Workers Face Bleak Future, As New Pension Scheme Struggles

THE hope that the Contributory Pension Scheme adopted in 2004 would resolve the perennial problems encountered by pensioners after years of meritorious service might have been outshined by contraventions created by those who should implement the scheme.

Today, there worry that a situation where the senior citizens of the go back to menial jobs to cater for themselves or, sometimes, result to beggarly behaviours (in a country they spent their youthful strength to serve) to feed might not stop in the nearest future unless the new scheme is retooled and its compliance level raised.

At a foremost Pension Fund Administrator (PFA), last week, a staff of a stock broking firm who claimed he had been on the company’s payroll for 18 months, painted a gloomy picture of how many organisations violate the policy at will. The staff, who brought a cheque for four-month remittance of the company’s staff whose accounts are managed by the PFA, disclosed that it was the first time in 18 month deductions from his salaries would be remitted. The cheque was attached with a schedule, which read payment for four months – June, July, August and September 2010.

According to him, the matter had been raised at the company’s staff/management meeting several times with the management waving it aside. He noted that it was not until the company received a warning letter that it quickly raised the four-month remittances he came to pay.

He narrated: “I kept asking the accountant why my account had not been credited a year after I joined the company. Throughout the time, deductions were made from my salaries. At a point, I raised the matter at a staff meeting but the management just waved it aside. I raised it subsequently but nothing was done.

“I was surprise last week when I heard that a cheque was raised for four months. It sounded like a joke because the management never really paid serious attention to the matter. It was later when I asked that a colleague told me that a letter was sent to the company that it would be sanctioned if it didn’t comply with the directive. Now that it reluctantly paid four months, I don’t even know when the next payment will come.”

A staff of the PFA told The Guardian that the problem encountered by the staff was common among many working class Nigerians, adding that some companies are currently in frantic move to avert the impending stiff sanction being proposed by the National Pension Commission (Pencom).

She said, “The problem is that most staff are aware about the scheme but they are afraid to challenge their employers. Nobody can claim that he does not know the essence of the scheme because we do a lot of marketing; people also believe it offers more hope for employees than the old system. But when you believe your present survival is more important than your future, you can sacrifice the future. People want to keep their jobs, which is the reason they can’t revolt against non-complying employers. That is what is happening now.

“Employees are not challenging their employers over the issue. But what you hear often is ‘the PFAs are not transparent; my PFA does not credit my account.’ People think as soon as salaries are paid, their contributions and the employers’ contributions automatically go into their accounts. How do you explain a situation where a company is just remitting contributions deducted about a year ago? People don’t know these issues.

“If I tell you how reputable companies we their employees’ accounts but which are not remitting you will be surprised. There are accounts that were opened over two years ago, which nothing has been paid into. But the staff will come, demanding that they want to withdraw their accounts to another fund administrators. What are you withdrawing when your account is zero Naira? They are often shocked when we tell them that their accounts are zero Naira. Employers remove the 7.5 per cent and use it for other things instead. Some of them just believe they will remit it in bulk when the economy improves. But they are actually surcharging the staff because that is against the spirit of the scheme.”

How is an employee surcharged when his contributions as well as his employer’s contributions are not remitted timely? Like any investment vehicle, the funds are invested by the PFAs, thereby helping contributors to build wealth that will take care of them after active service years.

An operator noted that savings of an employee ordinarily could only pay take care of his 10-year post-service salaries. However, with the accruing interest, 18-year salaries are guarantied to the senior citizens.

This is where employees whose contributions are not remitted as at when due lose. They miss the opportunity to use their savings to create additional wealth. For instance, an operator noted that when his company started in 2006, a Naira was equal to a unit of the investment vehicle, which is unitised just like in the case of the equity market. He said that those who contributed then would have grown each Naira saved to N1.70k today assuming a unit is N1.70k whereas a new contributor needs N1.70k to get a secure the same unit.

There is an allegation is that companies that habitually delay remittances convert the funds into other investment options at the expense of the interests the money would have yielded for the owners. Sources said this practice is most common among financial services and small and medium enterprise (SME) and financial services operators.

It was also learnt that public sector records the highest rate of default as regards non-remittance. It was disclosed that some organisations in these categories have not made remittances since the scheme came on board.

“I can tell you authoritatively that many public companies have not remitted a kobo into their staff’s accounts since the scheme commenced. We maintain accounts belonging to some of them; I am sure of what I am saying. When the employees come to complain, we simply tell them to sort it out with their employers. We can only do normal marketing and follow-up but we cannot force employers to pay.

“By the design of the scheme, we don’t even market to organisation because an employee is at liberty to chose a preferred PFA. So it is worrisome when an account holder accuses his PFA of non-transparency when his account is not credited. Credited with what when no money is paid?” questioned a source.

This is said to be raising fear that unremitted funds in the case of the public sector must have gone into private pockets. But an operator noted that they might have not been diverted but left in the coffers of the companies owing to the usual lackadaisical attitude among public servants.

Meanwhile it is a part requirement that all organisations wishing to bid for a contract with any of the Federal Government ministries, departments and agencies (MDAs) must provide evidence of implementation of the Contributory Pension Scheme.

Hanging funds is another worrisome vice that is taking shine out of the scheme, investigation revealed. Findings suggest that a large portion of the funds remitted is in roaming form (savings without destination). Two major reasons are said to be responsible for this.

It was explained that when a company deposits cheque for remittance without attaching schedule containing names and pins of the benefiting staff, the destination accounts remain unaccredited for as lone it will take the payer to send the specific details.

“It is like you when you pay money into somebody’s bank account without stating the account number. Yes, he has account with the bank but how can the bank post the deposit without the account number? There are companies who send cheques without stating the staff’s pin number; no PFA can post that money. Yes, it is in the company’s account but it is hanging,” explained a PFA marketing executive.

The second reason indentified, which is said to be more common, is when an employee changes job without a notification by the new employer that the individual is enlisted in its payroll. It was gathered that PFAs do not credit the Retirement Savings Account (RSA) of staff in this category until clarification is obtained.

Daily hundreds of Nigerians besiege PFAs’offices asking for authorisation for change of administrators. This, according to observers, is caused by poor understanding of the working of the system, transparency gap and the customer relationship mechanism adopted by specific operators.

While some fund administrators send statements of account in Naira-value format, others prepare the same in unit-value format. Also some statements specify, in detail, savings and the value of interest accrued to the capital in a specific period of time while others lump the balance. These coupled with their understanding also present variant ways savers perceive the transparency level of different PFAs. Operators say integrity has enormous impact on the speed of growth the savings enjoy.