Femi Aborisade
Senior
Principal Lecturer
Department
of Business Administration & Management Studies
The
Polytechnic, Ibadan
&
Centre
for Labour Studies (CLS)
Email: aborisadefemi@yahoo.com
Introduction
Internationally,
pension reform has been a common feature of public sector financial reforms
since the 1990s. According to the OECD (2007), in Europe ,
the reforms have led to increased retirement age but a reduction in terminal
benefits. Similar reforms have been embarked upon in the developing countries
resulting in throwing poorer segments of the society into harsher economic
conditions as responsibilities for old age care are transferred from the state
to the individuals. Within the context of pension reforms on a global scale,
this paper critically examines Nigeria Nigeria
The Need for Pension Reform
On an
international scale, social security pension system is undergoing reforms in
varying degrees and dimensions. Akintola-Bello (2004) has broadly accounted for
the reforms in Latin America, Eastern Europe and Central Asia, low income
countries in Africa, North Africa , South Africa and the Middle
East . The author noted that pension reform started with the 1981 Chile experience, which was a pioneering role,
not only in Latin America but even for the
world. Other countries in Latin America had
followed in quick succession about a decade later. Akintola-Bello also observes
that the low income countries of North Africa , South Africa and the Middle East have not
embarked on major reforms, given that many of them operate partially funded
defined benefit pay-as-you-go systems and that the reforms in the rest of the
low income countries of Africa have been
minimal.
Holzmann,
Orenstein and Rutkowski (2003:1) assert that pension reform has received
greater attention in Western, Central and Eastern Europe
than any other topic on the economic reform agenda even though the process in
individual countries is uneven.
Though the contents of the reforms differ
from country to country, there appears to be a similarity. In many cases, the
reforms are characterized by a move away from single-pillar, pay-as-you-go
defined benefit systems towards multi-pillar fully funded defined contribution
systems.
A comprehensive
pan-European pension reform (in the 15 European Union (EU) countries, the 10
European Union Accession (EUA) countries of Central and Eastern Europe, plus
Croatia) is motivated by three main factors: high budgetary or expenditure
pressure and the tendency of an aging population; socio-economic changes, which
render current provisions inadequate; and European economic integration and
common currency, which tend to prompt higher levels of internal and external
migration that current retirement provisions could hardly support. (Holzmann et
al, 2003: 2).
The Conference
organized by the World Bank and International Institute of Applied Systems
Analysis (IISA) in 2001 also found that the reform changes in both the EU and
EUA countries had been characterized by the inability to finance prior
commitments and the need to make pension system more sustainable in terms of a
move towards a greater role for a privately managed funded system and the
conversion of the pay-as-you-go (PAYG) systems into defined contributory
systems (Holzmann et al, 2003:8), which are perceived to be ‘more
self-sustaining and transparent’.
As it applies to
the reform process in Europe, pension reform in Nigeria, which is codified in
the Pension Reform Act 2004, was also rationalized by arguments of rising pension
liabilities and inability to finance prior commitments, as well as the need to
make the pension system more sustainable in terms of a move towards a greater
role for a privately managed funded system and the conversion of the
pay-as-you-go (PAYG) systems into defined contributory systems.
Key Patterns of Pension Reform
Two reform
styles have emerged in each of the two divides of EU/EUA. In other words, the
two patterns of reforms can be found in both EU and EUA countries. The two
reform styles that have developed have been conceptualized as the ‘parametric’ and ‘paradigmatic’ styles. (Holzmann et al 2003:8 - 9)
Holzmann et al
(2003:8) explain that,
a parametric reform is an
attempt to rationalize the pension system by seeking more revenues and reducing
expenditure while expanding voluntary private pension provisions. A PAYG pillar
is downsized by raising the retirement age, reducing pension indexation, and
curtailing sector privilege; and a development of voluntary pension fund beyond
the mandatory social security system is promoted through tax advantages,
organizational assistance, tripartite agreements, and other means of
administrative and public information facilitation. These among other things
are happening in Austria ,
the Czech Republic ,
France , Germany , Greece
and Slovenia
There is also
the paradigmatic reform which is often called a ‘three-pillar reform’. A
paradigmatic pension reform is an attempt to
move away from the monopoly
of a PAYG pillar within the mandatory social security system. A paradigmatic
reform is a deep change in the fundamentals of pension provision typically
caused by the introduction of a mandatory funded pension pillar, along with a
seriously reformed PAYG pillar and the expansion of opportunities for voluntary
retirement savings. Among other measures, this is what three-pillar Bulgaria , Croatia ,
Denmark , Hungary , Latvia ,
the Netherlands , Poland , Sweden
and the United Kingdom
Some of the claimed
attractions of a paradigmatic reform include the possibility of increasing a
nation’s savings and investment, acceleration of the development of a nation’s
capital market institutions and therefore overall economic growth rate, which a
funded pension system could afford. Holzmann et al (2003:10) suggest that these
advantages are perhaps the reasons for the predominance of paradigmatic reform
in the EUA countries than in the EU countries.
Paradigmatic
pattern of reform predominantly characterizes Nigeria
From the
foregoing, it can be deduced that social security pension systems can be
categorized into two types, namely, the Defined Benefit (DB) and the Defined
Contribution (DC) systems. The DB system refers to the PAYG system where
benefits are predetermined. These may be in the forms of lump sum benefits and
benefits related to previous earnings. The extent to which the benefits are
actually funded varies from country to country and overtime, even though the
partially funded DB system tends to be most common (Akintola-Bello, 2004). In
the case of Nigeria, the benefits side was characterized by two components of
payments – lump sum benefit in the form of gratuity, based on the number of
years of service and the terminal compensation package, and monthly pension payments
guaranteed for life, the rate of payment being dependent on the length of years
of service (Ozo-Eson, 2004).
The DC system on
the other hand refers to a fully funded ‘actuarially fair’ system, meaning that
the assets match liability at any given time. Akintola-Bello (2004, 47-48)
explains that the term ‘actuarial’ refers to the long-run financial stability
(viability) of the system. A stable system is said to be in ‘actuarial balance’
when there is a relationship between contributions and benefits at the
individual level. In reality, there are different degrees of actuarial
fairness. Also, both the unfunded PAYG and the funded DC systems can be either completely
non-actuarial or actuarially fair.
Motivation for Pension Reform: The Political Economy of
Pension Reform
Various scholars
have attempted to theoretically explain the causative likely triggers of
pension reforms. They include: the character of political leadership, pension
system and debt crises, the balance of power between reform advocates and
opponents, weak structures of governance, the combined roles of domestic and
external economic and political influences, the influence of neoliberal ideas, relationship
between international demonstration effects and domestic policy choices, and
the role of international organizations in cross regional diffusion of ideas
and models. These factors and how they apply to the particular Nigerian
experience are examined below.
Studying four
countries in both Latin America and Eastern Europe, namely, Argentina, Bolivia,
Hungary and Poland, Muller (2003: 47 -78) identifies five likely variables that
could trigger reform – dynamic political leadership, the role of international
financial institutions, pension system crisis, intelligent reform strategy
design, and the respective power or powerlessness of reform advocates and
opponents.
