Massive pension liabilities incurred by some state governments, as well as the failure of some private sector employers to remit pension contributions made by their employees, have slowed the growth of pension fund assets by N2.6 trillion.
Although pension assets have increased from N2 trillion in 2004, when it was established, to approximately N12.4 trillion as of the end of April 2021, market observers believe the assets could have increased to N15 trillion or more by now if all states of the federation subscribed to the Contributory Pension Scheme (CPS) and private sector employers who have subscribed remitted their employees’ contributions.
According to the investigation, by the end of December 2020, 25 states of the federation have enacted CPS laws, while 12 states are either in the bill stage or operating different pension schemes.
It was discovered that only 10 of the 25 states that have adopted the scheme were remitting both employee and employer contributions to their employees’ Retirement Savings Accounts (RSAs). Five of the ten remitting states are actually remitting pension contributions as and when they are due, while the others only remit on occasion, a development that is responsible for the rise in state pension liabilities.
Meanwhile, the National Pension Commission (PenCom) has taken defaulting employers in the private sector to court, and some have been convicted. Other defaulting employers have been ordered to pay about N9 billion in unremitted funds as well as N9 billion in monetary sanctions, for a total of N18 billion paid by these erring firms.
This has increased compliance in the private sector, but the Commission appears to be hampered when it comes to state compliance, as the law had to first be domesticated by the state Houses of Assemblies, limiting PenCom’s ability to prosecute at the state level.
In an exclusive interview with Leadership, Mr. Peter Aghahowa, Head, Corporate Communications Department, PenCom, confirmed that if states and private sector players had complied more effectively, the fund could have grown at a faster rate. He stated that the Commission would not back down in its efforts to fully enforce compliance.
PenCom has also taken the initiative to publish quarterly the status of each state’s compliance with the pension scheme, stating that “this has caused some state governments to sit up and do the necessary.”
Similarly, Mr. Ivor Takor, Director of the Centre for Pension Rights Advocacy (CPRA), urged labor unions to compel defaulting state governments and firms to pay up their outstanding pensions, as this is critical to the country’s workers’ future. He stated that while unions fight for wage increases and other emoluments, they should not forget to put pressure on state governors to secure workers’ futures by implementing the contributory scheme and remitting funds on time.