PENSION REFORM IN NIGERIA

Transcription

1 PENSION REFORM IN NIGERIA

2 TEAM MEMBERS YUSTO ESEKO TONGOLA TANZANIA Julius Tedunjaiye- Nigeria Adesina Balogun Nigeria Danatus Ogah - Nigeria

3 General Information Location- West Coast of Africa Population- about 130million

4 Historical Background Nigeria operated defined benefit scheme between January 1, 1946 and June The Pension Reform Act was enacted on 25 th June and came into effect on 1 st July 2004 Reform established a defined contributory (DC) scheme as against the erstwhile DB.

5 Pension Crisis Before DC Pension deficit of about N2.3 trillion in Pensioners not being paid entitlements regularly Existence of ghost pensioners in the public service. Pensioners dying on verification queues Unstructured and unfunded private sector schemes. Diversion and mismanagement of existing pension fund by BOT and Fund managers.

6 Pension Reform Objectives Ensures every person who has worked receives retirement benefit ( to reduce old age poverty) Assists improvident individuals to save towards old age (saving grows economy & deepens financial markets) Establishes a uniform set of rules, regulation and standards for administration and payments of pension.

7 Mechanics of the Reform Mandatory minimum contribution of 7 ½ % 7 ½ % employee and 7 ½ % employer of employees salary, housing and transport allowances in to individual retirement savings accounts (RSA). Contribution is remitted monthly, to designated Pension Asset Custodians (PAC) PAC notifies the Pension Fund Administrator (PFA) appointed by the employee within 24 hours of remittance of contribution PFA issues a PIN (Personal Identification Number) to the employee, manages the contribution and credits the returns into the account (RSA). The PAC, PFA and Employers activities are regulated and supervised by National Pension Commission (PenCom)

8 Pay Offs of Benefits Retirement age is 60 years or 35 years of service After retirement the employee meets the PFA and agree on the mode of withdrawal based on the life expectancy Withdrawal could be lump sum, programmed withdrawals and purchase of annuity from the insurance company

9 Challenges of the Reform Data gathering and the administration (PenCom is required to maintain a National Data Bank for the country) Skills and competencies of PFA are doubt Credibility of Providers (PFA&PAC) in doubt. No transition period.

10 Data Problems Civil servant population alone is over 260,000. Military and paramilitary over 200,000 Reform requires every employer with 5 employees and above to join the scheme Membership from formal and informal sector is not expected to be less than 25 million PenCom as presently constituted does not have the capacity to gather and managed the required data.

11 Required Data and Facilities Stock taking of working and jobless population Number of ghost workers Number of those entitled to benefits, but not having them Value of unpaid pensions/ accrued rights Baseline for workforce (hiring criteria) Past service records Appropriate Information System NSITF has compliance problem and outstations not connected by WAN (wide area network)

12 Policy Options Set up Independent Central Data Management Authority PenCom should only concentrate on regulatory function and ensure compliance of all stakeholders Set up Basic Registration System Revalidate Service Records in Federal and State Civil Services, military and paramilitary Validate membership records for other formal and private sector

13 Policy Options continue Carry out census of all informal employers and contributors Validate records of retirees and accrued right Develop appropriate information technology Connect PenCom, Central Data Authority, employers, PFA and PAC in a robust information system Allow at least 5 years transition period for all these to be in place Government should bear the contribution of low income earners, as 7 ½ % of contribution from the present minimum wage of N 7,500 may send them to their early graves.