Jonathan signs pension reform law

July 1, 2014 by Olalekan Adetayo, Abuja

President Goodluck Jonathan on Tuesday signed the Pension Reform Bill 2014 into law at the Presidential Villa, Abuja. The new law which is meant to continue to govern and regulate the administration of the uniform pension scheme for both public and private sectors in Nigeria repeals the Pension Reform Act, No.2, 2004. The Bill was passed into law by the Senate on June 3, 2014 and the House of Representatives on May 27, 2014. It was sent to the President on June 14, 2014.

The brief signing ceremony was witnessed by Vice President Namadi Sambo; Minister of Justice and Attorney-General of the Federation, Mr. Muhammed Adoke (SAN); Chairman of the National Pension Commission; and the commission’s acting Director-General, Chinelo Anohu-Amozu.

Parts of the highlights of the the new law is the power vested in PenCom to institute criminal proceedings against employers for persistent refusal to remit pension contributions. The 2014 Act empowers PenCom, subject to the fiat of the Attorney-General of the Federation, to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time. This was not provided for by the 2004 Act.

The new law also reviewed upward the penalties and sanctions having discovered that those provided under the old law were no longer sufficient deterrents against infractions of the law. There are also currently more sophisticated mode of diversion of pension assets, such as diversion and/or non-disclosure of interests and commissions accruable to pension fund assets, which were not addressed by the PRA 2004. Consequently, the Pension Reform Act 2014 has created new offences and provided for stiffer penalties that will serve as deterrence against mismanagement or diversion of pension funds assets under any guise. Operators who mismanage pension funds will be liable on conviction to not less than 10 years imprisonment or fine of an amount equal to three-times the amount so misappropriated or diverted or both imprisonment and fine.

The new law allowed PenCom to revoke the licence of erring pension operators but does not provide for other interim remedial measures that may be taken by PenCom to resolve identified challenges in licensed operators. Accordingly, the Pension Reform Act 2014 now empowers PenCom to take proactive corrective measures on licensed operators whose situations, actions or inactions jeopardise the safety of pension assets. This provision further fortifies the pension assets against mismanagement and/or systemic risks.

The Act also makes provisions for the repositioning of the Pension Transition Arrangement Directorate to ensure greater efficiency and accountability in the administration of the Defined Benefits Scheme in the federal public service such that payment of pensions would be made directly into pensioners’ bank accounts in line with the current policy of the Federal Government.

On the utilization of pension funds for national development, the new law makes provisions that will enable the creation of additional permissible investment instruments to accommodate initiatives for national development, such as investment in the real sector, including infrastructure and real estate development. This is provided without compromising the paramount principle of ensuring the safety of pension fund assets.

The Act expanded the coverage of the Contributory Pension Scheme in the private sector organizations with three employees and above, in line with the drive towards informal sector participation.

It also reviewed upwards, the minimum rate of Pension Contribution from 15% to 18% of monthly emolument, where 8% will be contributed by employee and 10% by the employer. This is aimed at providing additional benefits to workers’ Retirement Savings Accounts and thereby enhance their monthly pension benefits at retirement.

The Pension Reform Act 2014 has also reduced the waiting period for accessing benefits in the event of loss of job by employees from six months to four months. This is done in order to identify with the yearning of contributors and labour.

The new law also makes provision that would compel an employer to open a Temporary Retirement Savings Account on behalf of an employee that failed to open an RSA within three months of assumption of duty. This was not required under 2004 Act. Above all, the Pension Reform Act 2014 has consolidated earlier amendments to the 2004 Act, which were passed by the National Assembly.