New retirees in the public service of Nigeria over the last eight months will experience delays in accessing their pension benefits from Pension Fund Administrators (PFA’s), following the Federal Government’s failure to redeem its Retirement Benefit Bond (RBD), BusinessDay investigations reveal.
Affected retirees will be those who left the service beginning from February 2015, as the failure to fund the RBD, a responsibility of the Federal Government, has created a gap in excess of N30 billion, according to industry sources.
The implication is that this set of retirees will not be able to access their pensions from the PFAs for now, as it would require adding their accruals accumulated from the old pension scheme (Defined Benefit Scheme), under Federal Government RBD.
Section 15(1)(a)(b) of the Pension Reform Act (PRA) 2014 states that the transfer entitlement (the accrued rights to retirement benefit) for any non-exempted public service employees who had been under any unfunded DB pension scheme existing before the commencement of PRA 2004,shall be recognised in the form of a bond to be known as Federal Government or Federal Capital Territory Retirement Benefits Bonds(RBB) issued by the Debt Management Office (DMO).
Chinelo Anohu-Amazu, director-general, National Pension Commission (PenCom) said the retirees being owed now are simply those who have a history of pension entitlements from the public sector, being their accrued right from the DBS.
“It is not the PFAs that don’t have money to pay. I think I have to make this clear”, she said.
Anohu-Amazu informed that at the beginning of the reform, there was a cut off date and those who had three or less years to go didn’t have to join the scheme, while those who had four or more years to go, joined the new scheme. “Already, they were mid way into their careers, and so, had some rights due them. So the law says, those rights are to be computed as though they had retired in 2004 and then converted as bond to be redeemed at the time of their retirement.”
She stated that the law also mandated the Federal Government to set aside a percentage of its total monthly wage into a retirement savings bond account, so that upon the retirement of the affected individuals, this bond would be redeemed and then paid.
According to her, this has been going on until the past year, when there was a clear shortage in the funds because a lot of the country’s budget is dependent on the oil revenue, and the slump in oil revenue.
She said, “So, this is the first time there has been difficulty in meeting this accrued benefit. This is the issue, and the PFA’s saddled with managing RSA under the CPS are unable pay, because the payment schedule says they will need to add both the accrued rights and the contributions together, so that there will be agreement on whether it is for lump sum, programmed withdrawal or it’s for annuity. It will have to be a totality of what is due you, otherwise, it will not be a realistic payment.”
She however observed that President Muhammadu Buhari during a recent meeting with the commission, immediately directed both the Ministry of Finance and the Central Bank of Nigeria (CBN) to ensure that in the face of dwindling resources, the welfare of pensioners is accorded priority and money is made available to settle the accrued rights.
Pius Apere, an actuary, and deputy managing director, Linkage Assurance plc, concerned about this challenge, said the bond redemption value (amount acknowledged through the issuance of a bond) as at commencement date and the methodology in calculating this value are not clearly specified in the PRA 2014.
“This transitional cost (the bond redemption value) will not represent a fair value for the employees if the transitional cost is less than the actuarially calculated value of the employees’ accrued rights under the existing DB scheme.” However, I presume that an actuarial advice would have been sought before the issuance of the RBB.
A managing director in one of the PFAs said this is a serious problem because it could rob the industry of its esteem because many people do not understand that there was a transition and they assume it is the PFAs.
I do hope that the president will act quickly to make sure that the image of the growing pension industry is not brought to question as result of not funding their own part of the scheme. It is also not good, so that some private sector people do not use this as reason for not complying, the CEO observed.
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