At last the Pension Reform Act passed by the National Assembly was signed into law by President Goodluck Jonathan.
The law is to govern and regulate the administration of uniform pension scheme for both public and private sectors. It repeals Pension Act No 2 of 2004. Better late than never, it is believed that the new law is a response to the dynamic nature of the society and consists of sound provisions that are aimed at not just bridging the gap between the private and public sector labour but also protecting the worker and ensuring that contributions and investments made with pension funds are protected against risks and abuses especially by managers. The law, among several of its provisions, empowers the National Pension Commission (PenCom) to institute criminal proceedings against employers who fail to either deduct or remit pensions contributions. Equally, penalties and sanctions have been reviewed upward in view of the fact that the provisions in the old law became obsolete and ineffective.
In the new law, mode of diversion of assets and/or non-disclosures of interests and commissions accruable to pension fund assets which were not addressed in the old law have now been captured as offences and stiffer penalties are enshrined to serve as deterrence against mismanagement or diversion of pension funds under any guise. The new law also provides for, upon conviction, a prison term of not less than 10 years or fine of an amount equals to three times the amount so misappropriated or diverted, or both imprisonment and fine on any operator who mismanages pension funds.
Significantly, PenCom now has the legal powers to take proactive measures on licenced operators whose situations, actions or inactions jeopardize the safety of pension assets; and it further fortifies pension assets against mismanagement and/or systemic risks. The Pension Transition Arrangement Directorate under the new order is to ensure greater efficiency and accountability in the administration of the Defined Benefit Scheme in the federal public service such that payment of pensions would be made directly into pensioners' bank accounts in line with the current policy of the Federal Government.
On utilisation of pension funds for national development, the law makes sufficient provisions that will enable the creation of additional permissible investment instruments to accommodate initiatives for national development such as investment in the real sector, including infrastructure and real estate development. Finally, the new law consolidates previous amendments made to the 2004 Act. Some of these amendments are Pension Reform Amendment Act 2011and Universities Miscellaneous Provisions Act 2012, which reviewed the retirement age of university professors.
One of the major landmarks of the new law is the expansion of coverage to the private sector organisations with a minimum of three employees while reviewing the minimum rate of pension contribution from 15 per cent to 18 per cent of monthly emolument while 8 per cent will be contributed by the employee and 10 per cent by the employer. The law, by implication, further provides for additional benefits to workers' Retirement Savings Accounts (RSA) and enhances the monthly pension benefits at retirement as well as reducing the waiting period for accessing benefits in the event of loss of job by employees from six months to four, while at the same time compelling the employer to open a Temporary Retirement Savings Account on behalf of an employee that fails to open RSA within three months of assumption of duty.
As good as these new provisions are, the bill was delayed longer than necessary before its eventual passage due to the contentious issue of qualification of who to head the commission. As valid as the arguments from the two sides were, we are of the opinion that both the executive and legislative arms of government need to keep each other informed and sufficiently educated on matters requiring legislation in order to reduce unnecessary delays that are often experienced in the process of either making laws or amending laws that serve the good of the polity. Such unity of purpose and vigilance are also required at the implementation stage too. Specifically, the government must now work hard to ensure strict adherence to all aspects of the new Pension Reform Law.