By Maduka Nweke
The National Pension Commission (PenCom) has urged the Senate to jettison the move to increase the lump sum paid by pension fund managers to retirees by 75 per cent.
Pencom, instead, called on the Senate to seek ways of implementing the provisions of Section 4(4) of the Pension Reform Act (PRA), which demands that retirees be paid additional benefits by their employers upon retirement outside monies from the pension fund.
The Commission said the option would increase the emoluments of employees to cover the amount they may need after retirement without possibly increasing the total lump sum.
In a memorandum sent to Senate Committee on Establishment and Public Service, the Commission noted that the absence of other social security benefits in Nigeria was partly responsible for the clamour by the retirees to access substantial amounts as lump sum from their RSA balance. The Commission therefore canvassed the imperative for Nigeria to institute a Zero Pillar Pensions in the form of social security benefit, which is recognised and provided for under Section 16(2)(d) of the Constitution of the Federal Republic of Nigeria 1999 (as amended). It said that if implemented, it will go a long way to alleviating the sufferings of all Nigerians irrespective of whether or not they had formal employment, arguing that it will also augment earnings from occupational pensions.
“Rather than canvass for payment of 75 per cent lump sum, we believe that the remedy lies in the implementation of the provision of Section 4(4)(a) of the PRA, 2014 dealing with payment of additional benefits upon retirement. It provides that ‘notwithstanding any of the provisions of this Act, an employer may elect to agree on payment of additional benefits to the employee upon retirement’. This would enhance the amount that employees may receive as lump sum upon their retirement,” it noted.
The Commission further said, “experience has shown that about 99 per cent of retirees who collected huge lump sums from their RSAs squandered the money quickly after retirement and were left with meagre amounts as pensions. This category of pensioners are currently bitterly complaining against their low pensions and advancing this situation as justification to calls for exemption from the CPS. We, therefore, believe that it is not in the overall interest of the retiree to saddle him with the responsibility of managing 75 per cent of his total benefits after retirement, when he should have been resting and enjoying the fruits of his long years of labour.
“The Commission has just concluded an exercise to increase the monthly pensions of all retirees on programmed withdrawal due to the income earned on investing their pension assets.
The outcome of this exercise showed that 30 per cent of the retirees would not benefit from the increase due to insignificant income earned on the small balances in their respective RSAs. The payment of enhanced pension would apply only to retirees that left reasonable balances in their RSA, which has earned income over time. The payment will commence in December 2017. This indicates that the return on investment of pension fund is being utilised for the benefit of RSA holders,” the commission stated.