There have been a few misconceptions or misunderstanding about the CPS in Nigeria since its inception in 2004. In this article, we have tried to explain or unravel the misery behind some of these thinking.
Misconception 1: The new CPS is no different from the Old defined benefits scheme.
Response: This is not true. While we understand the fact that both the old DBS and the new CPS cater for pensioners, the former is more prevalent in the public sector. However, the CPS covers both public and the private sector self employed inclusive.
Misconception 2: The CPS allows the government to borrow my pension savings and use for whatever purpose.
Response: This is also not true. All pension assets are immune from government intrusion. The government cannot spend or touch the pension assets and use for whatever purpose it deems fit. The only way the government can have access to the fund is by borrowing through bonds and Treasury bills issuance which follows investment guidelines as stipulated in the Pension Reform Act 2014.
Misconception 3: I should be able to withdraw my pension balance and use when I am in need, afterall, it is my money.
Response: One of the purposes for which the pension industry was reformed is to enable a retired worker enjoy and live a good life after retirement. This can only happen if there is a sustainable pension plan in place.
It is not in the plan to allow pension contributors withdraw their pension contributions whenever they need fund. Fortunately, there is a leeway and in an extreme situation, a contributor can (if so decided) have access to a maximum of 25% of his pension balance if he/she loses his/her job and remained unemployed for a minimum of 4 months.
In addition, for those who are enrolled in the Micro pension plan, they can withdraw up to 40% of their contributions before retirement age of 50 years.
Misconception 4: Why do we have PFAs and PFCs afterall they do the same thing?
Response: The PFAs is an administrator in charge of managing your pension funds and ensuring that this is done in a professional manner expected of it which are safety and maintenance of fair returns. The PFC is the custodian of your pension assets. This means that all the assets including cash are all in custody of the PFC, which must be a subsidiary of a licenced financial institution. This is to ensure that all pension assets are properly and safely kept in custody of capable organization.
In addition, all instruction to invest or pay pension benefits must come from the PFA and go through the PFC to the other parties applicable. This is a check on their activities. They both report to a single regulator, PenCom, which monitors on a daily basis their activities and ensure that they all abide by the laid down rules, regulations and guidelines.
Misconception 5: Why does it take time before I get paid my benefits. It should be faster now.
Response: It is actually easier and faster than ever before. Before benefits are paid, approval must be sought from the regulator. Baring any unforseen issues, approval should be received to make payment to the beneficiary by at most 7 or 10 working days. This is unlike what was obtainable before the introduction of the CPS.