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Economy & Politics

PenCom releases guidelines on voluntary contribution under the contributory pension scheme

The National Pension Commission (PenCom) recently released guidelines (the Guidelines) to provide clarity on voluntary contributions (VCs) under the Contributory Pension Scheme (CPS).

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The National Pension Commission (PenCom) recently released guidelines (the Guidelines) to provide clarity on voluntary contributions (VCs) under the Contributory Pension Scheme (CPS).

The guidelines are coming on the heels of PenCom’s circular of 16 November 2017 to all Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) on “Withdrawals from voluntary contributions”.

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One of the key objectives of the Guidelines is to establish a uniform set of rules for the operation of VCs as well as define eligibility criteria for participation. The Guidelines apply to all voluntary contributions and shall also apply retrospectively. Key highlights of the Guidelines are provided below:

Eligibility

According to the Guidelines, the following persons shall be eligible to make VCs:

  1. Any employee in an organization with three or more employees
  2. Any worker or retiree in an organization that operates a Closed Pension Fund Administration and employed prior to June 2014, and employees/retirees in an organization with Approved Existing Scheme
  3. Any person who retired or disengaged, or whose employment was terminated and is currently receiving pension under the CPS, but secures another employment on contract basis
  4. Any retiree under the defunct Defined Benefit Scheme, who secures another contract employment
  5. Judicial officers, members of the Armed Forces and the Intelligence and the Secret Services of Nigeria
  6. Persons appointed by the President, State Government and elected officers to hold office for a stipulated tenure and who are not career civil servants
  7. Any foreigner residing and working in the formal sector in Nigeria.

General rules

Eligible contributors who wish to make VCs are required to notify their employers in writing, of intentions to make VCs and the amount to be deducted from their emoluments. In addition, VCs are to be made from an employee’s legitimate income, and shall be restricted to one-third of the employee’s monthly salary as stipulated in the Labour Act, 1990.

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The amounts so deducted as VCs are required to be remitted through an employer into a duly registered retirement savings account (RSA). VCs shall only be made once a month and all VCs are required to be made in Naira. PFCs are to report VC in excess of five million naira (₦5,000,000) in line with the Money Laundering Act (MLA) 2011 and Nigerian Drug Law Enforcement Agency (NDLEA) requirement.

Penalty for failure to deduct or remit VCs within the stipulated timeline remains at a minimum of 2% of the total unremitted contribution for each month or part of each month the default continues.

Active or mandatory contributors shall have 50% of their VCs available for withdrawal, provided the VCs are retained in the RSA for a minimum of 2 years before access. This implies that such contributors are entitled to withdraw 50% of their VCs once every two years from the date of last withdrawal.

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The balance of 50% shall be fixed and will only become available for withdrawal, on the date of retirement of contributors. In order to ensure accuracy and fairness, the PFA shall be required to ascertain and verify the portion of contributions that qualify for withdrawal based on the 2-year rule, before withdrawal by an applicant. For the purpose of determining the portion of contributions that qualify for withdrawal, the first date of pension contributions into the RSA shall be the date for counting period for the two years’ maturity.

Exemption

The 2-year rule for retention in RSA before access shall not apply to persons mentioned in (3) to (7) under eligibility above. Such persons shall have their VCs retained in their RSAs and shall only have access to their contributions at the expiration or termination of their contracts.

Tax implications

  • Income accruing on VCs are taxable, where the withdrawal is made before the end of five (5) years from the date the VC was made. This is in line with Section 10(4) of the Pension Reform Act 2014
  • For persons mentioned in (3) to (7) under eligibility above, tax deductions in respect of VCs is based on both principal amount and income earned, where withdrawals are made in less than 5 years from the date of contribution
  • PFCs are required to remit all tax deducted to the relevant tax authorities within 21 days following the end of month of deduction. PFCs are also required to render returns of such remittances to PenCom twice yearly.

It is hoped that upon full implementation of the Guidelines, Nigeria will have a pension system that is sustainable and has the capacity to achieve the ultimate goal of providing a stable, predictable and adequate source of retirement income for each employee in Nigeria. With the clarity provided, it is hoped that the objective of ensuring VC withdrawals are not abused, will be achieved. Further, it is expected that Joint Tax Board will release similar circular validating the position of PenCom especially as it relates to categories of persons covered in (3) to (7) under eligibility.

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Please click here to download the Guidelines.

Patricia

Visit our blog to keep yourself abreast of business alerts, subject matter expert perspectives and so on. This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.

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Economy & Politics

FG inuagurates 2nd National Voluntary Review Report on SDGs

The report enables member countries to exchange experiences and knowledge on Sustainable Development.

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FG inuagurates 2nd National Voluntary Review Report on SDGs

Federal Government has inaugurated the second National Voluntary Review Report on Sustainable Development GoalsThis was disclosed by the Senior Special Assistant to the President on Sustainable Development Goals, Mrs Adejoke Orelope-Adefulire on Tuesday. 

The report was launched after a virtual presentation session of the High-Level Political Forum of the United Nations (UN). 

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Meanwhile, the UN had offered to assist the Nigerian Government to realize its developmental aspirations most especially those related to the SDGs. 

READ ALSO: New tech opportunities amid COVID-19 crisis

The UN Resident Coordinator in Nigeria Edward Kallonhad explained that he visited Nigeria to explore better ways of collaboration between the two agencies in line with the recent reforms going on in the UN, which are being driven by Amina Mohammed, the Deputy UN Secretary-General. 

