July 25, (THEWILL) – Notwithstanding the glowing encomiums passed on Nigeria’s reformed Contributory Pension Scheme (CPS) by experts and stakeholders, a recent survey by this newspaper has revealed that 63 percent of those contributing to the scheme are unhappy with it.
Although they commend the initiative that gave birth to the scheme 17 years ago, during the former President Olusegun Obasanjo-led government in 2004, majority of the concerned contributors lament over a deficiency in the scheme which they consider critical to their life after retirement – paltry pension receipts.
THEWILL had on April 6, 2021, embarked on a satisfaction survey to determine the level of contentment haboured by Nigerians who contribute to the scheme and also identify the key area/s of improvement. The three-month survey which ended on June 30, 2021, sampled a population of 5,620 members of the CPS in the six geo-political zones and the Federal Capital Territory (FCT).
The survey was conducted through face-to-face interviews, telephone, WhatsApp and SMS messages, e-mail and telegram channels. THEWILL detailed a total of 15 field investigators for the exercise. Five key questions were posed in which respondents were requested to rank their answers on a scale of 1- 5; 1 being the lowest or least impactful while 5 is the highest or most impactful.
The survey questions bordered on general acceptance of the scheme, the level of employee/employer contributions, prompt payment of lump-sum, amount of spread monthly/quarterly pay and service of Pension Fund Administrators (PFA). Respondents were also asked to state three key areas of improvement opportunity in the scheme. The towns surveyed are Lagos (SW), Port Harcourt (SS), Owerri (SE), Kaduna (NW), Jos (NC), Bauchi (NE) and FCT Abuja. The bulk of the respondents came from Lagos and Abuja.
Of the total respondents, 3,540 representing 66.55 percent, are women; while 1,780 or 32.34 percent are men. They range from age brackets 50-70 years and have worked in both the private and public sectors.
A total of 3,352 respondents, representing 63 percent, expressed dissatisfaction over the monthly/quarterly pension which they largely considered as too “paltry and negligible” to make an impact on their lives. The surveyed respondents were reluctant to state the region of their total pension contribution at retirement even when their names were not required. “This should be kept secret because this information could slip into the wrong hands, such as tax people and they begin to behave funny”, a Lagos respondent stated during a telephone interview.
Majority of the respondents deplore the “peanut” they receive as a monthly pension because it does not meet their basic needs in the present economic realities. They argue that their contributions are invested by the PFAs to earn them huge returns for their owners and their workers while those that created the money are left with a little amount. They describe this as a fly in the ointment of the pension scheme.
Section 7(1)(a) of the Pension Reform Act (PRA) 2014 allows for 25 percent lump sum to be paid to a retiree (above 50 years) provided that the amount left after the lump sum withdrawal will be sufficient to fund a programmed withdrawal or annuity over the expected lifespan. The total pension contribution attracts a 5 percent or more investment yield. Thus, a contributor whose total contribution plus yield is N5 million, would be left with 3,750,000 after the lump sum withdrawal of N1,250,000. The 10 years spread earns a contributor about N20,000 per month or N60,000 per quarter.
Many of the respondents earn about N10,000; some earn between N5,000 and N7,000 per month after the initial 25 percent lump sum. This applies mainly to those that retired on low salary and whose contributions are equally low.
“The whole system is beautiful on paper; but in practice it does not. What will N10,000 do for me? Though I have finished training my children; they are not earning enough income to sustain us. I still support them and their families financially. This is what I do not like about the scheme, the monthly take-home pay after the so-called lump-sum is nothing to write home about,” said a Jos respondent who retired from a federal government educational institution as a junior worker.
THEWILL findings revealed that inflation is wrecking severe havoc on the paltry pension proceeds of the retirees who are members of the CPS. The respondents in unison lamented the eroding effects of inflation on their pension which they had received in the past five years.
“Rising inflation has a corrosive impact on pension investment and on the actual pension payment; so it is a double tragedy”, said an RSA operator, Jude Anyachor. “It is still better than nothing. If the federal government can consider a cash payment of N5,000 or N10,000 as big money, a retiree who receives it regularly should be thankful”, Anyachor added in a telephone chat.
Fifty-five (55) percent of the respondents agree that the CPS is commendable , while 58 percent are not satisfied with the untimely payment of the lump-sum, especially those who retired from public service where the scheme has not fully taken place. Many states of the federation are yet to key into the CPS with the result that the traditional pension mess is further complicated for such individuals.
Over 70 percent of the respondents want improvement in the scheme by increasing the lump sum and allowing contributors access their contribution for specific projects, especially housing, even while in active service. Some countries operate this system and it has helped workers build their own house while in service without waiting for the retirement lump-sum which could be eroded by inflation or impacted by other negative effects.
Under the new Contributory Pension Scheme, the minimum rate of contribution for all employees in the private and public sector is 18% of the employee’s monthly emoluments with the employer contributing 10% and the employee 8%.
In the case of the military, the employer contributes 12.5% while the employee contributes 2.5%. Government contribution is funded through a charge on the Consolidated Revenue Fund of the Federation.
The CPS covers employees in the public service of the Federation, Federal Capital Territory, States, Local Governments and private sector organizations with 3 or more employees.
Unfortunately, the implementation of the new contributory pension scheme across the 36 States of the Federation and Abuja as at September 2020 according to a publication by the National Pension Commission (PenCom) is hardly encouraging as more than two thirds of States were yet to make significant record in the implementation of the new scheme in their States.
In April 2019, retirees, under the auspices of the Nigeria Union of Contributory Pensioners, petitioned the House of Representatives to lament the delayed and non-payment of pensions to beneficiaries under the current scheme.
In the memorandum submitted to the House of Representatives’ Ad Hoc Committee to Investigate the Activities of the National Pension Commission, the NUCP condemned the CPS as being administered by PenCom, while calling for a reversal to the old system.
The pensioners particularly blamed pension laws and PenCom’s policies, alleging that the scheme was created to enrich PFAs while earning pittance for the contributors.
At a recent forum, the 3rd Annual Pension Fund Operators Association of Nigeria and the National Assembly Joint Committee for Establishment and Public Service of the Senate and House of Representatives Committee on Pension in Lagos, the participants agreed to push for a review of the RPA to increase the lump-sum being paid to retirees.
“There was a consensus that the lump-sum amount should be reviewed to address issues of adequacy and address contributors’ agitations”, the forum said in a communique issued at the end of the meeting.
Nigeria’s Pension Fund assets stood at N12.34 trillion as at March 2021 with above 70 percent borrowed by the Federal Government to finance infrastructure.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
