Retirement: Jigawa, Kano, 3 others adopt contributory defined benefits scheme
Jigawa, Kano and three other states are the states that have adopted the contributory Defined Benefits Scheme (CDBS) for pension and retirement planning for their workers.
Information obtained from the National Pension Commission (PenCom) show that the other three states include Gombe, Zamfara and Adamawa States.
The five states, which have adopted the CDBS, chose a pension plan that cuts across both the Contributory Pension Scheme (CPS) and the Defined Benefits Scheme (DBS).
The major difference between the CPS and the DBS is that the CPS is fully funded through the monthly pension contributions into the employee’s RSA, which are managed by the PFA and held in safe custody by the Pension Fund Custodian (PFC). These funds are readily available for payment of benefits at retirement.
On the other hand, the DB Scheme or PAY-AS-YOU-GO is not funded and dependent solely on budgetary allocation to pay a predetermined amount as benefits at retirement.
The CDBS, adopted by these states, adopts periodic remittance of pension contributions to create a pool of funds from which retired workers can be paid without delay.
Daily Trust analysed information from PenCom on the status of the implementation of the CDBS by the states.
Jigawa State enacted law on CDBS in 2005, amended it in 2015, paving the way for the establishment of a Pension Bureau to regulate the operations of the CDPS.
So far, the state has been regularly remitting pension contributions to selected Pension Fund Administrators.
PenCom’s record also shows that Jigawa State conducted actuarial valuation in 2019 to determine the benefits of workers due when they retire.
Kano State, on the other hand, enacted a law on CDBS IN 2006 and started deducting pension contributions under the management of the Board of Trustees instead of PFAs.
However, PenCom’s record shows that Kano State is yet to establish a Pension Bureau of Board, yet to transfer pension assets to a licensed pension operator, yet to conduct actuarial valuation and has huge pension and gratuity liabilities.
Gombe State enacted a law on CPS in 2008, amended the 2008 law on CPS to CDBS law in January 2019, but recently engaged the PenCom and is currently reviewing its pension law towards CPS.
Record shows that Gombe State is yet to establish a Pension Bureau; yet to commence remittance of pension contributions and is yet to conduct actuarial valuation.
Similarly, Adamawa State enacted a pension law in 2013 that was closer to the CDBS, but is yet to establish a Pension Bureau.
The State’s pension law does not allow for the appointment of PFAs and remittance of pension contributions has not commenced.
Adamawa State has not conducted actuarial valuation, has no Group Life Insurance Policy, yet to commence funding of accrued rights of workers and is yet to open Retirement Benefits Bond Redemption Fund Account.
Zamfara State repealed law on CPS and enacted law on CDBS in 2019 even as the state’s employees have exited from the CPS and RSAs opened under the CPS to be flagged off.
The State does not have a Pension Bureau, has not commenced deductions and remittance under the CDBS and remittances made under the cps currently being refunded to the employees.
PenCom’s records show that Zamfara State is yet to conduct actuarial valuation to determine the value of employee’s accrued rights and total retirement liabilities.
PenCom maintains its stance that the CPS is a better pension plan for workers and should be adopted by all states.
In a recent interview, the
Acting Director General of the National Pension Commission, Aisha UmarDahir, said Section 23(h) of the PRA 2014 clearly emphasised that the Commission’s role with regards to the application of the CPS at the states and local governments levels shall be to promote and offer technical assistance to states in line with the objectives of the scheme.
She said it would therefore be contrary to constitutional provisions for the commission to enforce the provisions of the PRA 2014 on the states without recourse to the extant laws and prevailing economic limitations of the states at every material point in time.
“There positive correlation between performance of states under the Defined Benefits Scheme and the adoption of the CPS by states. Most states that were doing well in the payment of retirement benefits under the Defined Benefits Scheme were more favourably disposed to adopting the CPS and are doing better in its implementation than those who were not,” the PenCom boss said.
As a result of the constitutional limitations on PenCom therefore, the commission has continued to adopt the persuasive approach in its efforts at driving full implementation of the scheme at the states and local government levels.
However, as a mechanism of encouraging sub-national governments to adopt the contributory scheme PenCom has also banned Pension Fund Administrators (PFAs) from investing in the bonds of states yet to comply with the CPS.
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