatever is necessary to prevent it from drifting into chaos and efforts should be made to do the right thing at the right moment.