There will always be consequences of exiting the police personnel from the contributory pension scheme. If it were to happen, then more government agencies and officials would borrow a leaf from the police and continue to seek exemption from the contributory pension scheme. Recently, the Office of the Head of Service and Permanent Secretaries secured presidential approval to exit the scheme and be placed on full salaries for life via IPPIS.
There are reports that the accountants-general and auditors-general are also agitating to join the exempted groups. Gradually, the success of CPS will be undermined and the scheme decimated. When senior government officials are being exempted, it is only logical that the others below them will begin to develop ideas and start agitating to be exempted as well. We may end up returning to the old scheme of defined pensions where government carries all the burden. Not only are we going to end up ruining the contributory scheme that is working well for us, we will return to the era of pensioners queuing up for arrears and suffering untold hardship jostling to be paid anything at all.
In fairness, maybe there are reasonable grounds for senior government officials to want to be exempted from the contributory pension scheme. They probably had looked at the fact of having to contribute 8 percent of their salaries as a disadvantage. However, they can treat that as savings (because that is what it is) especially since the employer is obligated to contribute a minimum of 10 percent. Also, since the funds in the Retirement Savings Account (RSA) will be invested on their behalf by the PFAs, it will yield significant returns by the time of disengagement from service.
This arrangement is definitely a win for the contributor at all levels. The fact that the CPS is a fully funded scheme with assets under the management of the PFAs also means they are available upon retirement. This is unlike the defined scheme where the government may not have the funds readily available to pay the beneficiaries when they retire. More so, pensioners will be getting a bulk sum upon retirement and they can do something substantial with it to ease into their new lives. If they also invest it well, they will be reaping the benefits for life.
Perhaps, it is relevant to mention that the core argument of those seeking exemption is that they will secure a guaranteed full monthly salaries in retirement under the defined scheme than what they may take from the PFAs under the contributory scheme. However, this is an erroneous argument because there are other ways of getting more benefits under the Pension Reform Act than taking actions that can ruin the contributory scheme. For instance, what the Pension Act prescribes is merely a minimum contribution rate, which can be enhanced by the employer. Thus, rather than shoulder a burden of unsustainable pension liability, government can decide to do one or two things that are clearly permissible under the Pension Reform Act.
Government can increase the rate of its monthly contribution above the current minimum 10 percent. Government can also have a gratuity package that will be a lump sum paid to the retirees on exit from service, in addition to the contributions remitted to their employees’ RSAs. Indeed, when government decides to do both or any of these two benefits improvements under the CPS, the pension system would still be less costly and less volatile for government than returning to the defined benefit scheme through the back door.
There is an African adage that says if the gods cannot improve your fortune, they shouldn’t worsen your situation. If the government cannot make the Contribution Pension Scheme much bigger, far better and more beneficial, then it should at least not seek to ruin it. It should leave it as it is. The surreptitious attempts to exempt groups, when there are other ways of incentivising them to remain in the scheme, is a looming danger for the pension industry and it must be discouraged by Nigerians. It is sad to note that rather than maintaining and sustaining what we have, we are now engaging in actions that would decimate it and pave the way for the unravelling of a reform that is clearly one of the most important in our history. We need to have a rethink.
Concluded
Abayomi, an economist, writes from Akure, Ondo State.
Be the first to comment