The Federal Government has called on all stakeholders in the nation’s pension industry to collectively embrace the ongoing pension reform in the country for the benefit of the Nigerian workers and the economy in general.
Nenadi Usman, minister of finance, who gave this charge recently, assured that the newly introduced contributory pension scheme in the country would reduce poverty considerably, especially in the case of retired workers.
While delivering a keynote address at the Pension Reform Summit jointly organized recently by the National Pension Commission, the institute of Administration, Ahmadu Bello University, Zaria, and Arthur Green Consultants, she charged participants at the summit to evolve ideas and strategies on how the stakeholders could collectively advance the ongoing pension reform for the benefit of the contributors and the nation in general.
The minister stated that the new contributory pension scheme became imperative due to the problem that bedeviled the old scheme, which made it impossible for the government to continue to fund it.
Usman, who was represented by Mohammed Maimala, an assistant director in the ministry, stated that the new pension scheme was introduced to reduce poverty in old age and avert a situation where pension entitlements would exceed the salaries of active workers in the public service.
According to her, the over dependence of the old pension scheme on budgetary allocation before the inception of the President Olusegun Obasanjo administration led to the accumulation of about N2 trillion owed by the Federal Government in pension arrears. This, she said, made the replacement of the old scheme with the contributory pension scheme being funded by both the employer and the employee necessary.
“The new pension scheme was designed to among others, provide a system that is financially sustainable, simple and transparent, less cumbersome and cost effective as well as encourage savings among workers. This is to ensure that every person who has worked would benefits and when due. This would prevent the vagaries of poverty and hardship in old age and retirement. The reform was therefore concerned with establishing a system that would ensure that workers receive benefits generated by their own savings in addition to government subsidy”, Usman said.
She further disclosed that the Federal Government has established the Retirement Benefits Bond Redemption Fund at the Central Bank of Nigeria to facilitate the transmission from the old to the new pension scheme. The fund, according to her is to be financed by the Federal Government with an equivalent of five per cent of its total monthly wage bill.
“To assuage the difficulties arising from the backlog of pension arrears, an actuarial valuation was carried out to determine the accrued pension rights of Federal Government employees, such workers that would be retiring under the new scheme would receive non-negotiable bonds redeemable upon retirement in an amount equivalent to the accrued benefits under the old scheme. For the redemption of such bonds, government has established the Retirement Bond Redemption Fund”, Usman said.
In establishing a contributory pension scheme for all employees both in the private and public sectors, the Pension Act provides that each contributor shall open a Retirement Savings Account, RSA, in his name with a Pension Fund Administrator, PFA, of his choice.
