By David Akinmola
The National Pension Commission (PenCom) has begun to fault 25 federation states for non-compliance with the Contributory Pension Scheme in the country.
The commission’s latest report displayed on its website also revealed that out of the 36 states in the country, only 11 states have fully domesticated (CPS). They include: Lagos, Federal Capital Territory (FCT), Osun, Kaduna, Ekiti, Edo, Ondo, Delta, Benue, Anambra, and Jigawa, urged those states that are yet to make legislation to domesticate the scheme to avoid creating weak financial trouble to their workers in their retirement age in the future.
The report also said that the only complied states have set the benchmark for sustainable pension administration by ensuring that retirees receive their entitlements promptly.
However, they are consistently remitting both employer and employee pension contributions under the CPS. Meanwhile, Jigawa State remits contributions under the Contributory Defined Benefits Scheme (CDBS).
This was revealed in the commission’s latest report displayed on its website at the weekend, which also called on the 774 Local Government Areas (LGAs), which are the third tier of government, below the state and federal governments across the country to domesticate the scheme, warning that continued delays by others risk exacerbating long-term pension liabilities and placing unsustainable financial burdens on future administrations.
The report cited the Pension Reform Act (PRA) 2014, in Section 2(1), which stipulates that the CPS applies to all public sector employees across the Federation, including the Federal Capital Territory, states, and local governments, as well as the private sector.
However, in line with the 1999 Constitution of the Federal Republic of Nigeria (as amended), state governments have the constitutional right to legislate on pension matters within their jurisdictions. As such, state governments are required to domesticate the CPS by enacting appropriate pension laws within their states.
In August 2006, the National Council of States adopted the CPS for all states and local governments. To support this adoption, PenCom developed a Model State Pension Law, enabling state governments to modify it according to their unique needs. PenCom reviews draft state pension laws and guides states throughout the implementation process.
So far, many states have yet to implement the CPS. For a state to implement the CPS in full, the state is required to enact a law on CPS, establish a Pension Bureau, register its employees with Pension Fund Administrators (PFAs), and commence remittance of pension contributions. The state is also required to carry out Actuarial Valuation, commence funding of Accrued Pension Rights, procure Group Life Insurance for its employees, and open and fund a Retirement Benefits Bond Redemption Fund Account with the Central Bank of Nigeria (CBN) or PFA.
Several States have enacted laws to adopt the CPS but have not yet made significant strides toward implementation.
These states include Abia, Adamawa, Bauchi, Bayelsa, Ebonyi, Enugu, Gombe, Imo, Kano, Katsina, Kebbi, Kogi, Nasarawa, Niger, Ogun, Oyo, Rivers, Sokoto, Taraba, and Zamfara.
The commission has urged the States to accelerate their efforts toward full implementation of the CPS.
This includes the timely remittance of both employer and employee pension contributions. By taking decisive action, these states can align with the pacesetters in ensuring a secure and sustainable retirement scheme for their workforce.
However, PenCom observes that Akwa Ibom, Borno, Kwara, Plateau, Cross River, and Yobe State are yet to commence implementation of the scheme.
The PenCom has strongly encouraged these States to expedite the enactment of their CPS laws and take immediate steps toward full implementation to ensure a secure and sustainable pension system for their workforce.
The transition from the Defined Benefits Scheme (DBS) to the CPS at the state and local government levels is both a significant and inevitable step.
Even States that have not transitioned will ultimately need to adopt the CPS as the scheme is designed to ensure that all retirees receive their benefits promptly, providing a sustainable and secure retirement for all public sector employees.
The CPS offers a long-term solution to the pension liabilities that many states currently face. By failing to address pension arrears, states are inadvertently creating a financial burden for future generations, as these liabilities will continue to grow. Adopting the CPS now will help states avoid these escalating costs and provide a more secure financial future for both retirees and taxpayers.
Moreover, the CPS ensures fiscal discipline by accurately determining and systematically settling pension obligations while also making funds available at the point of retirement for the prompt payment of benefits. This prevents the accumulation of pension arrears, contributing to the financial stability of the public sector.
The PenCom said it remains steadfast in its commitment to driving nationwide compliance with the CPS.
The Commission said it will continue to engage with non-compliant states, providing necessary guidance, advisory support, and technical expertise to facilitate their transition.
It said that a pension-secure Nigeria is not just a vision but an achievable reality, adding that this can only be realised when all states demonstrate commitment by fully embracing the CPS.
