April 2, 2023



Heated debate in Senate over Police transfer to exit PenCom 

Transfer by the Police to exit the Contributory Pension Scheme (CPS), generated heated debate for and towards, amongst stakeholders  on the Public Listening to organised by the Senate Committee on Police Affairs final Friday. TAIYE ODEWALE experiences 

Contributory Pension Scheme (CPS) 

Contributory Pension Scheme (CPS), managed by the Nationwide Pension Fee (PenCom), was caused by the reform of Nigeria’s pension panorama by the federal authorities in 2004 in direction of attaining a system that’s sustainable and has the capability to attain the last word objective of offering a secure, sustainable, predictable and enough supply of retirement earnings for workers in each the private and non-private sectors within the nation.

This resulted within the enactment of the Pension Reform Act 2004, which launched a compulsory Contributory Pension Scheme (CPS) for workers of the federal authorities, the Federal Capital Territory and the non-public sector organisations with 5 (5) or extra staff. 

After 10 years of implementation, the 2004 Act was repealed and re-enacted as Pension Reform Act 2014, which seeks to strengthen the Contributory Pension System and tackle among the challenges recognized throughout the implementation interval.

Accessible statistics from PenCom, present that as at 31 December 2022, the variety of registered contributors underneath the CPS has grown to 9.8 million (5.8 million from the non-public sector). This represents about 9.5% of the entire working inhabitants in Nigeria whereas  the entire pension fund property underneath the scheme has grown to N14.79 trillion as at 30 November 2022, which is equal to about 7.53% of the Nigerian GDP. 

As authoritatively gathered from PenCom, 60% of the entire pension property of N14.79 trillion belongs to staff of the non-public sector, whereas the steadiness of 40% belongs to public sector staff.

Through the years, the pool of pension funds generated by the CPS has aided in deepening the Nigeria’s monetary sector and offered a platform for attaining strategic programmes of presidency within the areas of infrastructure, housing and the event of the true sector of the financial system.

To this finish, 63.68% of the entire pension property have been invested in federal authorities securities (FGN Bonds, Treasury Payments, Sukuk and Company Bonds) as at thirtieth November 2022. The remaining investments are in cash market devices (14.61%), company debt securities (10.41%), quoted equities (6.50%) and different asset courses (4.80%).

CPS being totally funded as towards the pre –  2004 system funded solely by budgetary provisions, has  assured funds of  staff’ pension advantages upon retirement. 

Usually going by realities on floor, goals of the 2004 Pension Reform in addition to the amended 2014 Act, have been largely achieved within the areas of accumulation of long-term financial savings for Nigeria, in addition to transparency and effectivity in funds administration and advantages administration. 

Transfer by the Police to exit the  scheme 

Regardless of claims of achievements made by PenCom on administration and administration of pensions of retirees by the CPS scheme by the varied Pension Funds Directors (PFAs), serving and retired police personnel felt being shortchanged by means of impoverisation when in comparison with how their counterparts within the army are handled by the Army Pension Board.

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To be on the identical web page with pensioners from the army, the Nigeria Police by a invoice sponsored by Senator Elisha Abbo (APC Adamawa North), looked for institution of Police Pension Board.

Expectedly, at a public listening to organised on the proposed board by the Senate Committee on Police Affairs 5 days in the past, exactly, Friday final week; whereas the sponsor of the invoice, the Police and retirees from the Pressure, supported the transfer, PenCom, pension directors and the Nigeria Labour Congress (NLC), kicked towards the transfer.

First to make case for the invoice was its sponsor, Senator Elisha Abbo, who stated the particular remedy given the army by the Army Pension Board ought to be prolonged to the officers and males of the Nigeria Police Pressure so far as  retirement advantages and pensions are involved.

“It isn’t good for retired police personnel to be impoverised  in retirement going by poor remunerations and advantages being collected underneath the CPS managed by PenCom whereas their counterparts within the army are higher handled by a particular pension fund  administration and administration  physique, arrange for that goal.

“What is sweet for the goose, is sweet for the gander. The proposed Police Pension Board, ought to be allowed to see the sunshine of the day”, he stated.

The  Inspector – Common of Police, Usman Alkali Baba represented by Deputy Inspector Common Sanusi Lemu, adopted go well with in help of the proposal by saying that  the Police required a definite board by itself for administration and administration of pensions of retired Police personnel within the mode of the Army Pension Board.

His phrases: “The Police as clearly acknowledged by the title of the invoice “Police Pension Board Institution Invoice 2022”, need to have a separate physique for administration and administration of Pensions of its retirees.

“Exiting the Contributory Pension Scheme (CPS), being run and managed by PENCOM, is lengthy overdue for the Police on account of poor providers being subjected to.

“The proposed board will enhance the morale of Police Personnel to dispassionately discharge their duties of preventing crimes”.

Arguments towards Police transfer 

However their place was kicked towards by the Director – Common of PenCom, Aisha Dahiru who stated permitting the Police to exit CPS, will quantity to taking the nation again to the darkish ages of mismanagement of pension fund which landed the nation with N1.6trillion liabilities in June 2004 when the scheme began.

The PenCom boss who was represented by Mr Clement Oyedele Akintola, stated: “Distinguished Chairman and members of the Senate Committee on Police Affairs, might want to word that the explanations that knowledgeable the choices of the Federal Authorities, in addition to the sixth and eighth Nationwide Meeting to respectively decline the request to exempt the personnel of the Nigeria Police and different paramilitary companies from the applying of the CPS are nonetheless legitimate.

