FG’s no-compliance with extant laws on pension administration and violation of rights of pensioners

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By Ivor Takor, mni Esq.

There are two categories of federal government pensioners today. The first category are those drawing pension under the old Defined Benefits Scheme (DBS). These are retirees who had been on pension pay roll of the federal government before 25th June 2004, when the Pension Reform Act (PRA) 2004, which introduced the Contributory Pension Scheme (CPS) came into force and those exempted from the CPS under Section 5(1) of the PRA 2014.

Section 5(1) of PRA 2014 provides that “The categories of persons exempted from the Contributory Pension Scheme are (a) the categories of person mentioned in Section 291 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) including members of the Armed Forces, the intelligence and secret services of the Federation; (b) any employee who is entitled to retirement benefits under any pension scheme existing before the 25th day of June, 2004, being the commencement of the Pension Reform Act, 2004 by as at that date had 3 or less years to retire.”

The second category are those who retired from service with effect from 25th June, 2007 to date. This category of retirees, fall under the Contributory Pension Scheme (CPS).

The main deference between the DBS and the CPS is that DBS promises a specific income while the CPS depends on factors such as the amount balance in the Retirement Savings Account (RSA) of the would-be retiree and the funds investment performance.

While pension under the the DBS is funded solely by the employer (government or private company), under the CPS it is a contribution between the employer (government or private company) and the employee.

The accrued pension rights of federal public servants is protected by Section 15(1) of PRA 2014. The section provides that “As from 25 June, 2004, being the commencement of the Pension Reform Act 2004, the accrued pension Rights to retirement benefits of any employee who is already under any pension scheme existing before the commencement of that Act and has over 3 years to retire shall (a) in the case of employees of the Public Service of the Federation where the scheme is unfounded, be recognised in the form of an amount acknowledge through the issuance of Federal Government Retirement Benefits Bonds by the Debt Management Office in favour of the employees and the bond issued under this subsection shall be redeemed upon the retirement of the employee in accordance with Section 39 of this Act and the amount so redeemed shall be added to the balance of the retirement savings account of the employee and applied in accordance with the provisions of Section 7 of this Act.” Paragraph (b) of the subsection is a reproduction paragraph (a) in the case of employees of Federal Capital Territory.

Majority of pensioners, if not all under the CPS have accrued pension rights from the old DBS. Since 25th June, 2007 when the first batch of pensioners came on board under the CPS to date, there have been several increases in pensions for retirees under the DBS in line with the provisions of Section 173(3) of the Constitution of The Federal Republic of Nigeria, 1999 (as amended), excluding pensioners under the CPS.

Section 173(3) of the Constitution provides that “Pensions shall be reviewed every five years or together with any Federal Civil Service salary reviews, whichever is earlier.”

Section 39(3) of PRA 2014 provides that “Without prejudice to sub-section (2) of this section, the Commission shall, by the end of every calendar year, determine the adequacy of the Redemption Fund against the projected pension liability of Government arising from voluntary and mandatory retirements, death of employees in service and the right of pensioners to pension review in line with section 173(3) of the 1999 Constitution (as amended), and advise the Budget Office of the Federation of shortfall, if any.”

Section 173(2) provides that “Any benefit to which a person is entitled in accordance with or under such law as is referred to in subsection (1) of this section shall not be withheld or altered to his disadvantage except to such extent as is permissible under any law, including the Code of Conduct.”

The administrations of former Presidents Goodluck Jonathan and Muhammadu Buhari had give deaf ears to the agitations and pleadings by pensioners under the CPS for the administrations of these former Presidents to review their pensions in line with the provisions of PRA 2014 and the Constitution.

While these former Presidents should be held responsible for their administrations’ non-compliance with the provisions of the law and the Constitution in this regard, blame should also be put at the door steps of top federal civil servants, comprising permanent secretaries (PS) and Heads of the Civil Service of the Federation (HCSF). This category of public servants are all promoted through the ranks in the civil service to their exalted positions.

A permanent secretary who is appointed from among officers of the rank of Directors is the most senior civil servant of the ministry charged with running the ministry’s day to day activities. He is the Chief Accounting Officer of the ministry and is answerable to the Honourable Minister for the role delineated for his or her position. The Head of the Civil Service of the Federation who is appointed from among federal permanent secretaries to head the Office of the Head of the Civil Service of the Federation (OHCSF), is responsible for the leadership, management and capacity development of the federal civil service, the engine of governance and administrative machinery of implementing federal government’s policies and programmes. Permanent secretaries and Heads of the Civil Service of the Federation are the link between the public service and political office holders.

As it was the case with all public servants, upon the coming into force of the CPS, federal permanent secretaries and the Head of Service opened RSAs with Pension Fund Administrators (PFAs) into which their pension contributions and the contributions of the federal government their employer were paid into for their future pensions.

During the administration of former President Goodluck Jonathan, this categories of civil servant started a quiet agitation for their exemption from the CPS on the grounds that they are political office holders. The request made on their behalf by the then Head of Service, did not receive Presidential approval. However, in 2019 or thereabouts, during the administration of former President Muhammadu Buhari they had their way and by a presidential directives, they were placed on salaries for life to be paid through the Integrated Payroll and Personnel Information System (IPPIS) payment platform. The presidential directive, technically exempted them from the CPS without the amendment of Section 5(1) of PRA 2014.

