MY STAND ON CONTRIBUTORY PENSION SCHEME…..

I have been taken on severally on my stand on contributory Pension in Katsina by some of my friends and other people, mostly civil servants. The most recent is sequel to my piece AFTERMATH OF THE STRIKE….where I urged the labour Union to cause the introduction of contributory pension scheme in the state. Their opinion mostly is why I should be canvassing for this scheme when it is not going to be practicable in a state like Katsina.
Now, here is the thing…since my exit from the state service in the late eighties I have been engaged in Pension business and have come to terms with the fact that it is only the contributory pension scheme that can provide answer to the perennial imbroglio that has bedeviled the Pension industry.
What is this contributory pension scheme anyway? This scheme entails that each individual/ worker has his own saving account (RSA) where he contributes monthly towards his retirement and the money is kept by his chosen Pension Fund Administrator. The scheme is fully funded by both the worker and the Government so that at any given time that particular account is kept buoyant.
Traditionally speaking, the idea of saving is as long as history can remember. People do save now to enable them use whatever is saved in the future. That is the use of ASUSU, a small container with a small perforation in it that is used to put coins and other legal tender in it to enable the owner saves for future use. ADASHE is another form of saving, where a specified number of people mutually agree to contribute certain amount of money, monthly, weekly or even daily for only one of them to collect in a particular instance. All these forms of saving are still relevant in present day dealings. I can still remember when I was young, Asusu was always in vogue as children of my age were very fond of it, especially when there was going to be any occasion, like Sallah celebration or any festivities we used to save money in it to enable us buy things of our interest. Adashe is a much more elaborate operation as it involves bigger equity and interest. Many civil servants still do engage in it, especially when one has a certain plan to execute but does not have the capacity. Like when one wants to marry or buy a new car or wants to change to a bigger car he can always get himself involved in adashe and solve his problem without any qualms. This is saving now for future use and that is all what the contributory pension scheme is all about. Saving for the rainy day. When you can no longer work or when you are incapacitated .The paradigm is now towards somebody saving money for his pension entitlements not working for his entitlements. That popular phrase in our appointment letters…Permanent and Pensionable...will very soon be expunged and be replaced with …You are required to open a retirement saving account….
The World Bank came out with its landmark report titled ‘Averting the old age crises’ in it, the Bank advocated a move from the pay- as- you- go financing of pension. The report backed where possible, a much bigger role of earning in retiring account. Since the report came out, reforms along these lines have been carried out mainly in Latin America, Europe and Central Asia. Nigeria’s Pension Reform Act 2004 is also in line with this change. Hitherto, the Pension reform act, the defunct Obasanjo administration groaned under a N3 trillion pension arrears and that compelled it to send an executive bill to NASS as its own answer to averting the crisis in the Industry. The consequence of that singular action led to the enactment of the law that mandates each and every worker in the private sector, Federal service and the FCT to contribute for his retirement 7.5% of his/ her gross salary and his employer contributes the same amount monthly on his behalf and the total sum is kept for him by his chosen PFA in a RSA. It is interesting to note that about 14 states in the Federation have adopted the legislation. The scheme is fully funded through the monthly contribution of both the employer and employee. So, upon retirement the beneficiary collects his gratuity and is immediately placed on monthly pension because the funds are readily available, unlike the old pension scheme like the one we are operating in Katsina State, there would not be any ready funds to pay the pensioners. These Public pension schemes are not designed to deliver current benefits level when confronted with today’s major demographic and economic changes and to keep them afloat will drastically affect public spending on Health, Agriculture and Education to mention but a few.
For any pension scheme, whether public or private to be successful it has to be fully funded to the extent that the pension funds and assets match pension liabilities at any given time. In our own case, we know the liabilities but we don’t know if the fund is available, as we have to wait for the Federal grants to come. So no grant, no pension!!! But shifting to the privately managed plans that are fully funded and that tie benefits to contributions are more likely to improve economic growth, provide better benefits and more importantly, is you collect your entitlements as and when due than will continued reliance on Pay- as – you- go system.
It is therefore important for my friends and indeed all civil servants to come to terms with the reality that retirement from service is an inevitable end and when it happens there will be no more salary, no AIE, no MFA, not even egunje but your pension entitlements and as long as these funds are not readily available, the Government will just be owing- one month pension, five months, thirty months pension sometimes the number can even be more but if you are one of the doubting thomases and thinks it cannot happen in Katsina State you better think again or better still ask former workers of the Nigerian Railway corporation, New Nigerian Newspapers, just to mention but a few.