Proposed Amendments for Pension Reform Act 2014

The National Pension Commission has officially commenced the processes of amendment of the Pension Reform Act 2014.

The process of reviewing the Act is a long one so its expected that many more changes will be made before the new Act is released. That said, below are some proposed amendments for Pension Reform Act 2014 that have allegedly been submitted to the National Assembly and the estimated time for the release of the new Pension Reform Act.

Major proposed amendments

• Employers to pay 3 times total emoluments in case of death of staff
• NSE wont be a member of PenCom Board anymore
• PenCom Board will have power to approve PenCom budget
• PTAD Executive Secretary to be appointed by the President
• PFAs or PFCs can not have branches outside Nigeria
• Insurance companies can no longer keep custody of pension funds

Full details below,

Section 2(2), Amendment of the figure ‘15’ to read ‘3’.
“Section 2(2) of the Act, states that, In the case of the Private Sector, the Scheme shall apply to employees who are in the employment of an organization in which there are 15 or more employees” instead of 3 or more.

Section 4(4)(b) states amendment of the figure 20% to read 18%. The Section 4(1)(a) and (b) of the PRA 2014 stipulates a minimum of 10% contribution by the employer and a minimum of 8% by the employee, totaling a minimum of 18% monthly contribution in respect of individual employees. Section 4(4)(b) in stipulating that an employer may elect to bear the full burden of the monthly contribution, erroneously stipulated the total monthly contribution as 20%. There is, therefore, the need to amend the figure 20% to read 18% in order to align with Section 4(1).

Section 4(6) Deletion of the phrase “make arrangement to”, the proposed amendment would emphatically stipulate the obligation of an employer to effect the payment of claims arising from the death of any staff in its employment.

Section 19(2)(d)(ix) Deletion of ‘Nigerian Stock Exchange’. It is noted that the Nigerian Stock Exchange is a regulated entity under the regulatory purview of the Securities and Exchange Commission. It is, therefore, a misnomer to have a regulated entity on the Board of PenCom, being the regulator of the pension industry. Section 19(2)(d)(viii) of the PRA 2014 already provides for the composition of the Commission’s Board to include the Securities and Exchange Commission. Accordingly, the proposed amendment seeks to remove the Nigerian Stock Exchange from the Board of PenCom.

Section 20(2) should be redrafted to read “A member of the Board, other than the Chairman, the Director General and ex-officio members shall hold office for a term of four years in the first instance and may be reappointed for another term of four years and no more, subject to the provisions of Section 21(1) (a) to (g) of this Act. It is noted that the institutions listed in Section 19(2)(d) of the PRA 2014 are ex-officio members of the Board and their tenure is indefinite. They are, therefore, not subject to tenure of office as obtains in the case of the Chairman and the Director-General. Also, the provisions of Section 20 should be subject to the occurrence of any of the events stipulated in Section 21(1) (a) to (j), and not only paragraph (g) as stated in subsection (2).

To insert a new provision as Section 25(2)(d). The new provision would provide for the power of the Board to approve the Commission’s budget. The proposed amendment would be in tandem with subsisting Financial Regulations.

Section 42(2) should be amended to read that the appointment of the Executive Secretary of the Pension Transitional Arrangements Directorate shall be made by the President. Section 42(2) stipulates that the Management Team of the Pension Transitional Arrangements Directorate shall be appointed by the Minister. It is noted that the appointment of the Executive Secretary, who is the head of the agency cannot be made by the Minister as the power to appoint a Permanent Secretary in any Ministry or Head of any Extra-Ministerial Department of the Government of the Federation howsoever designated vests exclusively in the President in line with Sections 171 (1) and 171(2)(d) of the 1999 Constitution (as amended).

Section 72, deletion of the phrase “or outside”. It is noted that the businesses of Pension Fund Administrator and Pension Fund Custodian are undertaken within Nigeria, hence it is superfluous to allow PFAs and PFCs open branch offices outside Nigeria. Furthermore, the legal framework outside Nigeria may not permit such an arrangement. Lastly, it is noted that the Commission would not be able to monitor branch offices of PFAs and PFCs outside Nigeria.”

Section 106(4), which relates to “Board of the Commission”, was inappropriately placed in Section 106 of the PRA 2014, which relates to “Dispute Resolution”. This will be placed appropriately.

“Section 116(1), which states amendment of the phrase “in the custody of any insurance company” to read “in the custody of any Pension Fund Custodian”. This is because of the provisions of Section 56 of the PRA 2014 which stipulates that pension funds and assets shall only be held by Pension Funds Custodian licensed by the Commission. Accordingly, pension life annuity funds and assets which, by virtue of Section 120 of the PRA 2014, are pension assets must be held exclusively by licensed PFCs and not insurance companies.

When will the new Pension Reform Act be released

The first Pension Act was released in 2004, the second was released in 2014, so its naturally estimated that the 3rd should be released in 2024.

Please note that there is no official fixed date on when the new Act will be released, the Head, Corporate Communications Department of National Pension Commission (PenCom), Peter Aghahowa, on when the new Act will be released said, ”we have not agreed on anything yet. so for now we are still receiving suggestions and recommendations from stakeholders. What you are seeing now can be called speculations. This is the initial stage, all the ideas will be collated, agreed on and sent to the National Assembly, then a public hearing will be held. There is still a long way. Moreso in this Covid period, everything has been stalled, so one cannot say or be sure when the process will be ended but we have started work on it.”

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