Challenges of the Contributory Pension Scheme and What PenCom is Doing.

The Contributory Pension Scheme (CPS) has been largely successful since its introduction fifteen years ago, but there are some challenges that the National Pension Commission (PenCom) is constantly seeking ways to address.

Notable amongst these challenges are;

• Inadequate enlightenment of the Contributory Pension Scheme (CPS)
• Delay in payment to Federal Government retirees
• Database and technology issues (multiple PINs)
• Inadequate retirement and financial planning
• Delay/non-remittance of contributions by the private sector.
• Low compliance by state governments

Inadequate Enlightenment of the Contributory Pension Scheme (CPS)

At the centre of the challenges in the implementation of the Contributory Pension Scheme (CPS) is the low level of public awareness and knowledge on the workings and benefits of the CPS. PenCom in collaboration with other critical stakeholders such as the organized labour unions continue to make spirited efforts to enlighten the general public on the tenets of the CPS. It might interest you to note that PenCom, through various platforms such as the conventional and social media, continues to educate the public while at the same time respond positively to requests from various organisations for enlightenment session on the CPS.

Delay in Payment to Federal Government Retirees

Delays in payment of pension benefits to FGN retirees owing to budgetary inadequacies is another onerous challenge bedevilling the smooth implementation of the CPS. PenCom has been engaging all relevant stakeholders with a view to ensuring adequate budgetary provisions and timely release of funds so as to reduce the backlog of outstanding accrued rights. These efforts have resulted in significant improvement in the funds released over the past year. It is expected that with the renewed commitment of the Federal Government to defray these liabilities, more timely payments will be achieved.

Database and Technology Issues (Multiple PINs)

The issue of multiple registration has also been a challenge under the CPS. PenCom has however, deployed the Enhanced Contributor Registration System (ECRS) to address the deficiencies of the Contributor Registration System. The ECRS is an electronic platform for the submission of requests by Pension Fund Administrators (PFAs) for the registration of contributors and issuance of Personal Identification Numbers (PINs). It provides a more dynamic and user friendly interface and has also been integrated with the National Identity Management Commission (NIMC) for authentication of the uniqueness of individuals seeking to register under the CPS. The deployment of the ECRS will greatly enhance the integrity of contributors’ data and also provide a platform for the Registration of Micro Pension Plan Participants and Cross Border individuals. Ultimately, it would facilitate the opening of the transfer window which would enable contributors to move their RSAs from their current PFA to another, should they desire such transfer.

Inadequate Retirement and Financial Planning

The issue of inadequate retirement and financial planning is a major challenge faced by retirees under the CPS. As you may be aware, all choices with regards to the selection of PFA to mode of retirement benefits withdrawal reside solely with the individual contributors, hence lack of knowledge in retirement and financial planning often hindered effective choices by many retirees under the CPS. Although, the pension operators offer such value added services for the benefit of their clients, PenCom and other critical stakeholders are making various efforts to provide guidance to prospective retirees through the conduct of the annual nationwide Pre-retirement workshops.

Delay/Non-Remittance of Contributions by the Private Sector.

Another challenge that PenCom currently grapples with in the implementation of the CPS is the delayed or non-remittance of pension contributions by many private sector employers. Recall that the Pension Reform Act 2014 made it mandatory for employers with at least 3 employees to participate in the scheme. However, some private sector organizations have been indulging in delayed or non-remittance of pension contributions of their employees to the Retirement Savings Accounts (RSAs). To address this challenge, PenCom has engaged the services of recovery agencies to ensure recovery of the outstanding contributions and the penalties thereof as prescribed in PRA 2014. This effort has been yielding results even though there is still room for improvement.

Low Compliance by State Governments

Though over 25 States of the Federation have adopted the CPS by enacting relevant legislation but only the Federal Capital Territory (FCT) and 6 states out of 36 States in Nigeria have fully Implemented the Contributory Pension Scheme (CPS). Full compliance by State Governments with the implementation parameters such as remittance of both employer and employee pension contributions, payment of accrued rights, institution of the Group Life Insurance Policy etc., are still relatively low. PenCom has been intensifying efforts at ensuring that State Governments comply with the CPS by providing technical assistance to the states.