Expert Defends Contributory Pension Scheme
Faculty, staff and students of the Department of Banking and Finance, Covenant University were enlightened on the new Contributory Pension Scheme in operation in the country, by the Head, South West, National Pension Commission, Mr. Mohammed Umar, at a Town & Gown interaction recently organized by the Department.
In his presentation titled, “Overview of the Contributory Pension Scheme”, Mr. Umar explained the need for a shift to the new contributory pension scheme that was introduced in 2004 for both public and private sector workers. This new scheme, according to him, created an avenue where employees were able to save and receive benefits when due.“Prior to the enactment of the Pension Reform Act 2004, pension schemes in Nigeria had been confronted by many problems,” Mr. Umar informed all in attendance. “The Public Service operated an unfunded Defined Benefits Scheme and the payment of retirement benefits were budgeted annually. In many cases, even where budgetary provisions were made, inadequate and untimely release of funds resulted in delays, accumulating arrears of pension payment rights. It was obvious therefore, that the Defined Benefits Scheme could not be sustained,” he continuedMr. Umar explained that in the private sector, however, many employees were not covered by the pension schemes put in place by their employers and many of these alternative schemes were not funded. This scenario necessitated a re-think of pension administration in Nigeria by President Olusegun Obasanjo’s administration. Subsequently, the administration initiated a pension reform in order to address and eliminate the problems associated with pension schemes.He further highlighted the benefits of the Pension Reform Act of 2004, adapted from the Chilean Pension Model; to be contributory, fully-founded, personalised, potable with the aid of a Personal Identification Number (PIN), and encouraging of job mobility. “Pensioners are no longer at the mercy of the employer,” he stated. “They are assured of regular payment and contributors also have the freedom to choose administrators. It encourages savings and imposes fiscal discipline,” he remarked.He also mentioned some personnel that are exempted from this new pension scheme; including military, and security agency personnel as well as Federal University Professors. Concluding his presentation, he said that 130,000 retirees are currently receiving pensions and other countries such as Ghana and Malawi have adopted the Nigerian Pension Scheme Model.Earlier in his remarks, the Head of Department, Banking and Finance, Dr Ailemen Ikpefan, noted that the Town & Gown interaction was designed to help the students acquire relevant knowledge about the industry, develop network connections and bridge the professional gap between the industry and the institution.Also in attendance were members of the Department of Banking and Finance as well as two members of the Directorate of Media and Corporate Affairs.