GREY AREAS OF PENSION REFORM ACT

By NBF News

The reality and legitimacy of the Pension Reform Act, 2004 is obviously no longer in doubt. What is indeed, challenging is the practicability and efficacy of the scheme in line with the statute from where it takes root. The effective administration of the Act is predicated on the clarity and intention of the contents.

Perhaps, it is pertinent to mention that for the first time in the history of the Nigeria's industrial relation system, concept of a uniform pension scheme was mooted to apply to all employees of both the public and the private sectors. To buttress this assertion, S.1(1) and (2) of the Act states that '(1) There shall be established for any employment in the Federal Republic of Nigeria, a Contributory Pension Scheme (in this Act referred to as 'the Scheme') for payment of retirement benefits of employees to whom the Scheme applies under this Act. (2) Subject to S.8 of this Act, the scheme shall apply to all employees in the Public Service of the Federation, Federal Capital Territory and the Private Sector … who are in employment in an organization in which there are five (5) or more employees. By all standards, the new pension regime is designed for all categories of workers as implied in Section 1(2) of the Act.

It is instructive to note however, that certain clarifications have become imperative, particularly of the class of public employees that qualify to benefit from the scheme, and as a result there seems to be wooliness of connotation in the interpretation of the Act. Since the scheme is said to apply to all 'employees in the public service of the Federation …' it does simply imply that State Government workers, who constitute a segment of the Federal Republic of Nigeria, are also covered by the Act.

It is observed that most states of the federation have already presented or are in the process of presenting Bills to their various Houses of Assembly for enactment into law, to enable the scheme to take off. It is also appalling that some are yet to make move to initiate the scheme. Even others are reported to have gone ahead to deduct workers' 7.5% portion without remitting same to the appropriate quarters in addition to failure to credit their own contribution of 7.5%.

One is desirous to inquire if it is proper for a law enacted by the National Assembly not to be applicable to the States of the Federation? It is noteworthy that the Constitution of the Federal Republic of Nigeria has clearly spelt out the legislative powers of the Federal Government. The National Assembly has the power to make laws for the peace, order and good government of the Federation or any part thereof, with respect to matters contained in the Exclusive Legislative List set out in Part I of the Second Schedule of the Constitution. In such matters, the National Assembly makes laws to the exclusion of the Houses of Assembly of the States. In other words, the State Houses of Assembly cannot competently legislate over such matters. In Item 44 of the Exclusive Legislative List in the Second Schedule (Legislative Power - Part I) of the 1999 Constitution, pensions, gratuities and other-like benefits payable out of the Consolidated Revenue Fund or any other public funds of the Federation fall under this category (emphasis mine).

Another area that needs clarification is the age of employees and maximum number of years in service before retirement. Under the repealed Act for example, maximum retirement age in the public service was 60 years or 35 years in service. It is curious to wonder why there is no categorical statement on retirement age or service years in the existing law. Or should one take solace in some sections of the Act which obviously is not enough to clarify the issues in question?

By implication of S.3(1) and S.3(2)(c) of the Act, attainment of 50 years of age seems to be suggestive as retirement age, though it fails specifically to say so. For elucidation, S.3(1) provides thus: 'subject to S.3(2) as from the commencement of this Act, no person shall be entitled to make any withdrawals from his retirement savings account opened under S.11 of this Act, before attaining the age of 50 years' (emphasis mine). Section 3(2)(c) went further: 'Notwithstanding the provisions of sub-section (1) of this section, 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 S.4 of this Act.'

The web that surrounds this aspect is compounded by S.4(1) of the Act which highlights that '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: … The terms, 'upon retirement' and 'whichever is later' thus suggest that 50 years is unarguably acceptable by the Act.

If this school of thought is credible, one wonders why the status quo in the public service has remained the norm five years after the commencement of the PRA 2004. Employees in this sector are still allowed to attain the age of 60 years or serve 35 years whichever comes first before retirement. The contentious issue here is that the Pension Reform Act 2004 does not make provision for either a retirement age or service years whichever is applicable.

It is glaringly clear that the PRA does not make any provision for gratuity.

Employers and workers are either guided by collective bargaining for those in the unionized private sector or adoption of the guideline which has been in existence even before the new Act. However, one is satisfied to learn that the National Pension Commission has recently released a guideline on gratuity. It is pertinent to mention that the absence of gratuity leaves the employee vulnerable to the employer's antics where he may not be bound under any law to pay gratuity to his workers.

The Pension Reform Act 2004 is the last hope of the Nigerian worker who sees it as a bastion to fall back on in the face of dwindling resources. In the light of the above, the National Pension Commission is hereby called upon to harmonize these omissions with a view to incorporating them in the new Act in the form of Amendment in order to reflect the true tenets of the new legislation.

Arikibe writes from Lagos.