The former President’s administrative directives, brought about two unintended outcomes. The first outcome which continue to hunt pensioners under the CPS, is that the permanent secretaries and Heads of Service of the Federation, who should have pushed for the implementation of the provisions of Section 173(3) of the Constitution for pensioners under the CPS have been silent because they have “jumped out of the boat of the CPS.” Assuming they were still under the CPS and their pensions will be paid under the scheme, they would have pushed for government compliance with the provisions of the law and the Constitution because it would have affected them. Their inaction portrays them to be self-centered and a total lack of empathy with their other colleagues in the public service.

The second outcome although not intended, it was very obvious that the approval will give impetus to continuous agitations by other public servants for exemptions from the CPS. Already, Nigerian Universities Professors, Police Officers of the ranks of Inspector General of Police, Deputy Inspector Generals of Police and Assistant Inspector Generals of Police have all received approvals to earn their terminal salaries for life as pension thereby exempting them from the CPS. These exemptions as envisaged, have given further impetus for continuous agitation for exemptions thereby endangering the achievements of the CPS.

As earlier stated, pensioners under DBS have been having their pensions reviewed with every salaries increase since 2007, while pensions under the CPS have not been reviewed along with salaries increases. This development has caused pensioners under the CPS to ask if there is fairness, equity and natural justice in the administration of the two pension schemes that are running simultaneously within the federal public service.

The issue becomes more worrisome and perplexing, when juxtapose with the fact that funding of pension for federal public servants under DBS was the sole responsibility of the federal government as employer and it is a first head charge under the consolidated revenue fund of the federation while funding of pension under CPS is the responsibility of the employer and employees on a contributory basis.

Assuming without conceding that Section 173(3) of the Constitution, which was enacted in 1999 took into consideration only pension under DBS that was in operation before the enactment of the Constitution and not pensions under the CPS, which was not in operation as the time, does that stop the federal government from taking into consideration, increases to the portion of pension under the CPS that accrued under the DBS?.

Accrued Pension Rights under the DBS and contributions in the RSAs of employees under the CPS, are combined to pay pensions under the CPS. Moreover, all current pensioners under the CPS, have the bulk of their pension assets under accrued pension Rights from the DBS.

One of the weaknesses of the old DBS was that there was no regulatory agency to carry out oversight functions on the administration of pension. A regulatory agency is a government body that is created by a legislature to monitor and enforce specific laws. It has quasi-legislative, executive and judicial functions.

Section 17(1) of PRA 2014 established the National Pension Commission (PenCom). Subsection 5 of the Section provides that ‘The Commission shall report directly to to the President of the Federal Republic of Nigeria’. Section 18 states that ‘The principal objects of Commission shall be (a) enforce and administer the provisions of this Act; (b) co-ordinate and enforce all other laws on pension and retirement benefits; and (c) regulate, supervise and ensure the effective administration of pension matters and retirement benefits in Nigeria.’

In exercise of the duties imposed on it by PRA 2014, PenCom had made several recommendations to the federal government for it to comply with provisions in PRA 2014 and the Constitution with regards to increasing pension with every salary increase for pensioners under CPS but such recommendations have never been implemented.

PenCom’s inability to get the federal government, as an employer to comply with the provisions of law in the same way and manner it does for employers in the private sector is a serious regulatory drawback in pension administration in the country especially with regards to the public service. Private sector employers and employees are also covered by the PRA 2014 and nobody is hearing about non-compliance with the provisions of the law because PenCom is enforcing compliance and applying sanctions including taking private sectors employers to court for non-compliance.

Penalties for non compliance with the provisions of the Act, are imbedded in the Act. Section 99(1) provides that “A person who contravenes any of the provisions of this Act commits an offence and where no penalty is prescribed, shall be liable on conviction to a fine of not less than N250,000.00 or to a term of not less than one year imprisonment or to both fine and imprisonment.” Section 99 (2) further provides that “Any person or body who attempts to commit any offence specified in this Act commits an offence and is liable, on conviction, to the same punishment as is prescribed for the full offence in the Act”.

Section 103 states that “Where an offence under this Act is committed by a body corporate, the body corporate or every (a) director, manager, Secretary or other officers of the body corporate; (b) person who was purporting to act in such capacity mentioned in paragraph (a) of this section, who had knowledge or believed to have had knowledge of the commission of the offence and who did not exercise due diligence to ensure compliance with the Act shall be deemed to have committed the offence and shall be proceeded against in accordance with this Act”.

President Bola Tinubu has to move away from the unconstitutional path travelled by his predecessors and follow the path of fairness, equity, and natural justice as well as constitutionality in pension administration by directing compliance with provisions of Section 173(3) of the Constitution and Section 39(3) of PRA 2014. This will give life to his commitment as contained in his Renewed Hope 2023, where he categorically affirms that ‘Show us a door, we shall open it. Show us a road, we shall travel on it. Show us a problem, we shall find a way to fix it. Show us an injustice, we shall strive to correct it, no matter how long it takes or how hard it gets’. Takor was a two term President of NASU, a two term National Treasurer of NLC and an member of the inaugural Board of PenCom. Takor retired as a Director in federal public service and is now a Lagos-based legal practitioner. He is an alumnus of the National Institute of Policy and Strategic Studies (NIPSS), Kuru-JOS, Plateau State.