By Monday Akinmola
The Pension Fund Operators Association of Nigeria (PenOp) has faulty the plans by the Nigeria Police Force (NPF) to exit from the Contributory Pension Scheme (CPS) to the Defined Benefits Scheme (DBS) in the country.
The group also argued that an attempt to move the police out of the CPS will require a staggering N3.5 trillion yearly to fund pensions for approximately 400,000 personnel, in a budget already burdened by deficits as this is simply unsustainable.
This was the position of the association raised by the Chief Executive Officer of PenOp, Oguche Agudah, in Abuja, at the public hearing on a bill for an act to establish a police pension board, cautioning that it would erode the value of assets and destabilise the financial system.
Agudah said that the transitioning to the DBS would not solve the police’s challenges, but “will, rather, create deeper financial and operational challenges for the country’s financial system.”
According to him, reverting to the DBS model, which relies on government budgetary allocations, would lead to fiscal unsustainability and delayed payments for pensioners.
“It will also divert resources from other critical needs, including minimum wage adjustments and public services,” he said.
Agudah said that pension funds under the CPS are currently invested in bonds, infrastructure, and other critical sectors that contribute to the country’s economic growth.
Agudah said that the CPS currently holds over N21 trillion in assets, and remains a critical component of the country’s economic infrastructure.
He said that maintaining the police within the CPS would ensure long-term sustainability, equity, and economic stability.
While noting that the Police exiting the CPS would set a dangerous precedent that could prompt other government agencies to leave, Agudah said:
“If the police exit the CPS, other public sector groups may demand similar transitions, fragmenting the pension system and undermining reform efforts.
“And our key aim and our key goal is to ensure that all pensioners are paid on time, all pensioners have a living pension, and everybody gets their pension on time.
“What we heard at the hearing is a joy to us because what we are seeing is that even the sponsor of the bill is on the path that it is not the CPS that is the problem of the police. It is the welfare.
He said that the CPS operates on a pre-funded model with both employees and employers contributing a mandatory percentage of the employee’s salary.
According to him, a minimum of eight percent from the employee and 10 per cent from the employer, totaling a minimum contribution rate of 18 per cent, is usually gathered.
He said that either party had the latitude to contribute a higher percentage, which allows pension funds to accumulate and be invested for future payouts.
Agudah said that the National Pension Commission (PenCom), as of September, had total pension assets, under the CPS, that had exceeded ₦20 trillion (approximately $12 billion),
He said that PenCom had ensured that the funds were not solely reliant on government budgets, thus reducing vulnerability to fiscal constraints.
The Nigerian Senate is currently considering a bill to establish a board to oversee Police pension, as they plan to exit the CPS managed by PenCom.
According to the Chairman of the Senate Committee on Establishment and Public Service, Sen. Cyril FasuyiFasuyi, through the bill, the committee intended to create an enabling environment for retired police officers.
During a recent public hearing on the bill, Sen. Binos Yaroe, who sponsored the bill, said that retired Commissioners of Police take N70,000 while Assistant Superintendents of Police collect about N40,000 to N50,000 as pension.
He said that the Military, Department of State Service (DSS), Defence Intelligence Agency (DIA), and National Intelligence Agency (NIA) had pulled out of CPS.
He, however, said that the NPF, which is the lead security agency in section 214 of the constitution, is left under CPS and regulated by PenCom.
