Retirees pressure PFAs amid FG’s pension payment lapse
By Esther Agbo
Nigeria’s Pension Fund Administrators (PFAs) are facing increased pressure due to the federal government’s failure to disburse accrued pension rights to recent retirees.
The last pension payments were made in 2022 when the government released N13.89 billion covering a four-month period.
As a result, many federal employees who retired in 2022 and 2023 have yet to receive their pensions.
Retirees are demanding payments from their PFAs, but are being turned away because the government has not paid the accrued rights (the pension benefits that employees of the federal government’s treasury-funded Ministries, Departments and Agencies, MDAs, are entitled to), which are pension benefits owed for service years prior to the Contributory Pension Scheme (CPS) that began in 2004.
The CEO of Nigerian University Pension Management Company Limited (NUPEMCO), Ugwu Oluwakemi, explained that PFAs are unable to process retirement benefits immediately due to these unpaid accrued rights.
“Despite the balances in the Retirement Savings Account (RSA) of the retirees, the PFAs are unable to pay because of Section 2.3 of the Revised Regulation on the Administration of Retirement/Terminal Benefits.”
This section mandates that RSAs include accrued pension rights for pre-CPS employees, along with other contributions and returns on investment.
However, lack of awareness among retirees about this regulation has led to misconceptions that PFAs are deliberately withholding payments, which has tarnished the industry’s reputation. This delay has severe consequences, including preventable deaths among retirees who cannot afford healthcare during the waiting period, especially affecting university professors who retire at 70.
Oluwakemi warned that prolonged delays could lead to increased crime rates as affected families struggle financially.
She said, “This is very obvious in the university system where professors retire at 70 years. Life expectancy in Nigeria is less than 70 years, which means they have cheated death. Yet, they wait for an average of one year before they access their funds. This is very pathetic.
“One of the major purposes of the CPS is to ensure that retirees are paid as at when due, and if retirees have to wait for an average of one year to be paid, then this purpose is defeated.”
A U.S.-based pensions expert, Matthew Ike, added that insulating the entire pensions industry from government excesses through legislation is crucial.
“It is important to have legislation that mandates all entities to pay their contributions conformably. It won’t matter whether you are a government or the private sector. Any failure must attract some sanctions,” he said.
The House of Representatives Pensions Committee member, Olumide Lateef, emphasised the need to resolve issues surrounding accrued pension rights to ensure the scheme’s success.
“We have to make sure that issues around pensions’ accrued rights are resolved to ensure success of the scheme.”
“What we must fight for at the National Assembly this time is that when people retire they have access to their pensions,” he stated at a recent retreat by the Pension Fund Operators Association of Nigeria.
The CEO of Nigerian University Pension Management Company Limited (NUPEMCO) suggests that the government should create a dedicated pension reserve fund specifically for accrued rights payments to address the current pension crisis. This fund should be protected from other budgetary constraints and priorities.
She recommended sourcing sustainable and diverse funding for this reserve, such as allocating a portion of tax revenues, investment income, or implementing special levies.
Additionally, she proposed the introduction of special taxes or levies dedicated to pension funding and the passage of legislation mandating regular contributions to the pension reserve fund. This legislation should include clear guidelines for managing and disbursing pension funds.
Oluwakemi also emphasised the need for multi-year budgeting practices to better forecast and allocate funds for pension obligations over several fiscal years, ensuring that budget allocations for pension payments are secure.
She advocated for amending existing regulations to allow for more flexible and efficient consolidation processes, including setting specific timeframes for each stage to ensure accountability.
“This can include setting specific timeframes for each stage of the consolidation process to ensure accountability.
“Establish a joint task force comprising representatives from PFAs, PenCom, and relevant government agencies to monitor and resolve issues related to RSA consolidation and the timely disbursement of retirement benefits. Also, float a five-year bond specifically to cater for the employees who would retire in five years, and this will be repeated every five years.”
