Four Years of Pension Reforms

Some four years ago, exactly on June 24, 2004 the National Assembly enacted a law for the establishment of a contributory pension scheme for employees in the public and private sectors.
Set objectives of the scheme included: Ensuring that every person who worked in either the Public Service of the Federation, Federal Capital Territory or Private Sector receives his retirement benefits as and when due; assisting improvident individuals by ensuring that they save in order to cater for their livelihood during old age; and establishing a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the Public Service of the Federation, Federal Capital Territory and the Private Sector.
The law led to the establishment of the National Pension Commission (PENCOM) at a time when protesting retirees streamed along major highways especially in Abuja and when some other people, tired of tracking contributions they had made over the years gave up on it.
We believe dysfunctional pension administration has been a contributory factor to endemic corruption, particularly in the public service. In old age when body and spirit are worn-out, is the time people should fall back on all they have worked for. The fear of that scenario, we also believe, has been a reason for people to ask even in their official duties ‘what is in it for me?’ -- self-interest mentality that depletes productivity. As the Pension Act says, people should be facilitated to ‘save in order to cater for their livelihood during old age.’
Four years on, there are now 25 Pension Fund Administrators and four pension fund custodians, who collect contributions on behalf of the Administrators and take instruction from them on investing the fund. Over 31.4 people have accounts with the administrators and total pension funds is more than N970 billion.
While PENCOM is playing a key role in streamlining pension administration in Federal Government parastatals through a unified pension scheme, it is promoting the participation of states and local governments. So far, 10 states have passed their bills into law and started implementing the Contributory Pension Scheme in their States, 21 State Governments are at various levels of passing the bills into laws and 5 States are yet to commence action.
These are remarkable achievements for a commission that operates from only one office in Abuja. We are aware that in Nigeria, most people do not think about pension until they are close to retirement, but this should be one of the major tasks of PENCOM. It should embark on an enlightenment campaign to encourage people to embrace the new schemes. PENCOM should give this as much attention as it is currently giving the reconciliation of the accounts of people who have made various contributions in the past.
Considering the population of Nigeria and the fact that advertisements run by the fund administrators contribute to public enlightenment, we are persuaded to believe that there is need for more administrators. For the Commission to do this, it has to expand rapidly by establishing offices in all state capitals. This will help them monitor the administrators, and also ease the logistics problem caused by doing business with only one office.
We are also persuaded in joining call for an upward review of the 25 percent limit on the pension assets pension fund administrators can invest in the stock market in Nigeria. Growing the stock market is in the best interest of all Nigerians, including the contributors to the fund. Pension assets are suitable for this kind of long-term investment, which takes care of short-term volatility.
All said, we commend PENCOM and indeed the Federal Government for sanitizing the chaotic pension administration we have witnessed in the past. We are, however, appalled by the small number of state governments which have embraced the scheme and only wish that PENCOM will continue to encourage some of these leaders who think very little about the governed.