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Resolve pension arrears, prevent future financial crisis, PenCom tells states

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Resolve pension arrears, prevent future financial crisis, PenCom tells states
Written by Areatatafo

Resolve pension arrears, prevent future financial crisis, PenCom tells states

By Victor Ahiuma-Young

The National Pension Commission, PenCom, has told state governments that the Contributory Pension Scheme, CPS, offers a long-term solution to the pension liabilities that many states currently face.

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According to the Commission, by failing to address pension arrears, states are inadvertently creating a financial burden for future generations, as these liabilities will continue to grow.

PenCom advised states and local governments to implement the CPS to guarantee a pension-secure Nigeria.

In a statement, the Commission decried the non-adoption of the CPS by many states, saying that the Pension Reform Act, PRA, 2014, in Section 2(1), stipulates that the CPS applies to all public sector employees across the Federation, including the Federal Capital Territory, states, and local governments, as well as the private sector.

PenCom informed that, in line with the 1999 Constitution of the Federal Republic of Nigeria (as amended), state governments have the constitutional right to legislate on pension matters within their jurisdictions.

The Commission explained that state governments are required to domesticate the CPS by enacting appropriate pension laws within their states.

It recalled that in August 2006, the National Council of States adopted the CPS for all states and local governments, noting that PenCom developed a Model State Pension Law, enabling state governments to modify it according to their unique needs.

The statement explained that PenCom reviews draft state pension laws and guides states throughout the implementation process.

PenCom expressed concern that many states are yet to implement the CPS, insisting that for a state to implement the CPS in full, the state is required to enact a law on the CPS, establish a Pension Bureau, register its employees with Pension Fund Administrators, PFAs, and commence remittance of pension contributions.

The statement said, “The state is also required to carry out an Actuarial Valuation, commence funding of Accrued Pension Rights, procure Group Life Insurance for its employees, and open and fund a Retirement Benefits Bond Redemption Fund Account with the Central Bank of Nigeria, CBN, or PFA.”

PenCom commended the following states for their exemplary implementation of the CPS as of 31 December 2024: Lagos, Federal Capital Territory, FCT, Osun, Kaduna, Ekiti, Edo, Ondo, Delta, Benue, Anambra, and Jigawa.

“These states have set the benchmark for sustainable pension administration by ensuring that retirees receive their entitlements promptly. They are consistently remitting both employer and employee pension contributions under the CPS. Meanwhile, Jigawa State remits contributions under the Contributory Defined Benefits Scheme, CDBS.

“Several states have enacted laws to adopt the CPS but have not yet made significant strides towards implementation. These states include Abia, Adamawa, Bauchi, Bayelsa, Ebonyi, Enugu, Gombe, Imo, Kano, Katsina, Kebbi, Kogi, Nasarawa, Niger, Ogun, Oyo, Rivers, Sokoto, Taraba, and Zamfara. PenCom urges these states to accelerate their efforts toward full implementation of the CPS.

“This includes the timely remittance of both employer and employee pension contributions. By taking decisive action, these states can align with the pacesetters in ensuring a secure and sustainable retirement scheme for their workforce.

“However, PenCom observes that the following states have yet to commence implementation of the CPS: Akwa Ibom, Borno, Kwara, Plateau, Cross River, and Yobe. PenCom strongly encourages these states to expedite the enactment of their CPS laws and take immediate steps toward full implementation to ensure a secure and sustainable pension system for their workforce.

“The transition from the Defined Benefits Scheme, DBS, to the CPS at the state and local government levels is both a significant and inevitable step. Even states that have not transitioned will ultimately need to adopt the CPS. The scheme is designed to ensure that all retirees receive their benefits in a timely manner, providing a sustainable and secure retirement for all public sector employees.

“The CPS offers a long-term solution to the pension liabilities that many states currently face. By failing to address pension arrears, states are inadvertently creating a financial burden for future generations, as these liabilities will continue to grow. Adopting the CPS now will help states avoid these escalating costs and provide a more secure financial future for both retirees and taxpayers.

“Moreover, the CPS ensures fiscal discipline by accurately determining and systematically settling pension obligations while also making funds available at the point of retirement for the prompt payment of benefits. This prevents the accumulation of pension arrears, contributing to the financial stability of the public sector.

“The Commission remains steadfast in its commitment to driving nationwide compliance with the CPS. The Commission will continue to engage with non-compliant states, providing necessary guidance, advisory support, and technical expertise to facilitate their transition.

“PenCom maintains that a pension-secure Nigeria can only be realized when all states demonstrate commitment by fully embracing the CPS. The Commission expresses its commitment to the effective regulation and supervision of the pension industry in Nigeria.”

The post Resolve pension arrears, prevent future financial crisis, PenCom tells states appeared first on Vanguard News.

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