Pension Scheme: Senate, PenCom Clash Over Police Exemption

The Senate and Pension operators clashed over the Nigeria Police Force’s request for exemption from the Contributory Pension Scheme.

This occurred at the public hearing on Police Pension Board (Establishment) Bill, 2022 (SB 1009) and Nigeria Police Special Forces (Establishment) Bill, 2022 (SB 846) on Friday.

At the public hearing organised by the Senate Committee on Police Affairs, while Senators, the Police and groups of Police retirees supported the proposal, the National Pension Commission, Pension Fund Operators Association of Nigeria, and Nigeria Labour Congress, among others, kicked against it.

The Inspector-General of Police, Alkali Baba represented by Deputy Inspector General Sanusi Lemu, in his presentation, said the police required a distinct board on its own for the management and administration of pensions of retired Police personnel in the mode of the Military Pension Board.

He said, ‘The police as clearly stated by the title of the bill Police Pension Board Establishment Bill 2022, deserved to have a separate body for management and administration of Pensions of its retirees.

“Exiting the Contributory Pension Scheme, being run and managed by PenCom, is long overdue for the Police on account of poor services being subjected to. The proposed board will boost the morale of Police Personnel to dispassionately discharge their duties of fighting crimes.”

The Chairman of the Committee, Senator Haliru Jika,  sponsor of the bill, Senator Elisha Abbo and Senator Ali Ndume, in their separate remarks, said the Police deserved to be given special treatment enjoyed by the military with a special pension board.

The lawmaker representing Adamawa North, Senator Elisha Abbo, who sponsored the Police Pension Board Bill, said that the Nigeria Police were being treated unfairly when compared to others in the security sector.

He noted that the Nigeria Police, though a premier law enforcement and security agency, was left under the Contributory Pension Scheme unlike the Army, Navy, Airforce, Department of State Security Services, Defence Intelligence Agency, and the National Intelligence Agency, which have their Pension Boards, respectively.

Abbo also said that ensuring fairness in the payment of pensions to the police would boost the morale and standard of living of the retired police personnel.

Police retirees at the public hearing cheered in agreement as the senator stressed the need for the establishment of the Police Pension Board.

Some of them noted that they get roughly about N30,000 monthly as pension with no gratuity.

However, pension operators warned that the exception of the Nigeria Police would be a significant financial burden for the government and may not be sustainable.

The Commissioner of Inspectorate at the National Pension Commission, Mr Clement Akintola, who represented the Director-General of PENCOM, Aisha Dahiru, said allowing the police to exit CPS would amount to taking the country back to the dark ages of mismanagement of pension fund.

He also described the size of the current pension asset, saying, “As of 31 December 2022, the number of registered contributors under the CPS has grown to 9.8 million (5.8 million from the private sector). This represents about 9.5 per cent of the total working population in Nigeria. Furthermore, the total pension fund assets under the scheme have grown to N14.79tn as of 30 November 2022, which is equivalent to about 7.53 per cent of the Nigerian GDP.  It is important to note that 60 per cent of the total pension assets of N14.79tn belong to employees of the private sector, while the balance of 40 per cent belongs to public sector employees.”

The PenCom DG representative further warned about the consequences of the exemption, which would likely cost the government about N1.84tn.

He also noted that the Federal Government’s current liability to the police personnel under the current pension scheme was about N213.4bn.

He said, “Exemption of the personnel of the NPF would imply additional financial burden on the Federal Government by way of unsustainable pension obligations. For instance, as of 30 November 2022, there were 307,154 Police personnel based on IPPIS data. An actuarial valuation revealed that the retirement benefits (pension and gratuity) liability of this personnel under the defunct Defined Benefits Scheme would amount to about N1.84tn. This liability is expected to significantly increase with the proposed yearly recruitment of 10,000 personnel into the police force.

“Meanwhile, the FGN’s liability under the CPS for the same NPF personnel is made up of N213.4bn as accrued pension rights and monthly employer pension contributions of about N2.2bn. It would be recalled that accrued pension rights are retirement benefits of FGN employees who were in service before July 2004, prior to the enactment of the PRA 2004, and this liability will cease by the year 2039 when the last employee entitled to such benefits would have retired.”

The Chief Executive Officer, of the Pension Funds Operators Association of Nigeria, Oguche Agudah, admonished the committee and by extension the Senate, not to legislate liabilities.

He said since the proposed body will be solely funded by budgetary allocations, an avoidable burden, will be placed on the federal government currently battling with the N10.7tn budget deficit in the 2023 fiscal year.

“We cannot in good faith, legislate liabilities,” he stressed.

Pension operators further stressed that there can be enhancements to boost police pension and ensure that police retirees get paid well.

A non-governmental organisation, the Contributory Pension and Happy Retirement Advocacy said that the grievances of the police were making them want to exit the Contributory Pension Scheme and can be resolved within the system.

Legal adviser of the team, Ayinla Mahmod, while making the presentation said all the grievances of the police can be corrected within the CPS.

Stating why the police should not be allowed to exit, he cited global best practices, issues of unfunded pension liabilities; statutory government disbursements/deliverables; sustainability and cost of governance; governance by regulations, transparency and self-regulation.

He said, “Currently, the Government is saddled with heavy recurrent statutory expenditures as well as providing funding for necessary and important capital projects. A 3– year review of our country’s budget performance has shown that a large chunk of the budget is dependent on borrowed funds by virtue of rising budget deficits.

On sustainability and cost of governance, he said there is no sustainability in budgeting for a monthly pension, adding that the Sustainability of a non-terminal pension scheme such as the defined benefit scheme in the midst of the various modern challenges in a developing country like Nigeria is simply non-existent.

“The government is always finding ways to cut down cost of governance, overhead and recurrent expenditures in a bid to provide more for capital and developmental programs and projects. Incurring a life-long recurrent pension liability with increasing funding by the year is of no benefit to the economic viability of the nation as it also incurs its associated administrative costs.” Mahmud said.

The Office of the Attorney General also expressed some objections to the bills, which need to be addressed.

The President of the Nigeria Labour Congress, Ayuba Waba, in his presentation hammered on prompt payment of gratuities of retired police personnel or those who died in active service.

He said the proposed Police Pension Board was well envisioned but the problem was sustainability as regards funding, saying “the mistake of moving from known to unknown, should not be made”.