Of all the five
variables, Muller finds the role of political leadership to be critical in the
four case studies. In particular, she finds that paradigmatic reform is often
triggered by new actors being involved in the process. In addition, while
severe financial crisis may strengthen the position of the finance ministry,
high foreign debt may enhance the arguments of international financial
institutions pushing for reforms. She also reports that the state-labour
movement relationship could also facilitate or hinder reforms.
Some of the
factors identified by Muller are relevant in analyzing the pension reform
process in Nigeria
On a different but
related aspect, Ney (2003: 79 – 110) argues that contrary to previous political
economy literature, which portrayed democratic structures and processes as
obstacles to changes, pension policy changes had never been very democratic.
Rather, it had been monopolized and manipulated by small policy networks, which
operated in backrooms.
The findings and
perspective by Ney are confirmed perfectly in the recent Nigerian experience.
With the termination of military dictatorship in May 1999 and the introduction
of representative system of governance, it is assumed that the process of
law-making or changes in policy-making should reflect democratic norms. But as
it had been noted in the preceding paragraph, the inputs of labour and
organized private sector, were not taken into reckoning in the new legal
framework governing pension administration in Nigeria
The work of
Chlon-Dominczak and Mora (2003: 131 -156) among other findings posits that the
identity of the foreign pension reform agenda setter – whether the World Bank,
the United States Agency for International Development (USAID) or the
International Labour Organization (ILO) - does not matter. Instead, the role of
domestic actors, depending on the depth of preexisting pension system crisis, is
more significant in the reform process. Chlon-Dominczak and Mora (2003) also
find that there is no strong relationship between institutional arrangements
and implementation of pension reforms, noting that reforms have occurred
equally in authoritarian and democratic countries. Rather, they argue that the
influence of ideas, particularly the influence of neoliberal ideas, is more
decisive as a causative factor to trigger pension reform.
The postulation
of Chlon-Dominczak and Mora (2003) that the role of domestic actors is more
vital than the influence of foreign pension reform agenda setter could be said
to be half-truth. Rather than overrating the influence of one over the other,
it might be more useful to understand that endogenous and exogenous political
influences complement each other in the reform processes. This is the conclusion that could be drawn from
the deep reflections of Arundhati Roy (2004: 4-5) who explains as follows:
The World Trade Organisation, the World Bank,
the International Monetary Fund, and other financial institutions like the
Asian Development Bank, virtually write economic policy and parliamentary
legislation….. All this goes under the fluttering banner of "reform."
… Time and again we have seen the heroes of our times, giants in opposition,
suddenly diminished. President Lula of Brazil
Why does this happen? It is neither true nor useful to dismiss Mandela or Lula as weak or treacherous people. It's important to understand the nature of the beast they were up against. The moment they crossed the floor from the opposition into government they became hostage to a spectrum of threats - most malevolent among them the threat of capital flight, which can destroy any government overnight. …. Radical change cannot and will not be negotiated by governments; it can only be enforced by people. By the public. A public who can link hands across national borders.
Why does this happen? It is neither true nor useful to dismiss Mandela or Lula as weak or treacherous people. It's important to understand the nature of the beast they were up against. The moment they crossed the floor from the opposition into government they became hostage to a spectrum of threats - most malevolent among them the threat of capital flight, which can destroy any government overnight. …. Radical change cannot and will not be negotiated by governments; it can only be enforced by people. By the public. A public who can link hands across national borders.
However, the
findings by Chlon-Dominczak and Mora (2003) regarding the influence of
neoliberal ideas are relevant in explaining the evolution and development of
pension system in Nigeria
However, what is
considered a ‘revolution’ by proponents of the reform policy has been described
by a section of the Nigerian labour movement, represented by the voice of the
former President of the Academic Staff Union of Universities (ASUU), as
‘counterrevolutionary’ (Fashina, 2003).
Evolution of the Pension System in Nigeria
To determine the
direction of changes in pension reform, it is apposite to trace the development
of pension system in Nigeria
It should
however be noted that before April 1974, gratuity and pension for public
servants were not treated as rights but as privileges. The applicable law
provided that ‘no officer shall have an absolute right to …pension or gratuity’
[Section 6(1)]. As from 1974, they became rights to which a public servant who qualified
for them was entitled against the government. The pension scheme for civil
servants was financed, from government general revenue as may be appropriated
in annual budgets, on a pay-as-you-go basis. It was neither from payroll tax
deductions from employee salaries nor from any Fund specially set up for the
purpose. In that context, pension benefits were regarded as deferred element of employment compensation
package. Government parastatals however tended to operate separate funded
schemes which required setting aside on an annual basis, a percentage of the
total basic salaries of their staff in a special Fund under the management of a
Board of Trustees.
Under the
Pensions Act of 1979, both gratuity and pension for the public sector worker
were salary rate-related and were financed wholly by the government without
contribution by the workers.
The National
Provident Fund Act initially provided for private sector pension schemes. It
was however essentially a savings scheme. Originally, the National Provident
Fund (NPF), a contributory scheme, which was established in 1961, also covered
public servants. It was wound up for public servants after it had lost N17bn in
corruption (Fashina, 2003). The weaknesses in the National Provident Fund (NPF)
led to the establishment of the Nigerian Social Insurance Trust Fund (NSITF)
through Decree No 73 of 1993. The NSITF, a contributory scheme involving
contributions by both the employees and employers, aims at creating limited
social security, covering aspects such as pension, invalidity, death, accident
and disability benefits. In addition to the NSITF, there are also several
in-house arrangements in the private sector (Ozo-Eson, 2004: 85-86). Unlike the
public sector, most in-house pension schemes in the Nigerian private sector had
always been based on contributory system by which both the employers and
employees funded the schemes. The employees contributed a percentage of their
monthly salaries, subject to a maximum while the employers equally contributed
a percentage of employees’ salary to the scheme. Under the NSITF before the
Pension Reform Act 2004 became enforceable, this was 3.5% and 6% contributions
by the employee and employer, respectively. Considering the paltry benefit
resulting from the statutory scheme, individual companies tended to operate
company administered contributory gratuity schemes to supplement the statutory
retirement gratuity scheme. The previous pension scheme in the private sector
also provided for a lump-sum cash payment upon retirement, among other
benefits.
However, unlike
the trend in the private sector, employees in the public sector enjoyed a more
guaranteed security of tenure, with
guaranteed entitlement to pension and gratuity – the major advantage of the
public sector over the private sector. Once confirmed after the probationary
period, the employee’s job was secured until retirement age unless employment
was determined by either party by following the established due procedure. This
is derived from the doctrine of ‘employment with statutory flavour’. Contrary
to the practice in the public sector, the tendency in the private sector is
that the employer has the right to hire and fire at will, with or without any
reasons.
The maximum
monthly pension entitlement after retirement under the NSITF was 65% of past
salary level while for Federal Government employees, it was 80% of last salary
earned (Casey and Dostal, 2008).
