Status of Implementation of the Contributory Pension Scheme (CPS) in States as at February 2020

National Pension Commission (PenCom) has released the status of implementation of all States and the Federal Capital Territory (FCT) under the Contributory Pension Scheme as at February 2020.

State Governments continued to make slow unenviable progress in the level of implementation of the Contributory Pension Scheme (CPS). As at February 2020, a total of twenty five (25) States (Federal Capital Territory included) of the Federation have enacted pension laws on the Contributory Pension Scheme (CPS), seven (7) States are at the bill stage and five (5) States have, however embarked on pension reform other than the CPS.

Although, twenty five (25) States (FCT included) in Nigeria have enacted pension laws on the Contributory Pension Scheme (CPS), the States are at different levels of compliance. Only three (3) states (FCT included) are performing as expected under the CPS, they are Kaduna, Lagos and FCT. Though Lagos does not have a Retirement Benefits Bond Redemption Fund Account (RBBRFA) but that has not stopped Lagos from paying pension contributions and accrued rights to its employees/retirees. The other two states with notable performance are Osun and Delta states but they both dont have valid group life insurance for their employees.

Kaduna, Lagos and Federal Capital Territory are unfortunately the only states in Nigeria that have meaningfully implemented the Contributory Pension Scheme. However, there are indications that these states are not up to date in the transfer of pension contributions and or Accrued Rights to the Pension Fund Administrators (PFAs). Even the Federal Government is not up to date in remittance of Accrued Rights to PFAs, as at July 2020, FG had only released accrued rights for retirees up till March 2019. If FG and states do not transfer all the pension contributions and Accrued Rights of a retired employee to the PFA, the PFA can not pay the Retiree.

States at Bill Stage (7)
These are the states that have decided to enroll their employees under the CPS but their Bills are yet to be passed into Laws. We expect the State governments and the respective legislatures to work together to ensure these Bills are passed into Laws for the benefit of the employees of the State governments. The states are Kwara, Plateau, Cross Rivers, Borno, Akwa Ibom, Bauchi and Katsina.

States with enacted Laws on CPS (25)
These are states that have enacted laws on CPS and are legally ready to commence CPS. Most state pension laws are not readily available, in our checks only Ekiti, Kaduna and Lagos State pension laws are readily available online. Out of the 25 states only a few have moved further to have a pension Bureaux/Board or commence remittance of monthly pension contributions to proof that they are serious about adopting CPS. The 25 states that have enacted Laws on CPS are Lagos, Kaduna, Edo, Abia, Osun, Ekiti, Ondo, Anambra, Rivers, Ogun, Kogi, Taraba, Imo, Sokoto, Delta, Ebonyi, Nasarawa, Kebbi, Niger, Bayelsa, Enugu, Oyo, FCT, Adamawa and Benue.

States with Pension Bureaux/Board (14)
These are states that have established a Pension Bureaux/Board to manage CPS in the state. States Pension Bureaux/Board are mostly saddled with the responsibilities of proper computation of Pensions and Gratuities of Retirees under the old pension scheme and ensure smooth transition and remittance of Pension contributions for workers under the CPS. The states are Lagos, Kaduna, FCT, Delta, Osun, Ekiti, Ondo, Rivers, Ogun, Kebbi, Niger, Edo, Bayelsa and Benue.

States remitting ER & EE Pension (9)
These are states that their employees have opened Retirement Savings Accounts (RSA) under CPS and the states have commenced remittance of pension contributions (both employer and employee ) for their employees. The states are Lagos, Kaduna, FCT, Ondo, Edo, Anambra, Ekiti, Osun and Delta. It’s necessary to note that some states are still remitting based on the old requirements in the Pension Reform Act 2004, minimum 7.5% each for employer and employee, while some states adopt totally different percentages for their employer and employee pension contributions, instead of the minimum of 10% for employer and 8% for employee in compliance with Pension Reform Act 2014. e.g based on Kaduna State Pension Reform Law 2016, Kaduna state remits minimum 13% employer and 7% employee while Lagos State remitted 7.5% each for employer and employee uptill November 2019 before the state updated its Pension Reform law in 2019.

States Remitting only EE Pension
These are states that even though they have adopted the CPS, they are only remitting the employees pension contributions deducted from the employees’ salaries without adding the employers contributions. This is totally unacceptable and shows that the state is not serious about adopting CPS. The states are Rivers and Kebbi states.

Actuarial Valuation
An actuarial valuation is an analysis performed by an actuary that compares the assets and liabilities of a pension plan. Its gives an opinion on the amount an employer is owing its employees as pension under the Old Pension Scheme, i.e Defined Benefit Scheme (DBS). Pension Reform Act 2014 mandates employers operating any defined benefits scheme to undertake, at the end of every financial year, an actuarial valuation to determine the adequacy of the pension fund assets. Since States operate DBS before CPS and they are yet to transfer all the entitlements of their employees and even some retirees under DBS to CPS, they need to do yearly Actuarial Valuation. The states with Actuarial Valuations as at February 2020 are Lagos, Kaduna, FCT, Delta, Osun, Anambra, Rivers and Ekiti.

Availability of RBBRFA
RBBRFA, a Retirement Benefits Bond Redemption Fund Account, is an account maintained with the Central Bank of Nigeria in which Government (Federal, FCT, State and LG) will pay an amount equal to 5% of the total monthly wage bill payable to their employees in the public service. The total amount in the fund for FG or state is used to redeem any retirement benefit bond issued infavour of their employees and payments into the fund shall cease after all retirement benefit bonds have been redeemed. The states that have RBBRFA are FCT, Delta, Kaduna, Osun, Anambra and Rivers.

Funding of Accrued rights
Accrued rights are the entitlements of employees under the Old Pension Scheme from the date of first employment to the date of commencement of the new pension scheme. Usually, once employees retire, FG and state govts remit their accrued rights into the employees Retirement Savings Accounts. The states funding their accrued rights are Kaduna, FCT, Delta, Osun, Anambra and Lagos.

Payment of pension under CPS
These are states that their employees are receiving monthly pension through their Pension Fund Administrators (PFAs) under the CPS. The states are Lagos, Kaduna, FCT, Delta and Osun.

Valid Group Life
Pension Reform Act 2014 mandates that every employer shall maintain a Group Life Insurance Policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover. The group life insurance ensures that if an employee dies in active service, the insurance company will pay three (3) times the annual total emolument of the employee to his beneficiaries. States with valid group life insurance as at February 2020 are FCT, Kaduna, Edo and Lagos.

States with other Pension Schemes
These are states that are not operating Contributory Pension Scheme CPS). The states mostly operate Defined Benefit Scheme or some form of hybrid pension schemes. The states are Jigawa, Kano, Yobe, Gombe and Zamfara.