Former president Olusegun Obasanjo introduced the Contributory Pension Scheme (CPS) in 2004, which aimed to promote a culture of savings among workers. Under this scheme, both employees and employers are expected to make contributions to the pension fund, thereby fostering a habit of disciplined saving for retirement.
Twenty years later, Nigeria’s pension system is a story of contrasts as the failure of employers in both private and public sectors to remit pensions to the relevant authorities has defeated the aim of the noble initiative of the former President.
The Pension Reform Act 2004, as amended in 2014, establishes a Contributory Pension Scheme (CPS) for all employees in the country to ensure that every person who works in either the Public Service of the Federation, Federal Capital Territory or Private Sector receives his retirement benefits as and when due.
However, the pension system still faces challenges, including pension arrears for those under the Defined Benefit Scheme. While the Contributory Pension Scheme mandates that contributions continue to be invested even after retirement to ensure a steady income stream, the transition from the old system to the new one has not been seamless for all.
We note with dismay that Nigeria’s pensioners, after serving the country for the mandatory period of time, retire into penury.
Sadly, in our view, this unwholesome development has inevitably defeated the noble intentions for which the fund was established. Even worse, we dare say, it has made a nonsense of the veritable basis for the reform of the pension industry, which led to the enactment of the Pension Reform Act 2004.
State governments have been particularly notorious for non-remittance issues. Although the Nigerian Pension Commission (PenCom), the government agency in charge of managing the fund, has refuted claims that states have entirely failed to remit funds, it highlights systemic problems such as miscommunication between states and Pension Fund Administrators (PFAs).
According to a 2023 report, 21 states owe N790 billion in inherited pensions and gratuities, with Rivers and Benue states topping the list with N119 billion and N100 billion, while South-West and Niger Delta regions owe N256 billion and N22 billion, respectively.
According to industry analysts, the federal government’s total indebtedness on accrued rights up to May 2024 was estimated at N250 billion, covering about 18 months.
The report also claimed that successive governments in the states accumulated pensions and gratuities, forcing incumbent governments to grapple with liquidating their debts.
The non-remittance of pension contributions in Nigeria poses a significant challenge to workers’ financial security.
Despite legal frameworks like the Pension Reform Act of 2014, many employers, including state governments, fail to remit deducted pensions.
Another report indicatesd that as of 2022, over N3.4 billion was unremitted by various states, exacerbating workers’ anxieties about their future financial stability.
The Nigerian government has struggled with consistent and adequate funding for accrued rights under the defined pension scheme. Budgetary allocations often fall short of the required amounts, leading to delays in disbursement. The lack of a clear plan for paying off this deficit has exacerbated the issue.
When pensions are not remitted, employees face uncertainty regarding their retirement benefits. This situation not only undermines trust in the pension system but also places undue stress on workers who rely on these funds for their post-retirement lives.
The Commission has acknowledged the issue and is implementing stricter penalties for defaulting employers, aiming to recover unremitted contributions along with accrued interest.
Employers in both private and public sectors continue to take retirees for granted by not remitting their pensions even though the Pension Act stipulates penalties for non and even late remittances, including fines that accumulate monthly until the contributions are paid.
Majority of pensioners are wallowing in abject poverty and hunger, emotional trauma and social isolation.
The government has a moral obligation to do the needful urgently to save pensioners from avoidable deaths after serving their fatherland meritoriously.
It is rather unfortunate that enforcement remains a challenge, and even with recovery agents being appointed to pursue defaulters, many employers continue to evade their responsibilities.
Another problem that allows this impunity to fester is the system’s lack of accountability and transparency, which allows these practices to persist.
The non-remittance of pensions in Nigeria is not just a financial issue but a matter of moral justice and accountability.
This newspaper believes that the government must make concerted efforts to mandate stakeholders, such as government agencies, employers, and employees, to create a robust system that guarantees financial security for workers in their retirement years.
We believe the time for action is now, without which countless retirees face an uncertain future devoid of the financial support they deserve.