Olayiwola (ND:
Internet source) has summarized and categorized the types of pension systems in
Nigeria
- The fully Unfunded Defined Benefit (DB) Scheme, in the civil service
- The Defined Contributory (DC), scheme for employees in the organized private sector, administered by the NSITF
- The Self-Administered Scheme in government parastatals and the private sector, and
- The Insured Scheme by individuals administered by pension Fund management or Insurance companies
The nature of
the pension reform, pursuant to the Pension Reform Act 2004 and why the
Academic Staff Union of Universities (ASUU) perceives it as a retrogressive
piece of legislation from employees’ point of view may also be comprehended by
the nature of the concerns of the government expressed in an undated document
called ‘Blue Print on the Contributory Scheme’. The document is a summary of
proceedings at the National Workshop on Pension Reforms, which held on 11 – 13
September 2001. From the Federal Government point of view, the previous pension
system had to be reviewed because ‘increasingly, the number of officers on
pension payroll may in the next few years outnumber those in active service. At
the moment, the Federal and State Governments are bearing the cost of pension
hundred per cent under the ‘Pay-As-You-Go’ system’. (FGN, 2001). For a regime whose
economic policies tend to be more job-taking than job-creating, it is
understandable if measures are taken to reduce the pension-induced financial
‘burden’. The former President of the Federal Republic of Nigeria, Olusegun
Obasanjo, made this point in his address to the said National Workshop on
Pension Reforms, which held on 11 – 13
September 2001 – that ‘there should be a new pension scheme that can endure
economic depression’. The then President
also expressed concern for a situation in which ‘in some of our sectors, the
pension bills are as high as the bills for wages and salaries. This is neither
feasible nor sustainable … The pension bill has continued to grow
phenomenally (and) given the growing
demand from other economic sectors, the government will need to share the
burden’(FGN, 2001).
From the
foregoing, the findings of Chlon-Dominczak and Mora (2003) with regard to
neoliberalism as a factor triggering pension reform is applicable to explaining
the Nigerian pension reform process, which has brought with it the following –
abolition of gratuity, abolition of the PAYG system, abolition of payment of
pension for life and introduction of contributory system, privatization of
pension management, etc - measures which are critically analyzed later on in
this paper in the course of dissecting the Pension Reform Act 2004.
Adesina (2007:
Personal Communications) also shares the concern that the reform of social
policies in Africa should be seen as a
neoliberal agenda, which goal is to roll
back the state. To this extent, the reforms, which include pension reform,
should not just be seen as ‘World Bank’.
For Jimi Adesina, ‘It is more analytically and politically more
worthwhile seeing this as part of a wider class project within which to
understand the ascendance of market-transactional logic among the local
petty-bourgeois and bourgeois class elements; hence the internal/endogenous
economic and political forces that are driving the neoliberal project’. Adesina’s
conclusion is irresistible when the findings of Akintola-Bello (2004) are borne
in mind with respect to the uses to which governments, in varying degrees, had
deployed accumulated pension funds in the 1960s, ‘70s and early ‘80s.
Akintola-Bello
(2004:54-56) shows elaborately how in the past, in almost all countries,
pension reserves had been used to achieve social, economic and development
objectives. These could be in the form of policy directives for pension
reserves to be given as special loans to government as in Korea; a percentage
of pension funds being invested in areas with a social dimension as in
Mauritius; all monies being compulsorily invested in non-marketable government
bonds as in the United States; the bulk of pension funds to be invested in
government bonds or government-guaranteed debt while a small portion is to be
invested in the private corporate bonds as in India; and investment of pension
funds to develop the productive base and projects that have developmental
dimensions as in Jordan. Investing in projects that have ‘developmental
dimensions’ had permitted the use of
pension reserves to fund personal loans for housing that met the needs of low
and medium income groups, education, health, subsidies to mortgage markets and
investment in social and infrastructures as in Turkey, Jordan, Venezuela,
Tunisia, Malaysia, Japan, Korea, Sweden, Algeria, Iran and morocco. Similarly,
a recent study of Anglophone African countries (ISSA, 1997, cited in
Akintola-Bello) shows the same trend of how pension funds were used to finance
housing development in Gambia ,
Ghana , Kenya , Mauritania ,
Swaziland , Tanzania , Uganda ,
Zambia and Nigeria
The works by
Boeri (2003: 157 – 170) and Orenstein (2003: 171 – 194) examine the
relationship between international demonstration effects and domestic policy
choices. The insights they provide help
in an understanding of the impacts of global politics on reforms in developing
countries, not only on pension reforms but also on the broader social policy
models in transition and/or developing societies.
Boeri (2003)
argues that the choice of social policy models in transition countries is
influenced by geographical proximity to the EU countries. His work shows that
countries with a greater chance of EU accession adopted social policy models
that were more in tune with those of EU member states. Orenstein (2003) also analyses the global
spread of paradigmatic pension reform. Drawing on the literature concerning
diffusion of innovation, he posits that pension reform should not be seen
simply as a result of domestic political processes but also as a product of
global patterns of ideational innovation and diffusion. Countries tend to
follow the model of innovative leaders in their regions. Hence, the larger,
richer and more industrial counties tend to innovate first and smaller and
poorer countries tend to lag behind.
Orenstein (2003)
also shows that international organizations have played a major role, particularly
in cross regional diffusion of ideas and models. Orenstein (2003) explains for
example that the International Labour Organization (I.L.O) gave a major boost
to pension system creation in the years after the Second World War while the
World Bank has played a leading role in diffusing paradigmatic reform at the
present time. Orenstein (2003) points out certain notable differences in the
processes of creation of pension and the diffusion of its reform. While Germany was the leader in the first phase of pension
creation, the leader in the spread of paradigmatic reform was Chile
The insights
offered in the works of Boeri (2003: 157 – 170) and Orenstein (2003: 171 – 194)
are confirmed in the Nigerian experience. The trade unions have had to
constantly rely on the provisions of Conventions and Recommendations adopted by
the International Labour Organization (ILO) in their strivings to maintain the
universal minimum standards in working and living conditions that have been set
by the I.L.O. and the tendency by the Nigerian judiciary is to hold that where
there is variation between international law and domestic law, the
international law or treaty prevails.
From the
foregoing, it is clear that though there are certain differences in the
contents and speed of reform, there are also indisputable similarities in the
reform processes in Europe and the developing
countries, particularly in respect of the rationale for reform, the typology of
reform changes and the political economy of pension reform. In particular, the
literature review has shown that pension reform is a globalized idea, which is
influenced by neo-liberal ideology.
The relevance
and potency of the conclusions drawn from the literature review are further
reflected in the analysis of certain key sections of the Act undertaken below.
A
CRITICAL ANALYSIS OF THE PENSION REFORM ACT 2004
As stated
earlier, paradigmatic pattern of reform predominantly characterizes Nigeria
Though this
paper is essentially Nigeria-specific, there is a sense in which the
fundamentals are applicable to the processes of pension reform internationally.
The theoretical underpinning for this contention is rooted in Thandika
Mkandawire’s (2007:7) monocropping and monotasking, which characterize the
World Bank/IMF policy framework recommended for African states. Monocropping
has to do with the perception that there is only one optimum toward which all
countries must move and only one policy is good enough to attain that end. In
this regard, the idea of privatizing pension schemes as a policy is central to much
of the pension reforms internationally. Monotasking is concerned with
assignment of only one task to institutions. In this aspect, virtually
everything has to be harnessed to the task of safeguarding and promoting private
property. Even the judiciary is assigned the task of protecting private
property. According to a World Bank lawyer, judicial reform is part of a larger
effort to make the legal systems in developing countries and transition
economies more market friendly.