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“Certainly, the arguments towards the exemption of personnel of the Nigeria Police are compelling and strengthened by financial, fiscal, social and public coverage causes as highlighted beneath thus: 

“Exemption of the personnel of the NPF would indicate further monetary burden on the Federal Authorities by means of unsustainable pension obligations. For example, as at 30 November, 2022, there have been 307,154 police personnel based mostly on IPPIS information. 

“An actuarial valuation revealed that the retirement advantages (pension and gratuity) legal responsibility of those personnel underneath the defunct Outlined Advantages Scheme would quantity to about N1.84 trillion. This legal responsibility is anticipated to considerably improve with the proposed yearly recruitment of 10,000 personnel into the police drive. 

“The FGN’s legal responsibility underneath the CPS for a similar NPF personnel is made up of N213.4 billion as accrued pension rights and month-to-month employer pension contributions of about N2.2 billion.

“It might be recalled that accrued pension proper are retirement advantages of FGN staff who have been in service earlier than July 2004, previous to the enactment of the PRA 2004, and this legal responsibility will stop by 12 months 2039 when the final worker entitled to such advantages would have retired. 

“The Federal Authorities is already overburdened with the fee of pensions underneath the Outlined Advantages Scheme as illustrated by the 2023 Appropriation Act, which made a provision underneath the Service Vast Vote for the sum of N854.8 billion as whole allocation for pension and gratuities. 

“This contains allocations to Army Pension (N244.6 billion), NIA (N10.4 billion) and Division of State Safety (N18.5 billion) representing 29%,1.2% and a pair of.2% respectively. 

“Allocations to those companies signify 32.4% of the entire proposed allocations for pension and gratuity. In the meantime, solely N268.7 billion was proposed for fee of accrued rights underneath the CPS for the 2023 potential retirees of FGN treasury funded MDAs.

“It’s evident that the Outlined Advantages Scheme shouldn’t be sustainable as exempting the Army, Division of State Safety and the Nigeria Intelligence Company has resulted in very excessive allocation of assets to fund their retirement advantages. 

“From the varied Appropriation Acts from years 2013 to 2023, the mixed allocations for these Companies ranged from 41.9% to 49.4% of whole allocations for pensions respectively.

“Consequently, it could be fiscally imprudent to extend the variety of this class of retirees underneath that Scheme. It might additionally render the retirees financially susceptible and insecure.

“Exemption of Nigeria Police Pressure from the CPS would outcome within the dismantling of the establishments, methods and processes that Authorities had put in place in the previous couple of years in direction of the implementation of the pension reform programme.

“This might additionally negatively have an effect on the tradition of nationwide financial savings, in addition to efforts to eradicate the constructions that inspired corruption underneath the Outlined Advantages Scheme.

“One other rapid unfavourable impression of the proposed exemption of the NPF is to unsettle the FGN’s fiscal coverage and monetary system stability. It’s crucial to notice that as at date, about 63.68% of the N14.79 trillion pension property, as at 30 November 2022, are invested in Federal Authorities securities. Exempting the NPF would result in materials divestment from FGN securities earlier than maturity, which might have ripple unfavourable results on not solely the funds of Authorities, but in addition on your entire monetary system.

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“Additionally it is necessary to notice that the exemption of the NPF and every other Company from the CPS would erode the pool of long-term investible funds accrued underneath the CPS. That will undermine the method of funding the massive infrastructure hole within the nation. 

“Certainly, it’s noteworthy that the pension business has considerably contributed to the supply of finance for infrastructure improvement in Nigeria by investments in infrastructure bonds (together with sukuk) to the tune of N211.16 billion and actual property to the tune of N232.34 billion as at 30 November 2022”.

Additionally kicking towards the proposed board, the Chief Govt Officer of Pension Fund Operators Affiliation of Nigeria, Oguche Agudah, admonished the committee and by extension the Senate, to not legislate liabilities.

He stated because the proposed physique will likely be solely funded by budgetary allocations, avoidable burden, will likely be positioned on the federal authorities at the moment battling with N10.7trillion price range deficit in 2023 fiscal 12 months.

“We can’t in good religion, legislate liabilities”, he burdened.

“Below the contributory pension scheme, what you get at retirement relies on what’s contributed by the employer and worker throughout the work life and funding returns over the interval. It goes with out saying that if the contributions are elevated, the pension obtained will likely be elevated.

“We suggest a  common improve in salaries of members of the police drive as this may enhance their pension contributions and subsequently pensions at retirement. 

“The present system has instilled confidence throughout the system, ensured skilled fund administration, launched world class practices, and has confirmed to be protected and dealing for the thousands and thousands of contributors.

“While the system shouldn’t be excellent, what must be accomplished is to work on re-engineering the system to make it work for numerous individuals teams, reasonably than selecting to disintegrate a system that’s working”, he added.

President of the Nigeria Labour Congress (NLC), Ayuba Waba, in his presentation hammered on immediate fee of gratuities of retired police personnel or those that died in energetic service.

The proposed Police Pension Board although effectively envisioned, however the issue is sustainability as regards funding, he posited. 

“Mistake of transferring from recognized to unknown, shouldn’t be made”, he burdened.

Expectedly, in his closing remarks on the session, the Chairman Senate Committee on Police Affairs, Senator Dauda Haliru Jika, stated all of the divergent views expressed on the session, would  information the committee in getting ready its report.