9 things to know about the Pension Reform Bill 2014

President Goodluck Jonathan signed the Pension Reform Bill 2014 into law, consequently repealing the Pension Reform Act 2004.

The whole idea is to govern and regulate the administration of uniform Contributory Pension Scheme (CPS) for both the public and private sectors in the country.

Below are nine things about the new Act that you should know.

1. It prescribes a 10-year jail term for anybody who embezzles pension fund – at long last!

In the past, huge funds belonging to pensioners had been fraudulently diverted to private pockets due to holes in the previous act. This one explicitly prescribes that “Any pension fund administrator or pension fund custodian or person or body, who misappropriates or diverts pension funds, commits an offence under this Act …, the individual or group will also be liable on conviction to a fine of an amount equal to three times the amount misappropriated or diverted, or to a term of not less than 10 years or both the fine and imprisonment.”

2. The new Act gives more powers to the National Pension Commission (PenCom) to set new guidelines in pension management.

PenCom has the legal powers to seal offices or premises of any organisation not complying with the Pension Reform Bill. It also empowers PenCom to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time. This time, the pensions department in the office of the head of civil service of the federation would be harmonised with PenCom to reduce corruption in the system.

3. The Act provides that the mandatory coverage of the Contributory Pension Scheme in the private sector should be lowered.

This from the current mark of organisations with five employees, in order to capture a wider number of employees in the informal sector and leverage on Small and Medium Scale Enterprises. The scheme now covers private organisations with at least three or more employees. This also includes partnerships and micro enterprises that normally have less than five employees. It officially accommodates employees of private firms in the contributory pension scheme, making it possible for every person who worked in either the public service of the federation, the federal capital territory, states or local government and private sector, to receive pension benefits as and when due.

4. It envisages that the Pension Reform Act should facilitate the optimal utilisation of the pool of funds generated by the CPS towards national development.

Accordingly, provisions have been inserted in the proposed bill such that the sphere of permissible investment would be expanded to accommodate initiatives for national development, such as investment in the real sector, including infrastructure and housing development, while at the same time ensuring the safety of pension fund assets.

5. The act stipulates 15 years of experience as requirement for the appointment of the PenCom director-general.

The DG “shall be a fit and proper person with adequate cognate experience in pension matters”. The DG is to hold office for a term of four years in the first instance and shall be eligible for reappointment for another term of four years and no more.

6. The Act reviewed upwards, the minimum rate of pension contribution.

It has increased from 15 per cent to 18 per cent of monthly emolument, where 8 per cent is retained as contribution by the employee and a minimum of 10 per cent by the employer. “This will provide additional benefits to workers’ Retirement Savings Accounts and thereby enhance their monthly pension benefits at retirement”. It further mandates the Pension Transition Arrangement Directorate (PTAD) to ensure greater efficiency and accountability in the administration of the Defined Benefits Scheme in the federal public service such that payment of pensions would be made directly into pensioners’ bank accounts in line with the current policy of the Federal Government.

7. It stipulates that all monies received as penalty by the PenCom shall be paid into the Pension Protection Fund

This will have been established under Section 82 of the Act. It also requires anyone who misappropriates pension fund to forfeit to the federal government, any property, asset or fund with the accrued interest on the stolen money. Also a fine of N10m will be imposed on any pension fund administrator who fails to meet the obligations of the contributors, while each of the directors of the firm will pay N5m each as fines.

8. The Pension Reform Act 2014 is in fact a fusion of earlier amendments to the 2004 Act, which were passed by the national assembly.

They include the Third Alteration Act, which amended the 1999 Constitution by vesting jurisdiction on pension matters in the National Industrial Court; the Pension Reform (Amendment) Act 2011, which exempts the personnel of the military and the security agencies from the CPS; and the Universities (Miscellaneous) Provisions Act 2012, which reviewed the retirement age and benefits of university professors.

9. The Act reduces the waiting period for accessing benefits in the event of loss of job by employees from 6 months to 4 months.

This is in order to identify with the yearning of contributors and labour. It also makes provision that would compel an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee that failed to open an RSA within 3 months of assumption of duty.