(Messick, 1999:118, cited in Mkandawire, 2007:9). The pension reform Act 2004 should
be located within this declared goal.
A detailed
analysis of the Pension Reform Act 2004 is presented below.
The
Contributory Nature of the Pension Scheme
Section 1 subsection (1)
of the Act provides for ‘a Contributory pension Scheme’ for payment of
retirement benefits of employees to whom the Scheme applies.
The Scheme is
‘contributory’ because Section 9 sub section (1) provides that employers and
employees in both the public service and private sector (in enterprises
employing 5 or more employees) shall contribute ‘a minimum of seven and half
per cent’ of the employee’s salary to the scheme. This means that the public
sector worker, who was not required to make any contribution before the Act,
has to start contributing 7.5% while the contribution of the private sector
employee rises from 3.5% to 7.5% and the private sector employer contribution
rises from 6% (before the Act) to 7.5%, at the commencement of the Act. In the
case of the Military, the government shall contribute ‘a minimum of twelve and
a half per cent…’ while the employee shall contribute ‘a minimum of two and
half per cent’. However, the stipulated rates could be revised upwards upon agreement between the
employer and the employee. [S. 9(6)]. Similarly, an employer may ‘elect to bear
the full burden of the Scheme’, meaning accepting to pay 15% of the employee’s
salary to the Scheme. Also, an employee covered by the Act may make voluntary
contribution to his/her ‘retirement savings account’ in addition to the
statutory rates or rates fixed out of agreement, as the case may be. [S.9(5)].
The Pension
Reform Act 2004 however provides for taxation of additional contribution
(called ‘voluntary contribution’ in the Act) to pension funds, which is in
excess of the statutory rates of contribution. Section 10 of the Act provides
that the statutory rates of contributions ‘shall form part of tax deductible
expenses in the computation of tax payable by an employer or employee under the
relevant income tax law [S. 10]. However, any ‘voluntary contribution’ made
under subsection (5) of Section 9 of the Act shall be subject to tax at the
point of withdrawal where the withdrawal is made before the end of 5 years from
the date the voluntary contributions was made [S. 7(2)]. The taxation of
‘voluntary contribution’ constitute additional tax burden, which is
unjustifiable.
The crucial
point being stressed under this sub section of the paper is that in conditions
where the current salary rates at both the Federal Level (N7,500.00 minimum
basic wage) and State level (N5,500 minimum basic wage) are considered
inadequate, establishing a ‘contributory’ pension scheme represents an indirect
cut and punitive taxation on the income of the worker. For workers whose
poverty wages may cut short their life span, they do not stand a chance of
benefiting from their savings. Where there are no guarantees of subsidized
basic social services such as education and health, an average worker finds it
absolutely difficult to make voluntary savings. The ‘contributory’ pension
scheme is therefore nothing but imposed or forced taxation, which does not
enjoy the consent of the worker. For ‘contributory’ pension scheme to make
sense, government and the private sector employers should be made to pay enhanced
living wages and salaries, which will make it convenient for the workers to pay
their share of the contributions to the Scheme. For example, the NLC, TUC and
CFTU (2004) cited the practice in Chile
An international
comparison may also serve some useful purpose here. The public/state pension
rates paid by the government in Britain are 84.25 pounds a week (i.e. 4,381
pounds a year) for a single and 134.75 a week (i.e. 7,007 a year) for retired
couples, which Socialist Worker (16 December
2006: 13) considered grossly inadequate. It should be noted that every worker
(either in the public or private sector) is entitled to state pension in the
UK. As against 7.5 % of an employee’s salary expected to be paid by the
employer in Nigeria, British employers are typically required to pay 12.8% of
employees earnings, meaning between 97 pounds a week or 5,044 pounds a year,
and 645 pounds a week or 33,540 pounds a year. This translates to 9.6% of their
labour costs compared to an average of 15.2 percent for OECD countries and an
average of 17.8% across the EU. In fact, in many EU countries, the proportions
are higher – France 29.7%; Italy (24.9%); Belgium 23.3%; and Austria 22.6%.
(Andy Wynne, 2007:1). Similarly, in 2000, Pension Bills as proportions of GDP in
selected countries were as follows: Britain 4.5%; Germany 11.5%; Italy 12.6%;
Spain 9.8% (Organization of Economic Co-operation and Development (OECD) cited
in Socialist Worker, 19 February 2005).
Abolition
of Rights to Gratuity and Pension for Life
A study of the
Pension Reform Act, 2004 reveals that the right to gratuity has been abolished,
indirectly. Though, there is no direct provision to this effect. But this is
the implied or presumed conclusion that could be drawn from the provision of
Section 8 of the Act.
Gratuity is a
single, lump sum payment. Pension is a periodic payment, normally on monthly
basis for life, until the changes made in the Pension Reform Act, 2004.
Under the Pension Reform Act 2004, the only groups of
workers who have unequivocal entitlement to gratuity are the groups exempted
from the Act. [S. 8(3)]. The said workers are ‘any employee who at the commencement
of this Act is entitled to retirement benefits under any pension scheme
existing before the commencement of this Act but has 3 or less years to retire
shall be exempted from the Scheme’ [S. 8(1)] and ‘the categories of person
mentioned in Section 291 of the Constitution of the Federal Republic of Nigeria
1999’ [S. 8(2)]. The categories of workers exempted
by Section 291 of the Constitution of the Federal Republic of Nigeria 1999 are
judicial officers, as defined by Section 292 of the Constitution.
A judicial
officer at the levels of the Supreme Court or Court of Appeal may retire
voluntarily at the age of 65 and compulsorily at the age of seventy. [S.
291(1)]. A judicial officer at any other level may voluntarily retire at the
age of sixty years but compulsorily at the age of sixty-five [S. 291(2)].
Section 291(3) of the 1999 Constitution provides that any of the listed judicial officers
shall ‘be entitled to pension for life at a rate
equivalent to his last annual salary and all his allowances in addition to any
other retirement benefits to which he may be entitled’, provided he has
been in that position ‘for a period not
less than fifteen years’. [S. 291(3)(a). Those who have held their position
in the same categories for less than 15 years shall be entitled to the same
rate of pension stated above but ‘pro rata the number of years he served as a
judicial officer in relation to the period of 15 years’.
Now back to the issue of
gratuity. Section 8(3) of the Pension Reform Act
provides that ‘any person who falls
within the provisions of subsections (1) and (2) of this section (i.e. those
who have 3 or less number of years to retire and judicial officers, emphasis
mine) shall continue to derive retirement benefits under such existing pension
scheme as provided for in the First Schedule to this Act’. [S. 8(3)].
The First
Schedule to the Pension Reform Act 2004 contains the formula for calculating
pension and gratuity in respect of retirement.
The application
of Section 8(3) of the Act has put a category of the Academic Staff Union of
Universities (ASUU) in a precarious position. The Act not only nullifies the
Collective Agreement between ASUU and the Federal Government signed in 1992, it
has also repealed a more favourable legislation – the Universities
(Miscellaneous Provisions) Decree No 11 of 1993.
