N400bn State Pension Backlog Threatens Workers’ Retirement Plan

Workers in state civil services are having their retirement life being threatened as their employers are battling with N400 billion pension backlog under the Contributory Pension Scheme (CPS) and the Defined Benefits Scheme (DBS), LEADERSHIP has learnt.

Industry sources put the arrears under the CPS and the DBS at about N400 billion as at the end of the second quarter of 2023.

However, there is no official data on how much pension backlog these states are owing, there are five states with a backlog of pension remittances, according to the Second Quarter 2023 Pension industry report released by the National Pension Commission (PenCom).

The affected states are Osun, Anambra, Delta, Ekiti and Benue.

Anambra State, for instance, is having a backlog of unremitted pension contributions for its employees from January 2018 to February 2022.

However, the report shows that the current administration resumed remittances from March 2022 till the second quarter of this year when it was released.

While Gombe, Zamfara and Adamawa States have laws on Contributory Defined Benefits Scheme (CDBS), which is a fusion of CPS and Defined Benefits Scheme (DBS), they are yet to commence the implementation as of the second quarter of this year.

Rivers State is said to have made a one-off payment of N300 million in 2012 for accrued rights.

Of the 36 states of the federation, including the Federal Capital Territory (FCT), only 25 states have so far joined the new pension scheme known as Contributory Pension Scheme (CPS).

However, of this number, 10 states are remitting employee’s and employer’s contributions while only seven states among them are regularly paying the pension contributions of their workers monthly.

The seven fully pension compliant states are Lagos, Lagos, FCT, Osun, Kaduna, Ekiti, Edo and Info States. The remaining three States, which are; Delta, Anambra, Benue and Kebbi are partially implementing CPS

According to PRA 2014, employers are expected to contribute 10 percent of their workers’ salary as monthly pension remittance with each employee contributing eight percent, making a cumulative 18 per cent monthly remittances that should be remitted by employers into the Retirement Savings Account (RSAs) of the employees.

The situation, analysts say, portends a bleak retirement for the workers a few years down the line, as many retirees are currently suffering the plight of unpaid overdue pensions.

All the affected states, it was learnt, have subscribed to CPS.

This, according to investigation, is currently affecting retirees from the concerned states whose Retirement Savings Accounts (RSAs) are either not credited at all or are waiting on the government to fulfill its liabilities before they can have access to their own pension contributions at retirement.

To this end, the governors of the concerned states have left their workers with a bleak retirement, unless the state government cleared the backlog.

Speaking on the development at an IPEN Insurance and Pension Roundtable 2023 in Lagos recently, the director, Centre for Pension Right Advocacy (CPRA), Ivor Takor, urged the states and federal government as well as private sector players to prioritise pension welfare of their workers, adding that, this will raise the level of commitment of workers towards their employers.

“But when you don’t plan for the retirement of your workers, especially in the civil service, what you will see is people wanting to take whatever they can now from the system which is fuelling bribery and corruption in the civil service,” he said.

Stating that most states still favour the old pension scheme over the new pension scheme, and to this end are reluctant to fully commit to the CPS, he charged state governments to perform their civic responsibilities by honouring pension obligations of their employees.

He described as unfortunate a situation where some state governors left office and made some segmented pension laws that only cover them and their office holders, enabling them to draw massively from the purse of the state in the name of pension to build houses and cars, but refused to make laws for the state workers or remit their pension regularly.

He challenged workers’ unions at the state level to protest “this maltreatment.”

Speaking on the development, the zonal head, South West Zonal Office, PenCom, Mr. Akinsola Adeseun, said it is disturbing that some states, having commenced the implementation, decided to backtrack, thereby owing several pension arrears that will affect the future of civil servants in those states.

He stated that the commission had been persuading the concerned states to meet pension obligations of their workers as this will ensure civil servants enjoy retirement. Though, he said compliance level seems to have improved, there are still lots of ground to cover in pension arrears payment.

On his part, the executive secretary/chief executive officer (CEO), Pension Fund Operators Association of Nigeria (PenOp), Oguche Agudah, had at a forum, said pension fund operators have taken advocacy to state governors to enlighten them on the need to prioritise their workers’ pensions, promising that, operators would continue to raise awareness on the need for pension adoption in states and private sector, thereby, increasing pension funds bracket.