PenCom faults National Assembly bill on 75% retirement funds

The National Pension Commission (PenCom) has faulted the Pension Reform Amendment Bill, being debated in the national assembly, for proposing at least 75 percent lump sum to retiring workers.

The bill is seeking a one time payment of 75 percent to retirees from the Contributory Pension Scheme (CPS), leaving 25 percent to cater for their old age – PenCom said this contradicts the requirement of Section 173 of the 1999 Constitution.

The director-general of the commission, Aisha Dahir-Umar, on Monday, made this known during her presentation at a public hearing on the Bill for an Act to amend Section 1(c) and Section 7(2) of the Pension Reform Act 2014, NAN reported.

Dahir-Umar said, “It is inaccurate to suggest that there is a fixed lump sum for all retirees; rather the lump sum is determined after securing a minimum replacement ratio of 50 per cent of last pay as monthly pensions.”

She further stated that the, “suggestion also converts the CPS into a Provident Fund and leaves such a retiree with no periodic pensions, contrary to the requirement of Section 173 of the 1999 Constitution.

“It is doubtful if the 25 per cent balance in a retiree’s RSA, after deduction of 75 per cent lump sum would be adequate to reasonably cater for his livelihood in old age.

“It is important to note that the payment of 75 per cent of RSA balance as a lump sum upon retirement is not obtainable in other jurisdictions operating the CPS.

“This is due to its resultant effect of rolling back the principal objectives of the CPS. The objective seeks to provide a pool of pension funds that are invested for the benefit of retirees throughout their retirement life and not just immediately upon retirement.”

According to Dahir-Umar, if the national assembly wants a lump sum for retirees, she said additional benefits upon retirement is provided for in Section 4(4) (a) of the PRA, 2014.

Read also: Public sector contributed N107.7bn to Nigeria’s pension scheme in Q4 2021 – PenCom

“It provides that “notwithstanding any of the provisions of this Act, an employer may agree on payment of additional benefits to the employee upon retirement,” she added.

“Through this provision, employers may establish Gratuity or End of Service Benefit Schemes that are to be managed by licensed Pension Funds Administrators for the exclusive benefit of employees at retirement.

“These funds are usually separate from the RSA balances of employees and are paid directly to them at retirement.

“Ultimately, this would considerably enhance the amount available to employees as retirement benefits.” Dahir-Umar said.

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