In the
Collective Agreement, it was agreed that ‘the compulsory retirement age for
academic staff shall be 65 years. Contract appointment may be given to a
retired academic staff’. On voluntary retirement, it was agreed that ‘academic
staff could retire voluntarily after ten (10) years’ service while on pension
and gratuity, it was agreed that ‘each academic staff shall be entitled to
gratuity after five (5) years of continuous service’
The Universities
(Miscellaneous Provisions) Decree No 11 of 1993 had also incorporated aspects
of the above mentioned Agreement and in fact strengthened it. It provided for
instance that ‘a person who retires as a professor having served a minimum
period of 15 years’ in that position until retirement age, ‘shall be entitled
to pension at a rate equivalent to the last annual salary and such allowances,
as the Council may, from time to time, determine as qualifying for pension and
gratuity, in addition to any other retirement benefits to which he may be
entitled’ [Section 9(a)(b)]. The Decree (now Act), went further to provide that
‘notwithstanding anything to the contrary in the Pensions Act, the compulsory
retiring age of an academic staff of a University shall be sixty-five years.
[S. 8(1)], and ‘A law or rule requiring a person to retire from the public
service after serving for thirty-five years shall not apply to an academic
staff of a University’ [S. 8(2)].
Though Section
99(1) of the Pension Reform Act does not specifically mention the above
legislation that has given legal backing to the ASUU-FGN Agreement as one of
the legislations repealed, it falls under ‘other laws’ repealed or amended by
Section 101. The said section 101 of the Pension Reform Act provides that ‘If
any other enactment or law relating to pensions is inconsistent with this Act,
this Act shall prevail’.
Implication of Exempting Certain Categories of
Employees and public officers from the Scheme Created by the Pension Reform Act
2004
As we have
analyzed above, Section 8(1) of the Act exempts two main categories of
employees from the scheme, viz:
(i)
employees who have 3 or less
number of years to retire and who at the commencement of the new Act are
entitled to existing scheme and
(ii)
judicial officers, particularly
the chief Justice of the Supreme Court and all Justices of the Supreme Court
and the Court of Appeal as provided under S. 291 of the Federal Republic of
Nigeria, 1999.
The question then
is: if indeed the new Pension Scheme is more favorable to the employees than
the previous Act, why exclude certain categories of public sector workers? The exemption clause just shows that the new
Pension Act offers less favorable benefits, if any, to employees.
Though there is
no express provision excluding employees at state and local government levels,
the employees at those levels are impliedly excluded from the scheme by virtue
of S.1(2) of the Act which states that the Act covers all employees in the
public service of the Federation, Federal Capital Territory and the private
sector/establishment where there are 5
or more employees.
Considering that
labour, pensions and gratuities are on the exclusive legislative list,
precisely items 34 and 44, conflict of laws situation is likely to develop in
this respect.
Inadequacy
of the Level of Contribution
Although the
Public Service pension scheme under the Pensions Act No 102 of 1979 and that of
1990 was non-contributory, it had a
defined benefit scale - the quantum
of retirement benefits receivable by a retiree could be determined based on
total number of years computed on the officer’s total annual emolument.
For the purpose
of the Pension Reform, the Federal Government commissioned studies to determine
the level of contribution that could meet anticipated gratuity and pension
benefits. The actuarial reports indicated that for adequate funding of the
public service scheme, 25% of gross emolument of all Government employees
needed to be set aside annually to meet existing and maturing gratuity and
pension liabilities (Summary of Proceedings of the National Workshop on Pension
Reform, 2001). However, the Pension Reform Act stipulated a minimum of 15% of
total emolument shared on the basis of a maximum of 7.5% by the employee and a
minimum of 7.5% by the employer. This points to the fact that the level of
contribution is inadequate, ab initio.
Ambiguity
about Minimum Retirement Age
In the public
sector, the statutory retirement age is either 60years or 35 years of service,
whichever comes first. In the private sector, the effective key criterion
varies between 55 and 60 years. The factor of 35 years of service does not
apply strictly to the private sector. After retirement, professionals with
special skills may be employed on contract basis.
Section 4(1) of
the Pensions Act (CAP 436 laws of the Federation of Nigeria) 1990 had clear
provisions on the minimum retirement age. But the Pension Reform Act 2004
contains no specific provision on same. It however stipulates that no person
shall be entitled to make any withdrawal from his retirement savings account
before attaining the age of 50 years [Section 3(1)]
The pertinent
question therefore is: has the new Pension Act reduced the minimum retirement
age from 60 to 50? There is a need for
clarity on the minimum and compulsory retirement ages.
Shorter or Longer Working Age Before Retirement
In industrially
developed countries, there is a tendency for trade unions to argue for shorter
or reduced retirement age so that retirees can spend a longer part of their
lives to enjoy their retirement period. On the contrary, in Nigeria
Confusion about Retirement Age that Qualifies a
Retiree to Withdraw from Retirement Savings Account
While Section
3(1) provides that no person shall be entitled to make any withdrawals from his
retirement savings account before attaining the age of 50 years, Section
3(2)(c) states a contradictory provision permitting withdrawal from the
retirement savings account by an employee who retires before the age of 50
years. Section 3(2) (C) provides as
follows:
3(2) (C) … Any employee who retires before the age of 50 years in
accordance with the terms and conditions of his employment shall be entitled to
make withdrawals in accordance with Section 4 of this Act.
What appears to
justify withdrawal from the retirement savings account by a retiree who has not
attained the age of 50 (under Section 3(2) (C) is retirement ‘in accordance
with the terms and conditions of his employment’. But that differentiating
clause between Section 3(1) and Section 3(2)(c) has merely compounded the
confusion about the minimum retirement age.
If the Act concedes, as it appears, that employees could retire before
attaining the age of 50, in accordance
with the terms and conditions of employment, it means the Act appears to
accept that there is no uniform national law on the minimum retirement age
(even in the public sector) and that the issue has been ‘deregulated’ such that
employers and employees could determine the minimum retirement age through
negotiations and agreements.
What is clear
from the quoted provisions above is that there is no clear provision on the
minimum and compulsory retirement ages in the Act which replaces one that had
unequivocal provisions on the matter.
Legalized Delay in Payment of Retirement Benefits
Whereas one of
the problems, anomalies and hardships which the Pension Reform Act 2004
declares it seeks to remove is non-payment of retirement benefit as and when
due [S.2(a)], the Act goes ahead in Section 4(2) to legalize delay in the
payment of retirement benefits.
Section 4(2)
provides that when an employee retires before the age of 50 years in accordance
with the terms and conditions of his employment [S.3(2)(C)],
the employee may, on request, withdraw a lump sum of money not more
than 25 percent of the amount standing to the credit of the retirement savings
account provided that such withdrawal
shall only be made after six months of such retirement and the retired employee
does not secure another employment (S.4(2).
It does not seem
to matter to the lawmakers if the retired employee and members of his/her family
die before the expiration of six months when he/she will become entitled to
make collections from personal savings. How does that person sustain self
within the six months period?
Funds
in Retirement Savings Account: To Care for Contributors at Old Age or to Pool
Funds for the Interest of Investors?
