By IKECHUKWU AMAECHI

On Tuesday, February 22, 2022, the House of Representatives Committee on Pensions held a public hearing on two bills for the amendment of the Pension Reform Act 2014.

While the first, “A Bill for an Act to amend the Pension Reform Act 2014 to provide for the exemption of the Nigerian Police Force from the Contributory Pension Scheme and for related matters, was sponsored by Hon. Francis Ejiroghene Waive, the second, “A Bill for an Act to amend Sections 1 (c), 7(2), 8(1), 18, 24 and 99 of the Pension Reform Act 2014 providing that a pensioner shall receive at least 75 per cent of his retirement benefits immediately upon retirement and criminalise the undue delay in the payment of pension,” was sponsored by Hon Jimoh Aremu Olaifa.

It was all déjà vu. The issues at stake at the public hearing are as old as the Contributory Pension Scheme (CPS) itself.

But here, we will deal exclusively with the first Bill which has to do with exemption of the Police from the Contributory Pension Scheme (CPS).

To appreciate the renewed agitation for exemption, certain facts have to be put in context. When the Pension Reform Act 2004 was enacted, the idea was to have a new pension scheme that is not only contributory and fully funded but also privately managed, with funds and assets based on individual accounts under third party custody. The Pension Reform Act established a mandatory CPS for workers in both the public and private sectors.

The overarching goal was to ensure, unlike in the Defined Benefits Scheme (DBS), that everyone who has worked receives retirement benefits as and when due.

But the government, which modelled the country’s CPS after the Chilean scheme that exempted both the armed forces and the police, insisted that the police will be part of its own scheme while exempting the Army, the Nigeria Intelligence Agency (NIA) and the Department of State Security (DSS).

The police hierarchy kicked, preferring exemption. But the Federal Government demurred, insisting that the institution was so big that it will not be in the best interest of the country to let policemen out of the pension loop.

At the February 22 public hearing, proponents for the amendment argued that exempting the police from the CPS and ensuring that officers get the same pension packages as their counterparts in the military will be a healthy shot in the arm.

Hon. Waive, sponsor of the exemption bill, anchored his position on the claim that while “the highest retirement benefit of a Deputy Superintendent of Police under this obnoxious pension scheme is N2.5 million and that of Assistant Superintendent of Police is N1.5 million, their equivalent in the Army (Captain) and DSS are paid N12.8 million and N10.3 million respectively.”

So, the proposed legislation seeks to amend section 5 (1) of the Pension Reform Act of 2014, to include officers of the NPF as part of the categories of persons exempted from contributory pension.

To be sure, there is nothing wrong in the police calling for enhanced retirement package. There is near consensus that when it comes to issues of welfare and salaries, the police hold the wrong end of the emolument stick.

Yet, they are saddled with the onerous responsibility of not only protecting lives and properties of the citizenry but also preventing, detecting and investigating crimes and prosecuting offenders. In striving to ensure there is law and order, many policemen have lost their lives, leaving behind dependants that are not adequately taken care of.

So, the reason behind the exemption push is poignant and is not lost on many discerning Nigerians. The agitation is all about improved welfare for policemen both in and out of service.

A policeman who is sure of good life in retirement is bound to put in his best in service. So, it is not only in his best interest that he secures the necessary guarantees for a better tomorrow which is what the CPS is all about but the larger society is ultimately the better for it.

That being the case, the public hearing once again presented the lawmakers another unique opportunity to reexamine the fundamental issues inherent in the welfare and wellbeing of officers of the Nigeria Police Force as well as members of their families.

But in doing this, care must be taken not to throw away the baby with the bath water which is what exemption from the Contributory Pension Scheme will amount to at the end of the day.

This is important because exiting the CPS will not serve the ultimate goal of enhancing the welfare and wellbeing of officers and men of the Nigerian Police. So, travelling on that route, as enticing as it might seem, becomes counter-productive because the destination will be the Defined Benefits Scheme which was abandoned in 2004 because it had become impracticable.

As Ms. Funmilayo Sadiku, a Lagos-based financial analyst, argued recently, “NPF’s position on CPS exemption may sound good to the promoters, but it would result in the dismantling of the institutions, systems and processes that government had put in place in the last few years towards the implementation of the pension reform programme, in addition to unsettling the government’s fiscal policy and financial system stability.”

Not only that, the scheme has become the cornerstone of the country’s economy – providing the needed long term investable fund, which has helped in deepening Nigeria’s financial sector by providing a platform for attaining strategic programmes of government in the areas of infrastructure, housing and the development of the real sector of the economy.

Last week, the National Pension Commission (PenCom) disclosed that the total assets under the Contributory Pension Scheme rose by N190 billion in January 2022. The funds rose from N13.42 trillion as at December 31, 2021 to N13.61 trillion as at January 21, 2022. According to the report, the pension operators have invested N8.35 trillion in Federal Government securities, while N2.28 trillion and N123.4 billion were invested in mutual funds.

At N13.61 trillion, the total pension fund assets under the CPS represents about nine per cent of the country’s Gross Domestic Product (GDP). Against the background of Federal Government’s budgetary pension deficit, estimated at N2 trillion as at June, 2004 under the Defined Benefits Scheme, the difference between that era and now is like life and death, literally.

So, while the demand of the NPF for enhanced retirement benefits for their personnel cannot be faulted, it behoves the National Assembly to ingeniously find a way of arriving at that same destination but within the ambit of the CPS because exempting police from the scheme will pile additional financial burden on the Federal Government through unsustainable pension obligations.

According to PenCom, as at September 2021, there were 304,963 police personnel based on IPPIS data. Under the defunct Defined Benefits Scheme, comprising pension and gratuity, that would amount to about N1.84 trillion. That is a financial obligation the Nigerian state cannot afford to shoulder.

In considering the exemption bill, therefore, the National Assembly should explore administrative options in solving the problem.

The elephant in the room is the abysmally low pension. And pension packages of policemen remain insignificant because salaries of policemen remain embarrassingly low. But the way to tackle the problem is not to exit the CPS but enhance the salaries within the scheme so that the savings of policemen will improve.

As Aisha Dahir-Umar, PenCom director-general, rightly noted at the public hearing, “Pension is a function of salary, and as long as the salary of officers continues, then there is no need to exit.” What needs to be done is to administratively address the issue of low wages through upward salary adjustment.

The Centre for Pension Right Advocacy (CPRA), agrees. In a memorandum submitted at the public hearing by its executive director, Takor Ivor, CPRA stated that the CPS is the most guaranteed law in the country that protects policemen from old age poverty and destitution as well as financial protection for members of their families in the event of death of their bread winners.

The Pension Reform Act (2014) created a ready pool of fund that will be used in the payment of pension for life to an officer. It also ensures that payment of pension to retiring officers is no longer left at the mercy of annual budgets.

What the National Assembly needs to do is ensure that in line with the provision of Section 4(4(a) of the Act, the Federal Government starts paying police retirees 300 per cent of their last annual gross pay as gratuity on retirement.

When this is done, their contributions in the RSA can then be utilized for the payment of pension. This will boost monthly take home pension. The problem is the low pension package and not the CPS. Exiting the scheme, therefore, does not mitigate the problem. It rather compounds it because the Contributory Pension Scheme remains the safest safeguard against inclement retirement weather.

•Amaechi, a journalist, is a pensions expert, writes from Lagos.

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