Acting-Director General, PenCom, Mrs. Chinelo Anohu-Amazu
The National Pension Commission is working on a framework that will enable retirees under the Contributory Pension Scheme to enjoy a minimum monthly pension stipend like the minimum wage being enjoyed by workers, investigation has revealed.
Sources at PenCom disclosed to our correspondent on Monday that since retirees started emerging under the CPS, some pensioners had been receiving very low pensions, while others had very little balance in their Retirement Savings Accounts not enough to pay them monthly stipends.
As a result, it was gathered that the commission decided to work on a framework that would enable it to create special funds to take care of the problem of low pensions, a development that had discouraged many workers from the CPS.
PenCom officials told our correspondent that only workers who had contributed for specific number of years would enjoy the minimum pension stipend when it officially commenced.
They explained that retirees under the CPS were not entitled to gratuity unlike the old scheme, except lump sums from their RSAs.
Based on the retirement benefits paid to Federal Government retirees under the CPS, the commission said there had been some ex-workers whose monthly pensions were low when compared with their terminal salaries.
The commission noted that with the enactment of the Pension Reform Act 2004, there had been substantial increase in salaries, especially with the introduction of the consolidated salary structure, a situation that was not contemplated by the Act.
Salaries of the Federal Government employees, it added, had increased between 2004 and 2010 by between 76 per cent and 276 per cent.
This accounted for the low monthly pensions when compared to the defunct Pay-As-You-Go pension scheme, particularly for those who retired immediately after the salary increase.
PenCom observed that the bulk of the retirement benefits of those who might be retiring within the first 10 years of the scheme would comprise the accrued pension rights calculated based on the salary levels as of 2004, which were very low when compared with current salaries.
Such category of retirees, it stated, would not have enough time to accumulate pension contributions under the CPS.
According to the commission, certain categories of retirees, particularly in the private sector, have small balances in their RSAs that are insufficient to be subjected to a programmed withdrawal or the purchase of annuity.
PenCom also stated that Section 173(3) of the 1999 Constitution provided for pension review every five years or together with salary increases, as inflationary adjustment.
However, it stated that the CPS was not designed to incorporate increases in pension as inflationary adjustments were reflected in the investment yields of accumulated pension assets, while monthly contributions increased whenever salaries were reviewed.
“There is, however, the need to adjust the pension element of the accrued benefits of retirees in accordance with the provisions of Section 173(3) of the 1999 Constitution,” PenCom said.
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