PenCom in the Eyes of Pension Reform Act of 2004

Pension funds by their very nature can, in some cases, tempt even an angel. And that is why its administration demands from those charged with the responsibility of ensuring an effective and efficient managing the funds an unimpeachable integrity, transparency and accountability, proactive in terms of being hands on in a practical manner, responsiveness as it relates to promptness and sensitivity.

Before the enactment of the Pension Reform Act 2004, pension schemes in Nigeria, without prejudice to the system in place at that time, had their own share of challenges that made its management open to undue manipulation.

The Public Service, pre-2004, operated an unfunded defined benefits scheme and the payment of retirement benefits were budgeted annually.

Then, beneficiaries hardly made any contribution to what they expected to get at the end of the day.

Since it was dependent on annual budgetary allocation, it was one of the most vulnerable items in budget implementation in the light of resource constraints.

In many cases, even where budgetary provisions were made, inadequate and untimely release of funds resulted in delays and accumulation of arrears of payment of pension rights. The situation was worse in the private sector.

The reform of 2004, then was designed to ensure that every person who worked in either the public service of the federation, the federal capital territory or private sector receives his retirement benefits as and when due.

The Act mandated the commission to assist individuals by ensuring that they save to cater for their livelihood during old age and thereby reducing old age poverty; ensure that pensioners are not subjected to untold suffering due to inefficient and cumbersome process of pension payment; establish a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the public service of the federation, the federal capital territory and the private sector; and stem the growth of outstanding pension liabilities.

To carry out these functions, it became inevitable that the reform programme primarily was guided by principles that are inexorable with regard to sustainability, safety and security of benefits, transparency, accountability, equity, flexibility, inclusivity, uniformity and practicability.

In its application, the Pension Reform provides a robust legal and institutional framework for the administration of pensions in Nigeria and to that extent, has devised transparent processes in the operations of the Commission in their relationship with the pension fund administrators (PFAs) in the retirement benefits payment process, enforcement of compliance with the provisions of the Pension Reform Act (PRA) 2014 as well as other operations of the industry.

A major component of the reform programme is the Contributory Pension Scheme (CPS) made by made by the PFAs strictly from the retirement savings accounts (RSA) of pension contributors.

The RSA, in accordance with the legal instrument under guarding the reform itself, has three basic aspects vis, the monthly pension contributions; the returns on investment earned for the contributors by the PFAs; and the retirement benefits that accrued under the defunct defined benefits scheme.

The regulations on the administration of retirement and terminal benefits demand that the three aspects of the retirement benefit must be consolidated in the RSA before any payment is made by the PFA.

Accordingly, payments of retirement benefits are made promptly into the bank accounts of the retirees, except for cases where the employer delays in the release of funds to pay the accrued rights component of the retiree’s benefits.

In the event that a retiree does not have ac- crued rights, the retirement benefits are based on the monthly contributions and returns on investment.

PenCom exists for the effective regulation and supervision of the Nigerian Pension Industry to ensure that retirement benefits are paid as and when due.

In the performance of its statutory mandate, the Commission also issues compliance certificate to organisations wishing to bid for contracts with federal government institutions in compliance with extant laws and in particular, the Public Procurement Act 2007.

Furthermore, as it is the case with all institutions, the Commission engages vendors and services providers from time to time. In addition to the legal safeguards and institutional checks and balances of the CPS, the Commission, as the regulator of all pension matters in Nigeria, has entrenched good corporate governance practices, high ethical standards and zero tolerance to any form of malpractice in the conduct of its staff and the PFAs that manage the pension assets.

In the enforcement of its commitment to integrity in the services it provides to the public, neither the management nor staff of the commission entertain any forms of gratification in order to facilitate payment of retirement benefits, issuance of compliance certificates and engagement of vendors and service providers. The commission prides itself as an institution that is obligated to the principles that define its existence.

It is on the basis of this that it reminds members of the public, particularly pensioners and pension contributors, therefore, that no financial or other form of inducement is expected from them in their dealings with the commission and its staff to facilitate payment of retirement benefits, issuance of Compliance Certificate or engagement as vendor or service provider.