How Top Public Officers exempt themselves from Contributory Pension Scheme & get Life Pension
Recently, President Muhammadu Buhari was misled, I would say, into approving a recommendation that may end up harming the pension reform initiated by the Obasanjo administration in 2004.
The reform has been a success story so far, at least at the federal level and in the private sector. We used to have only the “defined benefits” scheme, whereby employers bore the entire pension burden, with accumulated arrears sending retirees to an early grave. The introduction of the “contributory pension scheme” has created another economy, enabling a new culture of saving towards retirement by employees and employers. It saves us the headaches of budgeting and “cash backing”.
However, as we love to do things in Nigeria, some senior civil servants have been working hard to undermine the Pension Reform Act (PRA) 2014. In February 2015, the head of the civil service of the federation and permanent secretaries sought to be excluded from pension regulation under section 6(2) of the act by the National Pension Commission (PenCom). Their argument was that they are “political appointees” and not “employees” of the federal government. The implication: unlike other civil servants, they would be excluded from the contributory scheme. Instead, they would be placed on “salaries for life”, with the government bearing the full burden as it was before the reform.
The attorney-general of the federation, in his legal advice to the head of service in March 2015, referred to a number of laws. One, section 173(1) of the constitution requires that the right to earn pension and gratuity in public service shall be regulated by law. Two, Certain Political Public Holders Act 2002 says benefits shall be paid to only those enumerated in the law based on the scheme of service. Three, Rule 020810 of the Public Service Rules 2008 stipulates the compulsory retirement age of all pensionable officers in the public service. The AGF concluded that the “political appointees” referred to in section 6(2) of the pension law are those entitled to retirement benefits.
In simple logic, even though the head of service and permanent secretaries may want to consider themselves as “political appointees”, they are bound by law to retire at the age of 60 or after having been in service for 35 years, and are therefore within the ambit of those whose retirement benefits should be under the regulation of PenCom. While the regulator cannot prescribe the quantum of the benefits of the senior civil servants since the law is clear on that, it is allowed to establish a uniform set of rules, regulations and standards for the administration and payment of the retirement benefits. After the attorney-general’s opinion, PenCom rolled out the guidelines in 2015.
The head of service and perm secs were asked to open retirement savings accounts (RSAs) and make pension contributions like the rest of us. Also, since their benefits are already defined by law — guaranteeing that government would pay them 100 per cent of their terminal benefits as pension upon retirement — PenCom said the federal government, as the employer, is statutorily obligated to pay the shortfall in case the RSA savings do not cover the 100 per cent. In other words, they were not going to lose one kobo of their entitlements. The temporary gap, in the absence of budgetary allocation, was to be covered by the Pension Transitional Arrangement Directorate (PTAD).
However, the politicking continued into the Buhari administration. There was a “breakthrough” in 2019 when the new attorney-general countered the previous legal opinion, declaring that the head of service and perm secs are not “employees” but “appointees” of the president and that they should not be subjected to the contributory scheme as stipulated in PenCom guidelines. The ministry of finance then directed that retired heads of service and perm secs should be placed on “salaries for life” via the integrated payroll and personnel information system (IPPIS) platform. By the way, IPPIS is for active workers, not retirees. Pensions and salaries are not the same thing, legally speaking.
It did not take long for a letter to land on Buhari’s desk seeking approval to exclude the head of service and perm secs from the contributory pension scheme and place their entire retirement burden on the government. Buhari approved. It appears the senior civil servants, having reached the peak of their careers, believe they should be treated like former heads of state who are on salaries for life. But if they are political appointees as they are trying to define it, all they will be entitled to at retirement will be a severance package and not salaries for life. If they want to be treated as civil servants, they cannot exit contributory pension. But they want to have their cake and eat it too.
In my opinion, Buhari did not get good legal advice before issuing the directive — and I don’t have to be a lawyer to know this. One, section 318 of the constitution defines “public service” to cover presidential appointees. Two, sections 2, 3, 4 and 6 of the PRA place all federal public officers — “employees” and “appointees” alike — under the contributory scheme. The only ones expressly exempted are judicial officers, personnel of the armed forces, personnel of the intelligence and security services, and employees who had three or less years to retire as at June 25 2004 when the scheme was launched. The head of service and perm secs are not listed for exemption anywhere.
I think there are two obvious remedial options before Buhari. One is to withdraw the directive entirely and return the head of service and perm secs to the contributory pension scheme before other government “employees” and “appointees” begin to develop ideas about agitating for “life salaries” too. The second option is for the president to seek an amendment to PRA 2014, Rule 020810 and the 1999 Constitution to expressly exclude the head of service and perm secs from the contributory pension scheme if he so desires. Judicial office holders and elected officers are legally excluded from contributory pension. But a presidential directive can never supersede a law.
It is not just the senior civil servants that are seeking to undermine the pension reform and weaken a watershed policy in our history. The police force has been coming up with all kinds of schemes over the years to exit. They see pension as a billion-dollar industry with plenty idle funds. After a wave of high-level lobbying, the federal government allowed them to set up a pension fund administrator (PFA) in 2013. But they are still subject to regulation by PenCom. To take the funds off the eyes of PenCom, the police are lobbying yet again that they be exempted from the contributory scheme, like the armed forces. However, as I have noted, the armed forces are expressly exempted by law.
There are reports that some retired deputy inspectors general (DIGs) and assistant inspectors general (AIGs) have been enrolled on IPPIS to enjoy “pensions for life”. This was never part of the pension guidelines or the law. It is alleged that some are collecting from both sides — the IPPIS and the police PFA. These are the things that depress you about Nigeria. We do not want the system to work. When revolutionary policies are put in place, our first instinct is how to subvert them. That is when you see us at our best: plotting, scheming, lobbying, campaigning and politicking to punch holes for selfish purposes. We hardly see things from the prism of progress and development.
Even with Pensions, It’s All Politics, the above is an an extract from Simon Kolawole’s upcoming book titled “Fellow Nigerians, It’s All Politics”.
Simon Kolawole is a Nigerian journalist, public speaker and media entrepreneur. He is the founder and chief executive officer of Cable Newspaper Limited and Nigeria’s Independent online newspaper.
You can pre-order the Book on TheCable here
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