Let us attempt to demystify some of the mysteries surrounding the contributory pension scheme which came on board by an act to repeal the pension act No. 2, 2004 and enact the pension reform act 2014, which made provision for a uniform contributory pension scheme for public and private sectors in Nigeria; and for related matters on the 1st day of July, 2014. Majorly, the Defined Benefits Scheme (The old pension scheme) witnessed so many challenges, one of which was the fact that it was unfunded and solely budget based. This gave way to the Contributory Pension System (The new pension system), which is funded by the employer (Minimum 10%) and the employee (8%) in line with the pension law of the Federal Republic of Nigeria as enshrined in Section 4(1) of the PRA as amended 2014. The new scheme was too make way for a more effective, efficient and quick pension payment; fifteen years down the line, where are we?

Without much ado, it is pertinent to look at some of the provisions of the PRA 2014 (As amended) so as to be able to match the with your rights, duties and obligations. Section 7 of the PRA explains how you can access your terminal benefits. Section 7(1a) defines the limits of the lump sum you are entitled to, while the Programmed Withdrawal option, offered by the Pension Fund Administrators is embedded in Section 7(1b) The Annuity for life option, which can be purchased from life insurance companies is captured in Section 7(1c). But note that this is subject to you attaining age 50 or upon your retirement. When you juxtapose Section 7 of the PRA with the Regulations for the Administration of Retirement and Terminal Benefits, Article 1.2.8 which says “A PFA shall advise a retiring employee of the features of its programmed withdrawal products, including the rates of return, and shall also advise the employee to obtain quotations from the insurance companies on annuity products”, you will realize that the Federal Government have good plans. They do not want you to make a decision without being exposed to options, so that your judgment can be sound, to a large extent. If you take it down to Article 1.2.9 of the same regulation, it says “A PFA shall not impose any option on the retiring employee or coerce…” The key word there is “coerce”. Which translated means “Persuade (an unwilling person) to do something by using force or threats.” By extension, be it the PFA or Insurance companies or their representatives, it is unethical and against internationally acceptable best practices in service delivery and excellence to play on the ignorance of employees who have labored all their life to serve their nation and companies to shield them from basic information that helps them make life long decisions. However, as a contributor, if you feel dissatisfied or confused, please visit any PenCom zonal offices around you for clarification.

Let us look at a situation where an employee dies in active service. Under the CPS, there is a life insurance maintained under Section 4(5) of the PRA, where the beneficiaries of the deceased contributor are entitled to the life insurance benefits under Section 57 of the Insurance Act. Please note that terms and conditions apply which is clearly stated in Section 8(2) of the PRA.

I want us to carefully read through this next lines. Do you know that Section 11(3a) mandates your employers to deduct at source your contribution and remit same not later than (7) days from when your salary is paid to the Pension Fund Custodian who warehouses the funds for your Pension Fund Administrator? It is when your PFA is notified by your PFC that they send you an acknowledgement text message or email as the case maybe. So, my question is, where you do not receive a text message or email acknowledgement, can we just safely assume that the money has been remitted but you are just yet to be notified? Let me leave you to answer this question while I close with Section 11(6) and I quote “An employer who fails to deduct or remit the contributions within the time stipulated in sub-section (3b) of this section shall, in addition to making remittance already due, be liable to a penalty to be stipulated by the Commission”. So, you see, like Bishop Oyedepo usually says “A closed mouth is a closed destiny”. Understanding the workings of the PRA is the first step towards maximizing the scheme and avoiding pension and retirement pitfalls, trust me they are innumerable.

Please understand that pension and retirement sensitization awareness should be a core in the fabric of our organization, ministry, department, agency, military or para-military formation. It is a disservice to think your employees only deserves this awareness few years to retirement. Retirement sensitization and planning should start from your first income or first day at work, not a few years to retirement. I feel duty bound to educate you, within the confines of the law, the same way I have travelled across Nigeria preaching the same gospel. Just that you know, retirement planning is for all even if you are self employed because one day either by retirement, resignation of retrenchment, you will be out of service but on what? Perhaps you are self employed, you will not work forever, so it is good to start understanding the how and start planting your cocoa now and reduce the focus on tomatoes. It is a wise person that keeps the pot of water filled during the “Now” rainy season against the dry season.
Till I come your way again with more lucid interpretation of the Pension Reform Act, that you may decide if it is a blessing or a curse, thank you for reading.

Babatunde Raimi
Pension & Retirement Advisor
*Author:* Planning Your Retirement & Beyond Salary
08178827380 & 08035063895

The contributory pension scheme is a blessing but yet to manifest until the defined benefit is completely faced out