Section 2(b) of
the Pension Reform Act 2004 states that one of the objectives of the Pension
Scheme being established under the Act is to assist individuals by ensuring
that ‘they save in order to cater for their livelihood during old age’. However, the provisions of S.4 of the same
Act suggest that the real goal of the Pension Scheme under the Act is to ensure
a pool of funds for investors, rather than the concern for livelihood and
survival of employees at old age.
For example,
S.4(1) (a) provides that:
4(1) A holder of a
retirement savings account upon retirement or attaining the age of 50 years,
whichever is later, shall utilize the balance standing to the credit of his
retirement savings account for the following benefits:
(a)
programmed monthly or quarterly withdrawals calculated on the basis
of an expected life span.
Certain
questions arise from the provision of S.4 (1) (a) above. How is the so-called ‘expected
lifespan’ of the individual to be determined? Do employees at top management
level and lower management level who belong to different income brackets tend
to have the same average life-span? What will be the criteria for calculating
the ‘expected life-span’ of individuals at lower and top levels of management? What
happens when the actual life-span is shorter than the calculated ‘expect
life-span’ – who enjoys the surplus balance? What happens if the actual
lifespan of the retiree is longer than the estimated ‘expected life-span’ - who
supplies the shortfall to maintain the retiree for the rest of his/her life?
These are critical issues not addressed by the Act.
Section 4(1) (b)
also contains another ‘benefit’ (read purpose) to which the holder of a
retirement savings account ‘shall utilize the balance standing to the credit’
of the account – ‘Annuity for life
purchased from a life insurance company licensed by the National Insurance
Commission with monthly or quarterly payments’.
While
individuals should be free to buy any form or type of insurance policy at any
time in his/her lifetime, it is curious why the Act should obligate a retired
person to compulsorily acquire a particular insurance policy by employing the
word ‘shall’ rather than “may” as in the text above.
The third
‘benefit’ (again read ‘purpose’) for which a retired person ‘shall utilize the
balance standing to the credit’ of the retirement savings account is provided
in Section 4(1) (C). – collection of ‘a
lump sum from the balance standing to the credit of his retirement savings account
provided that the amount left after that lump sum withdrawal shall be
sufficient to procure an annuity or fund programmed withdrawals that will
produce an amount not less than 50 percent of his annual remuneration as at the
date of his retirement’.
In the situation
of lack of government welfare programme to provide social services for
vulnerable groups, e.g. children and the aged, in the absence of any form of
social security as of a right, the tendency of retired persons in Nigeria is to
use the lump-sum benefit received as gratuity to invest in some form of
business activity which could yield them income to supplement their pensions to
maintain themselves and their families.
We have shown earlier that the Pension Reform Act has effectively eliminated
the right to gratuity. Section 4(1) (C)
of the Act is now reiterating that a retired person can only collect a lump sum
from the retirement savings account only if the sum left after the lump sum
will be sufficient to buy an insurance policy – an annuity – or fund periodic
pension payment which will not be less than half the remuneration the person
was receiving when in employment.
When the
combined effects of the provisions of S. 4(1) (a), (b) and (c) are considered,
it would not be difficult to come to the conclusion that the Pension Reform Act
2004 does not seem to be concerned with the care of retired persons at old age;
rather, the concern seems to be to create a pool of cheap funds for investors. The
Pension Reform Act 2004 seems set to stimulate savings for the development of
the domestic capital market in line with the concern of the economic blueprint
of the Federal Government, the National Economic Empowerment and Development
Strategy (NEEDS). The NEEDS document states that a minimum investment rate of
about 30 per cent of GDP is required to unleash a poverty-reducing growth rate
of at least 7-8 percent per annum, yet, the savings-investment equilibrium had
stagnated at about 20 per cent. In order to mobilize investible resources from
the capital market development, the NEEDS document identifies a policy thrust
to be pursued – ‘encourage the deepening of the capital market by encouraging
investment in insurance…’ (Cited in Ozo-Eson, 2004: 86).
It is within
this context that S. 73(1) and S.74 can be properly understood. The two sections make provisions for
investment of pension funds within and without the country.
S.73(1) itemizes
how the pension funds and assets ‘shall’ be invested. It provides:
73(1) Subject to guidelines
issued by the Commission from time to time, pension funds and assets shall be
invested in any of the following:
(a)
bonds, bills and other security issued or guaranteed by the Federal
Government and the Central Bank of Nigeria
(b)
Bonds, debentures, redeemable preference shares and other debit
instruments issued by corporate entities and listed on a Stock Exchange
registered under Investment and Security Act 1999.
(c)
Ordinary shares of public limited companies listed on a Stock
Exchange registered under the Investments and Security Act of 1999 with good
track records having declared and paid dividends in the preceding five years., and so on.
To show the bias
for creating a pool of investible funds rather than caring for employees at old
age, Section 9(3) of the Pension Reform Act also strengthens the bias for the
insurance sector of the economy. It
provides that:
‘employers shall maintain
life insurance policy in favour of the employees for a minimum of three times
the annual total emolument of the employee’
Without doubt,
the insurance industry hardly enjoys the confidence of ordinary Nigerians. The question can therefore be reiterated: Is
the pension scheme, as presently conceived, to take care of employees at old
age or to make available a pool of cheap investible funds?
Encouragement of Non-Remittance of Deducted
Contributions
The Pension
Reform Act encourages corruption in terms of weak penalty for failure on the
part of the employer to remit contributions (by employees and employers) to the
Pension Fund Custodian within seven (7) working days from the day the employee
is paid his salary. (S. 11(5)(b).
The employer is
empowered to deduct at source, the monthly contribution of the employee in his
employment [S.11(1) 5(a)]. The penalty
for non-remittance within seven days as stated above is payment of not less
than 2 percent of the total contributions that remains un-paid in addition to
making the remittance already due [S.11(7)].
With the weak
penalty for non-remittance, the tendency will likely be a harvest of
predominant non-remittance by employers of labour, including government. Given the high cost of funds in the banks,
employers are likely to prefer not to remit pension contributions and pay the
cost of non-remittance, if at all they would be penalized.
Minimum Pension Guarantee
Section 71(1) of
the Pension Reform Act provides that ‘All retirement savings account holders
who have contributed for a number of years to a licensed Pension Fund Administrator
shall be entitled to a guaranteed minimum pension as may be specified from time
to time by the Commission’.
The following
observations about S.71(1) above are pertinent. First, how the ‘guaranteed
minimum pension’ will be determined is not explained. Pensioners are likely to be at the mercy,
whims and caprices of the Commission that may arbitrarily fix rates that may
have no bearing with the salary structure, including the national minimum wage
obtaining in the country.
Second, in view
of the provision of S.4(1) (a) which states that the monthly or quarterly
withdrawals by a contributor will be calculated on the basis of an expected
life span, how would a ‘minimum pension
guarantee’ be met? If the rate of withdrawals based on an
expected life span is below the ‘minimum pension guarantee’ how would the
difference be made up?
Third, one of
the qualifying criteria for being entitled to a ‘minimum pension guarantee’ is
having contributed for a number of years to a licensed Pension Fund Administrator
(S.71(1). Surprisingly, the number of
years is not specified. The only
conclusion that could be drawn is that pension administration will be left to
the arbitrary regulations of the National Pension Commission.
