A gaping N41bn hole may be created in the 2016 budget, following appropriation of N50 billion in the budget for payment of Federal Government Employees’ accrued retirement benefits, against N91 billion required to fund the scheme called Retirement Benefits Bonds Redemption Fund (RBBRF) Account, reports have revealed.

The shortfall, if allowed to subsist and get passed into law in this year’s appropriation bill, would mean government compounding the plight of more retirees who would be unable to access their retirement benefits, having already an unremitted accrued benefits right of N20 billion for 2015.

The affected retirees are Federal Government employees who had four years or more to retire at the Commencement of the Contributory Pension Scheme (CPS), but had been part of the old pension scheme (Defined Benefit Scheme).

The Pension Reform Law mandates the Federal Government to set aside five percent of its total monthly wage into a retirement savings bond account so that upon the retirement of the affected individuals, this bond will be redeemed and then paid.

Section 15(1) (a) (b) of 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) who confirmed the development during an interaction with journalists in Lagos, said it’s a worrisome development, pointing out that the process has been smooth until last year, when the economy started facing serious difficulties.

“The free-fall in oil prices, our major revenue and its attendant impact on Federal Government revenue, beginning from last year, affected government remittances.”

“This has been going well until the past year when there was a clear shortage in the funds because a lot of the country’s budget is dependent on oil revenue and the slump in oil revenue is affecting everybody across nations. This is the first time there has been a difficulty in meeting this accrued benefit.

“It is not as if the government is not willing, but it has been affected by the situation in our economy”.

Anohu-Amazu, however stated that government must do everything it can to meet this obligation, as not giving retiress access to their pension benefits as at when due, would undermine the achievements of the scheme.

Government had embarked on bailouts for payment of salaries, pensions should be given similar priority and even if it will require taking loans to close the hole, it is worth the effort, the DG stated.

She noted that PenCom would continue to engage with the government and through advocacy, ensure that something is done as quickly as possible.

The Director General had 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.

“This is the issue, and the PFA’s saddled with managing RSA under the CPS are unable to 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.”

The Pension Fund Operators Association of Nigeria (PenOp) recently said the CPS has been working perfectly, but the delayed accrued rights payment by government is dragging the shadow of the old scheme into the new scheme; making it look ineffective.”

http://www.financialwatchngr.com/2016/02/22/2016-budget-fails-to-cover-n41bn-hole-in-fg-retirees-pensions/