Stanbic IBTC pension – my PFA

For centuries, it has been the practice for either employers, government or both to extend to their aged retired workers some monthly “stipend” to keep body and soul together. This  is often paid to the retiree throughout the remaining part of his life as a means of appreciating the aged for serving the state or the enterprise with all the vigor and energy of his youthfulness. Pension – whatever the origin – becomes the manna to which workers, especially the blue-collar and the lower ranked white-collar ones, look towards.

With the promulgation of the Pension Reform Act (PRA) in Nigeria in 2004; it becomes mandatory for both public and private (exceeding 5 employees) enterprises to engage in contributory pensions scheme where both the employer and the employee are required to contibute a minimum 7.5% of the employee’s income into a retirement savings account (RSA) to be held with a pension fund administrator (PFA). The contributions into the scheme are expected to be invested, with the objectives of safety and maintenance of fair returns on amount invested, through vehicles already specified under Section 73 of the Act. Perhaps, in order to cut the risk of mismanagement or “mysterious” disappearance of funds, the Act provided that the fund and assets of the pension fund are to be held in trust for the employees by a pension assets custodian (PAC). Though I’m yet to understand the period when the Custodian takes possession of the assets from the PFA – I only know that the Custodian receives the contributions (from the employer) on behalf of the employee and passes same on to the PFA.  In order to ensure some level of control, the operations and management of both the PFA and the Custodian are to be guided by the National Pension Commission (PenCom), a body corporate established to regulate, supervise and ensure the effective administration of pension matters in Nigeria.

However, the incidents of recent months concerning huge pension frauds unearthed by both Economic and Financial Crimes Commission (EFCC),  and the Senate give rise to some justified concern of how really safe people’s pension are. The Police and the Power Holding Company of Nigeria (PHCN) pension frauds are being reported to the to tune of  several billions. What is supposed to be many people’s hope of continued survival after years of labor is practically being fraudulently scooped away by some heartless few for their personal gains. Yet they will keep summoning the pensioners for periodic verification, making them to stand on long queues, and some dying out of not only exhaustion, but hunger and regret of having to spend their lives in the service of whoever and whatever. You would probably appreciate the pains of the pensioners if you have an aged one looking forward to the monthly crumbs which Jairam Ramesh, an Indian cabinet minister, called “an insult to the dignity’ of the elderly; going through the humiliation of being tossed around for documentation and verification, only to hear that the so called pot of soup have been drilled. My father went through drills like that a couple of decades ago, so I know the feelings.

Though the reported frauds have all been in the public service arm of the scheme, everybody (either in public or private sector) needs to be alarmed as to whether his pension – deducted monthly from his income – is really safe. And you should be alarmed, because it’s your money. This becomes necessary noting that the same PenCom ought to oversee the “effective” administration of both sectors, and the fact that the perpetrators of the reported frauds are never docked nor prosecuted. The only thing we have seen or heard are rebukes and curses from the Senate President. It is the Section 86 of the Act (you can download the entire Act here) that says:

“Any pension fund administrator or custodian who misappropriates pension funds commits an offence and is liable on conviction to a fine of an amount equal to three times the amount so misappropriated or imprisonment for a term not less than 10 years or to both fine and imprisonment.”

yet despite having a knowledge of possible perpetrators, they continue enjoying their loots. We would not appreciate the usual Nollywood type of probe, wrist slapping, a silent whisper of “you are on your own”. We need action. We are talking about people’s livelihood here.

It is also a huge concern to me that the Act, through the Commission, does not really stress the possible effects on the contributions of workers where either the PFA , Custodian or both become distressed; or where funds are mismanaged or embezzled. We saw share prices plummeting when it became known that shareholders’ funds in some banks have been mismanaged by the directors just before Sanusi Lamido assumed CBN governorship. In fact, Sanusi opined then that the shareholders have lost their investments in the banks since the institutions had to be bailed out.

In fairness to the Act and the Commission though, there are several regular statutory examinations, checks and penalties that should safeguard the funds. But what happens in the event of undetected, colluded, or window dressed, distress, fraud or/and mismanagement? Will the pensioners face the same fate as the other banks’ investors? Lose their life savings to the system? As far as I know, it is only in the case of revocation of licences of a PFA or a custodian that the Act stressed that the entitlements of any beneficiaries of the retirement savings account under the scheme would not be prejudiced. In essence,it is only in that instance there is a mention of a possible guarantee.

In some years from now, people of my generation will be eligible to access their pension having reached the minimum age 50 as stated in the law. Do we have any guarantee that these funds will still be available by then? I mean, is my pension really safe?

Share your insights and understanding of this concept by dropping your comments below.