Why Pension Reform Act 2004 needs amendment - PenCom

Continues from  last edition

The Commission submits that the National Assembly should de-emphasis the issue of qualifying years of experience and adopt the model of the CBN Act where no requirement of specific years of post-qualification experience is stipulated by the CBN Act. This is the position that is consistent with global best practice which emphasizes competency rather than years of post-qualification experience, which does not necessarily translate into capacity and capability.

b)     Staffing and Funding of PTAD (Ss. 42 – 49 of the Bill): The Bill does not provide for the staffing and funding for the FGN and FCT PTADs. Consequently, it is recommended that additional provisions should be inserted to empower the PTADs to employ their staff and make provision for their sources of funding, which should primarily be from Government subvention.

c)     Re-admission after recertification of medical fitness (S.16(3) of the Bill): The re-integration of persons certified by a medical board or suitably qualified physician upon securing another employment was made subject to Guidelines to be issued by the Commission from time to time. The purpose is to ensure that whenever such persons are employed, the onus of confirming their fitness for employment is on the employer based on extant labour laws.

d) Exemption from the Scheme (S. 5 of the Bill): Section 5(1) of the PRA 2013 included under the list of persons exempted from the Scheme, professors covered by the Universities (Miscellaneous Provisions) Amendment Act 2012 and categories of employees entitled by virtue of their terms and conditions of service to retire with full retirement benefits.

This is not the intention of the amendment. These two categories of persons are not meant to be exempted from the Contributory Pension Scheme. Rather, they will continue to be under the CPS but would, upon retirement, get their full retirement benefits. We recommend that this should be rectified to reflect the true intendment of the amendment.

Flowing from the above, there is a need to also review the provision of Section 46 and 49 of the Bill. Thus, the expression “exempted under section 8 of this Act” in Section 46 of the Bill should rightfully read “exempted under section 5(1)(b) of this Act” because the PTAD would not be responsible for payment of pension to judicial officers and personnel of the military and security services.

The benefits of these categories of persons would be administered in the case of judicial officers, by the NJC and in the case of the Military and Intelligence and Security Services by their respective pension Boards or Offices.  In all case however, PenCom shall continue to regulate and supervise their activities.

e)   Pension component of the accrued rights of retirees (S.15 of the Bill): The requirement for amounts derived from the pension reviews to be credited into the FG and FCT Retirement Fund Account respectively with the CBN is being recommended for change in order to read that the amounts so derived from such reviews shall be credited into the RSA of the retirees since they have already retired and have nothing to do with the Retirement Benefits Bond Redemption Fund.

f) Transition of Closed Pension Fund Administrators (S. 51 of the Bill): The provision should be amended such that it would guarantee the existence of CPFAs for existing employees while every new employee of the sponsor of the Scheme shall join the CPS.

g)   Requirements for PFC Licence (S. 62 of the Bill): The provision should be amended to read that applicants for PFC License shall be limited liability companies incorporated by financial institutions with the sole object of keeping custody of pension and retirement benefits assets to avoid engaging in any other activity.

Also, the requirement for a minimum paid up capital of N25bn to read a minimum paid up capital of such sum as may be prescribed, from time to time, by the Commission and wholly owned by a licensed financial institution with a minimum net worth of N25bn and an annual fidelity insurance cover for the full value of the pension and retirement benefits funds and assets it holds.

Publication of accounts

h)     Proper books of accounts and audit (S. 66 of the Bill): this is recommended for review in order to exempt CPFAs from the requirement for publication of accounts and include the sponsors of approved retirement benefits schemes under the exemption as they are also Defined Benefit schemes.

i)  Operation of branch offices by PFCs (S. 72 of the Bill): It is recommended that due to the centralized nature of their business, PFCs should not open branch offices.

j)Penalty for persistent offenders (S. 76(2) of the Bill): The provision to revoke licence of the operator in the event of persistent contravention of section 76(1) of the Bill is recommended to read “the imposition of additional penalties, including the removal of any top management staff who had knowledge or ought to have had knowledge of the commission of the offence, but failed to take action”.

k)     Acquisition of primary home under the CPS (S. 89(2): The provision on application of a percentage of the pension assets in the RSA towards the acquisition of a primary home is recommended for amendment to read that the money be applied towards the payment of equity contribution for securing residential mortgage as the term ‘primary home’ is nebulous.

l)  Operator’s Board meeting to consider the Commission’s examination reports (S. 95 of the Bill): The provision for suspension of operator licence for not convening of board meeting to consider the Commission’s examination reports is recommended for amendment to read the suspension of the operator’s board as the suspension of licence without transfer of assets under management would jeopardize the interest of the members of the schemes.

m)  Letters of Administration (S. 8(4) of the Bill): The exclusive jurisdiction of the National Industrial Court (NIC) to issue Letters of Administration for payment of retirement benefits may result in multiplicity of Letters of Administration in respect of the estate of one deceased person. It is therefore recommended for deletion.