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According to him, UN is looking for innovative ways to come up with a robust collaboration framework that will foster a more solid and workable partnership by way of creating a platform for Nigeria to leverage on and support its developmental aspirations most especially, the implementation of the SDGs. 

Why it mattersThe report enables member countries to exchange experiences and knowledge on Sustainable Development. It would feature Nigeria’s most important priorities as it is nearly impossible to achieve all SDG’s because of the limited economic challenges. 

READ MORE: $600 million needed to achieve SDGs in Sub-Saharan Africa  

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According to Orelope-Adefulire, the goals prioritized by the governments were no poverty, health and wellbeing, education, economic growth, security & peace and partnerships. 

She said, “Poverty is more than the lack of income and resources to ensure a sustainable livelihood. Its manifestations include hunger and malnutrition, limited access to education and other basic services, social discrimination and exclusion as well as the lack of participation in decision-making. Economic growth must be inclusive to provide sustainable jobs and promote equality. 

“Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Job opportunities and decent working conditions are also required for the whole working-age population.”

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She added that the agency would prioritise seven goals and reached out to the private sector, women organisations, CSOs, youth groups, academia and people living with disabilities; finding out from them what needs to be done. 

 

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Economy & Politics

Just-in: FG kickstarts its 774,000 jobs SPW initiative as Buhari backs Keyamo

The initiative plans to employ 1,000 persons from each of the 774 LGA in the country.

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FG kickstarts its 774,000 jobs SPW initiative as Buhari backs Keyamo, FG urges DStv, MTN, others to offer free subscription, airtime, data to Nigerians

Despite the opposition from members of the National Assembly, the Federal Government have formally kick-started the Special Public Works (SPW) programme, which was designed to create 774,000 jobs across the nation, with the inauguration of the State Selection Committees.

This was disclosed in a tweet post by the Federal Government on its official Twitter handle on Tuesday, July 14, 2020.

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In the tweet post, the Federal Government said, ‘’The Special Public Works Programme of the Federal Government has kicked off nationwide. The State Selection Committees have been inaugurated and have commenced work. Find the names and contact details of members of your State’s Committee here.’’

The National Assembly had earlier called for the suspension of the programme, following disagreement and altercations with the Minister of State for Labour and Employment, Festus Keyamo, over the operations and processes of the programme.

READ ALSO: FRAUD: FG uncovers N62.555 billion unaccounted for in NSITF

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This programme, which is coordinated by the ministry of labour and employment, was part of the federal government’s intervention programmes and fiscal stimulus measures to help cushion the negative impact of the coronavirus pandemic on Nigerians.

The initiative which is expected to start on October 1, 2020, plans to employ 1,000 persons from each of the 774 local government areas in the country. Each of the beneficiaries of the programme will be paid N20,000 monthly to carry out public works.

READ ALSO: 4.48 million beneficiaries apply for N-Power jobs in 16 days

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The implementation agency for the programme is the National Directorate of Employment (NDE).

The Minister of State for Labour and Productivity, Festus Keyamo, while performing the virtual inauguration in a joint address with the Director-General of NDE, Nasir Ladan Argungu, disclosed that an inter-ministerial committee drawn from 8 ministries and headed by the NDE recommended the setting up of states’ selection committees to identify and recruit those to be engaged under the programme

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It can be recalled that Keyamo, has been at loggerheads with the federal lawmakers over the implementation of the SPW programme. The lawmakers had insisted that the Minister must seek their inputs before going ahead with the constitution of the 20 man states selection committees. They also accused Keyamo of trying to hijack the programme from the NDE, who should be the implementation agency.

But the Minister, while appearing before a joint committee in the National Assembly accused the lawmakers of trying to hijack the process. He insisted that President Buhari gave him the mandate to directly supervise the programme and as such he is the only one that can ask him to stop.

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Economy & Politics

Seyi Makinde Proposes N3 billion investment plan for water supply

The local governments in Oyo are advised to submit a list of 10 faulty boreholes in the LG. 

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Seyi Makinde Proposes N3 Billion plan for water supply

The Governor of Oyo State, Seyi Makinde announced the proposal of a N3 billion investment plan dedicated to water supply in rural and urban areas of the state.

Speaking through the Chairman of Rural Water Supply and Sanitation Agency (RUWASSA), Mr. Najeem Omirinde in Ibadan on Monday, he added that N500 million of the N3 billion would be used for repairing broken and faulty state-owned boreholes.

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READ MORE: Network operators accept government’s ‘shared facility arrangement’ that limits financial risk 

All Chairmen of each of the Local Governments in Oyo are advised to submit a list of 10 faulty boreholes in the Local governments.

The Oyo State governor, Seyi Makinde also ordered that all new boreholes must be compliant with solar-powered pumps, to enable their longevity and save costs.

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READ ALSO: Diageo to invest $219 million in renewable energy in Nigeria, six others

Urging residents to patronize the agency if they need to dig up boreholes for water, citing that it would be cheaper if done through the state agency than with private drilling companies.

Minister of Finance, Zainab Ahmed stated last year that Nigeria needs an estimated N36 trillion annually for the next 30 years to solve Nigeria’s infrastructure problem. The investment, although a tiny fraction of what Nigeria needs is a bold step by the Oyo State government.

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