The confidence reposed in the 11-year-old Contributory Pension Scheme (CPS) by registered workers is beginning to wane due to recent interest being taken in it by lawmakers. The pension assets, which had faced various threats in the past following calls by top government functionaries that the funds be invested in developing ailing infrastructure, is gradually being confronted with more pressure as lawmakers plan to amend the Act setting up the scheme.
The latest move, which has been criticised by major stakeholders, is the second in less than three months by the legislators, who are seeking higher percentage to be accessed by workers instead of the statutory 25 per cent.
In the latest move, a senator is proposing that those who retire before the age of 50 should be given the opportunity to withdraw up to 75 per cent of their contributions irrespective of whatever would be left in the account to either fund programmed withdrawal or annuity plan.
The prime sponsor of the bill, Senator Aliyu Wamako (APC Sokoto), said: “The Bill, when enacted, will provide succour to retirees in the delay and other difficulty they face in withdrawing their saving.
The Pension Reform Act 2014, which came into effect on July 1, 2014, stipulates that every person who worked in either the public service of the federation, Federal Capital Territory or private sector receives his retirement benefits as and when due and assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.
Wamako said: “Our position is corroborated by the proposed amendment in Section 2(c) of the Bill.
This amendment seeks to ensure that persons who retire before the age of 50 years in accordance with the terms and conditions of their employment Section 16 (2)(c) of PRA 2014 access the RSA in line with the mode stipu lated for employees who disengage or are disengaged from employment before the age of 50 years and are unable to secure another employment within four months Section 16(5).
“The import of the proposed amendment, in line with the foregoing, is to allow the following persons to, rather than withdraw a lump sum based on a computation that allows the balance in the RSA to be sufficient to procure a programmed withdrawal or annuity for life, can withdraw up to 75 per cent as lump sum, irrespective of whether or not the balance would be sufficient to procure a programmed fund withdrawals or annuity for life.”
A few months ago, a member of House of Representatives, Hon. Amadi Dennis Oguerinwa, also moved for the alteration of Section 7 of the Pension Reform Act 2014.
Oguerinwa proposed that the amount to be accessed be increased from the current 25 per cent to 50 per cent, a development that is likely to effectively slash the total contributions.
Commenting on the proposed amendment, the Director, Centre for Pension Right Advocate, Ivor Takor, observed that the promoters of the current amendment failed to note that the Pension Reform Act 2014, established a Contributory Pension Scheme and not a Provident Fund Scheme, stressing that Section 7(1) and 2 of the Act 2014 attested to this.
He said: “The difference between pension funds and provident funds is that members of pension funds are able to take out a small portion of their retirement benefits – typically one-third or one forth-in a lump up-front sum.
The remaining benefits are distributed in monthly pay-outs. On the other hand, members of provident funds can take out as much of their benefits as they would like in a lump sum.
“That the Senate is contemplating a back door re-introduction of a Provident Fund, which was jettisoned 24 years ago in 2017 through the proposed amendment is unthinkable and at best, retrogressive.
“In a country lacking minimum standards of social security for her senior citizens, such as medical care, sickness benefit and old age benefit as provided for in ILO Social Security (Minimum Standards) Convention, 1952 (No.102) one is at a loss as to what the Senate expects the life of retired workers would be, after collecting 75 per cent of their retirement benefits as lump sum as being proposed in the amendment.”
He said that in view of the fact that one of the objectives of the Contributory Pension Scheme (CPS) is to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age, it was doubtful if the 25 per cent balance in a retiree’s RSA, after deduction of 75 per cent lump sum, would, if spread through the retiree’s expected life span, can be adequate to reasonably cater for his livelihood during old age.