Lack of Categorical Provision on Disbursement of
Returns on Investment of Pension Funds and Assets
Although Sections
73 and 74 of the Pension Reform Act stipulate how Pension Funds are to be
invested, there does not seem to be any categorical provision on how employee
contributors to the scheme are to benefit from accruals of the returns on
investment of pension funds and assets.
There is hardly any specific provision on the percentage of the returns
that should be paid into the employee’s retirement savings account. How and why should a set of people be
compelled to make contributions which will be invested and without any
consideration for a share of the returns on investment?
Section 47(f)
provides that the pension funds custodian shall:
undertake statistical
analysis on the investments and returns on investments with respect to pension
funds in its custody and provide data and information to the pension fund
administrator and the Commission
Surprisingly,
the Act does not make any provisions with regard to the responsibility of the
Pension Fund Custodians to render account on investments to the employee-contributors
to the Fund.
Management Structure of the Pension Fund
To manage the
Pension Scheme, the Pension Reform Act 2004 has created a complex management
structure. At the apex is the National Pension Commission (NPC) which is to
regulate, supervise, issue licenses and ensure the ‘effective administration’
of pension matters in Nigeria
Section 44 of
the Act establishes the Pension Fund Administrators (PFAs) which are empowered
to manage pension funds by opening retirement savings account for all employees
with a Personal Identity Number (PIN) and investing and managing pension funds
and assets, among other responsibilities. to employees, among other functions.
Next to the PFAs,
are the Pension Funds Custodians (PFCs) established by Section 46 of the Act.
Only a licensed financial institution could be registered as a Pension Fund
Custodian. The functions of the PFCs include receiving contributions remitted
by the employer under Section 11 of the Act on behalf of the Pension Fund
Administrators
However, Section
11(4) provides that:
the employee shall not
have access to his retirement savings nor have any dealing with the Custodian
with respect to the retirement savings account except through the pension fund
administrator.
From the above
provisions, it could be observed that the PFC is nothing but an unnecessary
duplication of the roles of the PFA. How could the PFA manage funds being kept
by another body? Why should the employee not have access to a body (PFC) that
is said to be holding fund in trust for him/her? The provision that says the
employee cannot have any access to the PFC means that the PFC does nothing but
insulate the PFA against the pressure of the employees.
By virtue of
Section 11(3), the employee selects a PFA and notifies his employer. To be registered, the PFA is expected to have
among other things, a minimum paid up share capital of N150m
(N150,000,000.00). But the PFC is
expected to be a financial institution, which in the case of banks, were
recently required to have a minimum recapitalization base of N25bn. Why the duplication of roles and bodies? Why the waste of funds and returns on
investments realized from the pension funds? Considering the recent reports of
corruption and failure of one of the recapitalized banks, the Spring Bank, due
to high level corruption in the Central Bank of Nigeria (CBN), what is the
guarantee for security of contributors’ funds held by the PFAs/PFCs? For
example, in a newspaper advertisement, the Chairman of Spring Bank PLC, Segun
Agbetuyi (2007) accused Governor of the CBN of collusion in the corruption
perpetrated by some Directors of Spring Bank and posed a pertinent question: ‘How many more of the Spring Bank odyssey do
we currently have in the belly of the Consolidation programme’ in the
Nigerian banking system? (See The Punch,
Wednesday, June 13, 2007: 44 – 45).
Transitional Bureaucratic Structures
The Act makes
provisions for transitional bureaucratic structures to co-exist with and be
supervised by the NPC.
For the public
sector, Section 30 of the Act establishes a Pension Department made up of the
existing pension boards or offices in the Public Service of the Federation and
the Federal Capital Territory
Sections 32 and
33 of the Act spell out the functions of the Department, which include
receiving budgetary allocations from Government and paying pension and gratuity
of existing pensioners and the exempted category of employees under the
previous pay-as-you-go pension scheme. Section 38 of the Act provides that ‘the
Department shall cease to exist after the death of the last pensioner or
category of employee entitled to retire with pension before the commencement of
this Act’.
The
establishment of the Department is another duplication of the activities of the
NPC and it amounts to a waste of resources, particularly bearing in mind that
the Department shall only be dissolved ‘after
the death of the last pensioner or category of employee entitled to retire
with pension before the commencement of this Act’. If the last pensioner
remains alive for the next century, would public resources continue to be
wasted on retaining the Department for the purpose of paying the pension of
that single person?
Sections 39 to
41 of the Act make provisions for transitional arrangement for the private
sector. Section 39 provides that ‘any pension scheme in the private sector
existing before the commencement of this Act may continue to exist’. However, among other things, the pension
funds and assets are to be fully segregated from the funds and assets of the
company and held by a Custodian. Every employee is given the option of
continuing under the previous scheme or joining the Scheme established by the
new Pension Act. Any employer who opts to manage its pension fund shall apply
to be registered as a ‘Closed Pension Fund administrator.’ And be subject to
the supervision of the NPC.
As in the case
of the NPC, PFAs and PFCs, there is no consideration for accommodation of the
democratic voice of the trade unions representing the employees in the
transitional structures.
Section 42 (1),
(2) and (3) of the Act also provides that the NSITF shall establish a company
to undertake the business of a Pension Fund Administrator. The funds that had
been contributed by any person before the coming into force of the Pension
Reform Act 2004 together with any attributable income are to be credited into
the retirement savings account to be opened by the NSITF for individual
contributors. However, contributors under the NSITF Act cannot access their
account until five years after the commencement of the Pension Reform Act when
the individual contributor shall be free to select the Pension Fund
Administrator of his choice for the management of the funds standing to his
credit. Section 42 is essentially a
provision in the interest of investors, not contributors. The Section merely seeks
to create an accumulation of investible funds.
As far as the
management and transitional management structures are concerned, there tends to
be an implicit assumption in the Pension Act that the implementing
transitional institutions such as the National Pension Commission, Pension Fund Custodian and Pension Fund Administrators, among others will play by the rules. Nothing can be further from the truth. Evidences abound that inNigeria Nigeria
than economic institutions expected to invest the accumulated pension funds through different forms of portfolio management. The crucial question remains: what happens to the funds of the pensioners in situations where any of these privately owned institutions collapses, either through administrative or systemic failure?
transitional institutions such as the National Pension Commission, Pension Fund Custodian and Pension Fund Administrators, among others will play by the rules. Nothing can be further from the truth. Evidences abound that in
than economic institutions expected to invest the accumulated pension funds through different forms of portfolio management. The crucial question remains: what happens to the funds of the pensioners in situations where any of these privately owned institutions collapses, either through administrative or systemic failure?
Denial of Access to Court
The Act also
denies access to court contrary to the provisions of Section 6 subsection (6)
of the 1999 Constitution, which guarantees access to court ‘in all matters between persons, or between government or authority and
to any person in Nigeria, and to all actions and proceedings relating thereto,
for the determination of any question as to the civil rights and obligations of
that person’.
Section 92(1) of
the Act provides that any employee or beneficiary of a retirement savings
account who is dissatisfied with the decision of a PFA or PFC may apply to the
NPC to review the matter. Section 92(2) guarantees speedy resolution of matters
by the NPC. Hence, NPC shall dispose of any matter within three months from the date the matter was referred to it!
