The Lagos State government has adopted the new 18 per cent monthly pension contributions as provided for in the Pension Reforms Act(PRA) 2014, thereby, becoming the first state in the federation to do so.
To this end, the state government also surpassed the federal government who is still paying the monthly pension contribution of its workers on the old rates of 15 per cent.
Before now, Lagos State has been contributing 7.5 per cent and workers contributing the remaining 7.5 per cent from their respective salary to make up 15 per cent monthly contributions as provided by the PRA 2004 that has been amended to become PRA 2014.
The PRA 2014 had since replaced the PRA 2004 that allowed 15 per cent monthly pension contribution to be shared between an employee and an employer at 7.5 per cent each. Unlike the PRA 2004, PRA 2014 mandates an employer to contribute 10 per cent on behalf of its employees, while the employee contributes eight per cent of his monthly salary, making a cumulative 18 per cent monthly contribution paid into the Retirement Savings Accounts (RSAs) of federal workers.
While the private sector has so far been remitting the pension of their workers in the new 18 per cent monthly contributions, the public sector, that is, the federal and state governments, have continued to work with the old monthly contributions of 15 per cent, thereby, short-changing the employees in the process
With Lagos State governor, Mr. Akinwunmi Ambode, signing into law the Amendement of the Lagos State Pension Reform Law which increased the contribution rates under the Contributory Pension Scheme(CPS) to 18 per cent, the state government’s contributions has now soared to 10 per cent from 7.5 per cent, whilst the employees’ contribution has increased to 8 per cent from 7.5 per cent.
To this end, Ambode said, this was to make life more comfortable for employees who retire from the state’s public service.
Meanwhile, investigation showed that the new increase places further financial burden on employers of which, in this case, are federal and state governments who are not ready to shoulder this additional financial responsibility.
Insider source revealed that the federal government through the ministry of finance, is aware of this increase but has refused to make budgetary provision for it, for fear that it would jack up government’s expenditure at a time it is still battling to offset its pension arrears.
With some states still battling salaries and pension arrears, insider source revealed that they were not ready to commence the new monthly contributions any time soon, especially, with most states yet to domesticate the PRA 2014.
However, LEADERSHIP findings revealed that about 70 per cent of players in the private sector have commenced implementation of the new 18 per cent monthly pension contribution, meaning that private sector employees could have more in their RSAs at retirement than their counterparts in civil service.
A credible source in the pension industry, who wants to be anonymous, said since federal government has failed to make provision for such increase in the national budget, there was no way implementation can commence, stating that, the economic scenario of the country plays a big role in the failure of the government to comply with this new pension contribution.
However, the National Pension Commission(PenCom) said, it was discussing and advising government on the need to adhere to the new rate, adding that, it was discussing this with relevant stakeholders to ensure and enhance compliance.
Speaking in an exclusive interview with LEADERSHIP, the acting director- general, PenCom, Mrs. Aisha Dahir-Umar, said the commission had so far made efforts through continued engagement of relevant stakeholders in ensuring implementation of the 10 per cent employer and 8 per cent employee rates of pension contributions.
Stating that the new rate would enhance the contributions and RSA balances of workers and retirees, thereby engendering greater acceptance and confidence in the CPS, the increment, she added, would equally serve as an impetus for states and other private sector employers to comply with the provisions of the Act.
To her, it is important for the federal government through the Budget Office of the Federation(BOF) to urgently review the rates currently being applied in line with the provision of Section 4(1) of the PRA 2014, stressing that, the new rate would improve the pension benefits of retirees thereby providing a more comfortable livelihood at retirement.