Not too long ago, justice was served on Abdulrasheed Maina, a former chairperson of the defunct Pension Reform Task Team. Mr. Abdulrasheed Maina was handed an 8-year jail term for stealing over N2 billion belonging to pensioners.
What Mr. Maina did is only one of the ills affecting Nigerian retirees and pensioners. There have been stories of some of them collapsing on the line while waiting to collect their pensions, many have been said to have died without even collecting the pensions they had so hoped for. It is an ugly sight beholding hungry-looking and emancipated retirees, lining up in the picket line or even payment centers, picketing or waiting to get paid their pensions. They must have thought, during their hay days, that after working for the government or the private sector, they would have some pension to live on and age gracefully. Unfortunately, that has not been the case.
Not far enough
While sending Maina to jail and the restitution that may result from the served justice may send a signal that the Nigerian justice system is out to punish whoever toys with Nigerian pensioners’ money, it may not be enough to assure those still working and hoping on getting their pensions, that their future will be rosy. Maina, and his likes are individuals, what happens, if the pensioners get disappointed because a corporate body that manages their Retirement Savings Accounts, goes under?
One might say that any Pension Fund Administrator, PFA, going under, cannot or can only happen with the remotest possibility. Agreed, but there is no need to wait for that to happen before we proactively guide against and prepare for it. It had happened in the banking industry, and if it did happen in that industry, what guarantees do we have that it may not happen elsewhere. Food for thought, right? – chew over that for a few.
The Nigeria Deposit Insurance Corporation
Bank failures prompted the Nigerian Government to establish the Nigeria Deposit Insurance Corporation, NDIC, to protect Nigerian depositors from the devastating effects of bank failures. According to the NDIC website, the institutions covered by the corporation include Deposit Money Banks, (DMBs), Micro-Finance Banks, (MFBs), and Primary Mortgage Institutions, (PMIs). There is no mention of Pension Fund Administrators, PFAs. It would therefore be a positive development if that same protection can be extended to those saving their money for their retirement.
Think about it this way, if someone decides to save for his or her retirement by opening a savings account with a registered bank, such account is covered by the protection of NDIC. If the same person decides to save the same money for his or her retirement by opening a Retirement Savings Account with any of the Pension Fund Administrators in Nigeria, that RSA may not be covered by the NDIC protection. Therefore, there is a need for the establishment of a Pension Benefits Guarantee Corporation in Nigeria.
What about PenCom?
One may ask, why establish a Pension Benefits Guarantee Corporation when we already have the National Pension Commission, PenCom. It does not appear that PenCom Guarantees pension payment. According to a Question-and-Answer document on PenCom website, and in an answer to the question, “What is the Guarantee that the pension funds under the new scheme will be well managed and not diverted for other purposes?”, PenCom answered by saying, “The functions of the Pension Fund Administrator (PFA) and Custodian are clearly spelt out in the Pension Reform Act 2004. The Act provides adequate safeguards against the misuse of the pension funds and assets by any operator”. That does not sound like a guarantee.”
What will the Pension Benefit Corporation do?
If established, the Nigerian Pension Benefit Corporation will guarantee the payment of the outstanding balances in the Retirement Savings Accounts of Nigerians, up to a certain limit, if need be, in the event that the Pension Fund Administrator, PFA, is unable to pay or goes under. Depending on how far the government wants to empower the corporation, it can also take over the assets of any PFA that goes under (as trustee), administer orderly payment to RSA holders and a lots more.
Funding: I am sure that you will be asking how the payment will be funded. The Pension Benefits Guarantee Company will act like an insurance company that indemnifies the RSA holders in case the PFAs default. In that case, they are working for the PFAs and as such, the PFAs will pay the monthly premium (pension insurance premiums) for the supposed insurance, but the government will make it compulsory for them to do so. The pension insurance premiums will be based on the asset under management of each Pension Fund Administrator.
Advantages: There are advantages and synergies that can accrue from the establishment of a Nigerian Pension Benefit Guarantee Company.
Confidence building and growth: One of the advantages is that it will increase the confidence of those saving for their retirement. With increased confidence, they will be motivated to save more and those not yet saving will be motivated to do so. When retirees get the assurance that their retirements will be paid as at when due, it will grow the Nigerian pension market and assets.
Job creation: The establishment of a Nigerian Pension Benefit Guarantee Company will create jobs for those that will administer the company as well as those that will ensure compliance and enforcement, among others.
Risk management: The establishment of a Nigerian Pension Benefit Guarantee Company will create the risk management framework that the government needs to ensure that Nigerian retirees will be taken care of when they retire.
Poverty reduction: When retirees are given their payment in a timely and uninterrupted manner, it will help in reducing poverty and crime levels while increasing the longevity of the retirees.
Oga, there’s the Pension Fund Administrators (PFAs) and the Pension Fund Custodians (PFC). And as you rightly pointed in your article, their duties and functions have been spelt out by the Pension Reform Act as stated on the PENCOM website.
The Pension Fund Custodian is already performing the function of the Pension Benefit Corporation you’re proposing.
The success of the Nigerian pension system as presently constituted has been praised both within and outside Nigeria, so much so that other African countries are currently understudying it.
There’s no need for a Pension Benefit Corporation. Nigerian pensioners who are currently suffering and having challenges accessing their benefits are victims of government agencies and companies that failed to, or refused, transfer their benefits into the current pension scheme as presently constituted under the Pension Reform Act.
SEC is part of the rot and largely because a number of it’s officers, not excluding directors are proteges of the defaulting and fraudulent companies. It is laughable that SEC just keeps amplifying a criminal antics without seeking help from the EFCC. The leading culprits ate the banks and their subsidiaries, particularly registrars. The Nigerian market is a centre for fraud and those who thought they were masters of creative frauds have also fallen victims of fraudsters in other sectors.