Where any party is dissatisfied with the decision of the Commission, the party
may refer the matter to arbitration or the Investments and Securities Tribunal
established under the Arbitration and Conciliation Act and the Investment and
Securities Act 1999, respectively. [S. 93(1) and (2)]. The awards got under S.
93(1) and (2) ‘shall be binding on the parties and shall be enforceable in the
Federal High Court. (S.94).
However, it is
not an individual party that can approach the Federal High Court! ‘An offence
under the Act shall be instituted before the Court in the name of the Federal
Republic of Nigeria by the Attorney General (AG) of the Federation or such
officer, State Attorney General or his agent or any other legal practitioner in
Nigeria that the AG may authorize. (S. 91). So, if the Attorney General of the
Federation or the Attorney General of the State is not positively disposed to
initiating the necessary legal processes or too preoccupied with other state
matters, the aggrieved contributor suffers.
It is not only
in respect of denial of access to court that the Pension Reform Act violates
the Constitution. The idea of imposing a uniform regulation on both the private
and public sectors offends the provision of Section 173 of the Constitution,
which limits the legislative capacity of the National Assembly to pensions in
the Public Service. But the private sector employers might not have been able
to effect fundamental changes such as abrogating gratuity right without State
support. Hence, the need for government’s arbitrary, unconstitutional and
undemocratic action of disregarding collective agreements covering such issues
in both the public and private sectors.
CONCLUSION
This paper assesses pension reform processes in Nigeria
The extent of
poverty in Africa, including Nigeria Nigeria and Africa
could be associated with socio-economic insecurity – poverty, absolute want,
destitution, hunger, homelessness, disease and unemployment induced idleness -
of the vast majority of the citizens in individual countries. A pension reform,
which implies low pensions and denial of guaranteed pension for life, among
others, would further deepen the existing levels of pensioner poverty and
misery, which would have implications for degrees of corruption, commitment to
work, productivity and overall wealth creation.
As Amartya Sen
(2004) puts it, public reasoning should be foundational to public policy.
Public policy in turn means the deliberate collective public efforts which
affect and protect the social well-being of the people within a given territory
(Adesina, 2007). Indeed, as Roy (2004) points out, in India
Femi
Aborisade
References
Adesina, J. O. (2007). ‘In Search of Inclusive
Development: Introduction’ in Social
Policies in Late-Industrializers: Sub-Sahara African and the Challenge of
Social Policy (forthcoming).
Agbesuyi, S. ‘Mr. CBN Governor Sir, Please Resign
Now’ in The Punch (Nigeria
Akintola-Bello, O. (2004). ‘The Role of Social
Security in Economic Development’ in Nigeria Abuja
Boeri, T. (2003). ‘Social Policy Models in
Transition: Why are they so different from one another?’ in Holzmann, R., M.
Orenstein, and M. Rutkowski (eds). (2003). Pension
Reform in Europe : Process and Progress. Washington DC
Casey, B. H. and Dostal, M. J. (2008). Pension Reform in Nigeria London
Chlon-Dominczak, A. and M. Mora. (2003). ‘Commitment
and Consensus in Pension Reform’ in Holzmann, R., M. Orenstein, and M.
Rutkowski (eds). (2003). Pension Reform
in Europe : Process and Progress. Washington DC
Elumelu, T. O. (2005). Investment, Finance and Banking in Nigeria Summit
of the Corporate Council on Africa . Baltimore,
June.
Fashina, O. (2003). The Position of the Academic Staff Union of Universities (ASUU) on the
Proposed Act to Establish a Contributory Pension Scheme for Employees in the
Public and Private Sectors in the Federal
Republic of Nigeria
Federal Government of Nigeria
Federal Government of Nigeria
Holzmann, R., M. Orenstein, and M. Rutkowski (eds).
(2003). Pension Reform in Europe : Process and Progress. Washington DC
Korpi, W. and J. Palme (1998) ‘The Paradox of
Redistribution and Strategies of Equality: Welfare State Institutions,
Inequality, and Poverty in the Western Countries’, American Sociological Review, 63(5),
661–87, cited in Adesina, J. O. (2007). ‘In Search of Inclusive Development:
Introduction’ in Social Policies in
Late-Industrializers: Sub-Sahara African and the Challenge of Social Policy
(forthcoming).
Messick, R. E. (1999). ‘Judicial Reform and Economic
Development: A Survey of the Issues.’ The
World Bank Research Observer, 14:1, pp. 117-136.
Mkandawire, T. (2007). ‘Institutional Monocropping
and Monotasking in Africa .’ Paper presented at
the Guy Mhone Conference on Public Sector Reforms in Africa organized by
CODESRIA in Zomba , Malawi
Muller, K. (2003). ‘The Making of Pension
Privatization in Latin America and Eastern Europe ’,
in Holzmann, R., M. Orenstein, and M. Rutkowski (eds). (2003). Pension Reform in Europe :
Process and Progress. Washington
DC
Ney, S. (2003). The Rediscovery of Politics:
Democracy and Structural Pension Reform in Continental Europe in Holzmann, R.,
M. Orenstein, and M. Rutkowski (eds). (2003). Pension Reform in Europe : Process and
Progress. Washington DC
Nwabueze, B. O. (1993). Military Rule and Social Justice in Nigeria
OECD (2007). Pensions
at a Glance: Public policies Across OECD Countries, 2007 edition. OECD
Publishing.
Olayiwola, K. (ND). Pension System in Nigeria Ibadan
Orenstein, M. A. (2003). ‘Mapping the Diffusion of
Pension Innovation’ in Holzmann, R., M. Orenstein, and M. Rutkowski (eds).
(2003). Pension Reform in Europe : Process and Progress. Washington DC
Ozo-Eson, P. (2004). ‘Pension Reforms and Economic
Recovery’ in Nigeria Abuja
Palacios, R. and Whitehouse, E. (2006). Civil Service Pension Schemes aound the
World. Social Protection/World Bank (May). (internet download).
Popoola, A. O. (ND). Review of Existing Labour Laws in Nigeria Obafemi Awolowo University
Sen, Amartya (2004) ‘Graduation Address’, Rhodes
University, Grahamstown, 30 July, cited in Adesina, J. O. (2007). ‘In search of
Inclusive Development: Introduction’ in Social
Policies in Late-Industrializers: Sub-Sahara African and the Challenge of
Social Policy (forthcoming).
Socialist Worker, 19
February 2005 (www.socialistworker.co.uk/art.php?d=5875)
Socialist
Worker, 16 December 2006: 13.
The Nation. December 4, 2006.
The Punch,
June 13, 2007.
Wynne, A. (2007). ‘Reflections on Gratuities and
Pensions in Britain
[1] Paper Presented at a Workshop on Employment Law and Regulations
Organized by Resource Development Forum Ltd RDF) at Administrative Staff College
of Nigeria (ASCON),
Topo-Badagry, Lagos
State
A very good write up, educating and all encompassing.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteGratuity fund services includes advisory services as well as day to day maintenance of Gratuity Trust accounts & administration.
ReplyDeleteGratuity Fund Management System
Nice one! Am happy I stumbled into this and read it.
ReplyDelete