Private Pension Fund Managers Should Be Removed From The Pension System In Nigeria -By Eugene Uduigwome

One of the reasons for the removal of fuel subsidy in Nigeria is that fuel subsidy has made some individuals very rich, while majority of Nigerians are not benefiting from fuel subsidy.

The same thing can also be observed in the prevailing pension system in Nigeria managed by private Pension fund managers, which has made owners of big companies and pension fund managers stupendously rich, while workers and retirees who are the owners of pension funds are impoverished.

Pension fund companies make their own huge profits from the contributions of workers, without a corresponding growth on the retirement savings accounts (RSA) of workers and retirees.

When the Pension Reform Act came into effect in 2004, political office holders and few public servants were exempted from the scheme, all other public officers were railroaded into the scheme. The basic objective of the Pension Reform Act of 2004 and the Amended Act of 2014, is that retirement benefits will be paid as and when due.

However, up till date the objectives of the reform have not been fully met. In Nigeria today, public retirees wait for more than fifteen months before getting their retirement benefits, whereas, under the Defined Benefit System (DBS), some retirees obtained their retirement benefits less than three months after retirement.

The federal government and some state government also had a policy under DBS system that ensured the placement of retirees on monthly pension immediately after retirement, while awaiting the payment of their gratuity. Under the current pension reform act, all new public service retirees do not get either lump sum of monthly pension until more than fifteen months after retirement.

Federal public servants who retired since April 2022 up till date have not been paid their entitlements, whereas banks and big companies are busy trading with their contributions and pension fund companies are unfailingly deducting their fees and commissions from this group of retirees who have not been paid their entitlements.

Can the Pension Reform Act which has caused pension disparity and inequality be termed a good law? DBS pensioners who retired with lower terminal salaries receive higher monthly pension than contributory pensioners who retired with higher terminal salaries.

Minimum Pension Guarantee (MPG) provided for in the pension reform act have not been implemented since 2007. In the absence of MPG, many public service retirees have exited the contributory pension system prematurely.
Contributory public retirees have been denied the payment of their pension rights as contained in Section 173(3) of the Constitution of the Federal Republic of Nigeria 1999 (as Amended). Is the pension reform act actually meant for the welfare of workers and retirees in Nigeria? Or to provide capital for big businesses?

The Pension Reform Act of 2004 and the Amended Reform Act of 2014 has certainly created opportunities for banks, owners of big companies and pension fund companies to have access to a veritable source of virtually free public funds (pension funds) to ply their trade.

They are all making huge profits, smiling to the banks daily and living luxuriously with workers contributions, while workers and retirees are impoverished and groaning.

Public Service International (PSI) Secretary General in reaction to a book on pension privatization published by International Labour Organisation (ILO) remarked that the book “Starkly reveals the hypocrisy of pension privatization, which have basically institutionalized the theft of workers wages, it shows the moral bankruptcy of the neoliberals who new exactly what they were doing. One can only feel outrage when reading the conclusions. But one also feels hope that good sense will prevail, and that the remaining countries with privatized pensions will take them back under public management – as is increasingly the case in water, energy, transport, health and other key public services” source: (ILO study reveals bankruptcy of pension privatization).

According to PENCOM, pension assets in Nigeria as at the end of June 2023 was N16.76 trillion. With the ever increasing assets in a system that delivers low benefits, have public service retirees really benefited from the pension assets? In the last pension enhancement carried out by PENCOM which was well publicized, how much was paid to public service retirees? More than fifty percent (50%) of public retirees were paid less than one thousand Naira (N1000) each as enhancement.

Can PENCOM reveal how much pension fund companies have made as their own profit cumulatively from the contributions of Nigerian workers since 2004?

Today the federal government is grappling with the payment of accrued pension rights, which is the reason why public retirees who retired from April 2022 till date have not been paid. These retirees have now been plunged into misery despite having million of naira of their own contributions in their retirement savings account, which they cannot assess due to an obnoxious clause in the Pension Reform Act, which does not permit them to touch a dine in their accounts until the federal government pays the accrued rights.

If the federal government had exempted from the contributory pension scheme, public servants who were in service before the reform act came into effect, the implications of paying accrued rights could have been avoided.

Many countries who previously embraced the privatized pension system after observing the low benefits that the system delivers, coupled with the fact that the system only benefit companies, have since rejigged their pension system. Most of the countries have reversed their pension system to public management.

Due to consistent protests and strikes in Chile spearheaded by the orgainsed labour who demanded the abolishment of the privatized pension system in Chile, Mr. Gabriel Boric made a campaign promise to dismantle the privatized pension system in Chile if elected as president. In fulfillment of his campaign promise, President Boric has sent a proposal for the reform of privatized pension system to Parliament. He declared that in his proposal “Pension fund administrators are finished”.

Why is Nigeria still retaining a pension system that has been criticized and rejected in so many countries, including Chile the progenitor of privatized pension system.

Kudos to members of the 9th National Assembly in Nigeria for ensuring the passage of the bills to exempt Nigerian Police Force and staff of the National Assembly from the contributory pension scheme. Members of the 10th Assembly should please help to fine-tune and complete the good works that the 9th Assembly has started by emancipating public workers and retirees remaining in the privatized scheme from the shackles of pension fund managers.

Pension fund managers should be removed from the contributory pension system, they are the albatross in the system due to the huge profits they make which eats deep into the savings of contributors. Removing them will certainly bring respite and the clamour to exit the contributory pension system will cease.
Active public servants in Nigeria observing how their colleagues who have retired under the reform act are been unfairly treated as if they are second class retirees, may now be looking forward to retirement with some trepidations.

DBS retirees in Nigeria who are now been treated with dignity and like first class pensioners, for them rest is truly sweet after labour, thanks to the management of Pension Transitional Arrangement Directorate (PTAD) that has ensured the prompt payment of monthly pension to DBS pensioners.

PTAD has also paid all approved pension increases to DBS retirees in compliance with the provisions in Section 173(3) of the constitution of the Federal Republic of Nigeria 1999 (as amended), a feat that PENCOM has not been able to accomplish.

Those managing the affairs in PTAD are not from the private sector, they are all civil servants and the excellent and commendable service delivery from PTAD, clearly indicates that unlike in the past, contributory public retirees can also be effectively paid by a public managed pension office. Therefore, Nigeria should emulate other countries who have eliminated private pension fund managers from their pension system.

Nigeria can adopt the guidelines that International Labour Organisation has recommended for countries wishing to reverse their privatized pension system to public management.

If the present brutal and iniquitous privatized pension system is allowed to prevail, will public servants truly comply with their code of ethics?

Eugene Uduigwome
genecandid@gmail.com