A growing number of retirees have breathed a sigh of relief as a result of their employers’ default, which ruined their retirement by not sending in their pension contributions.
In the third quarter of last year, the National Pension Commission’s (PenCom) designated pension recovery agents collected an additional N326.6 million in workers’ unremitted employer-employee contributions. This included principal contributions of N276.52 million and penalties totaling N49.64 from 24 employers who had fallen behind on their payments.
According to data from PenCom, a total of N25.13 billion has been collected from defaulting employers from the start of the recovery campaign in June 2012 to September 30, 2023. This amount consists of principle contributions of N12.80 billion and penalties of N12.33 billion.
The agents recommended five employers who were in default to the commission’s legal advice services and secretariat in Q3 2023 so that they could face legal action.
According to Section 11(6) of the Pension Act of 2014, employers that do not make the required contributions on time will also be subject to a penalty set by the commission in addition to the remittance already being due.
The amount of the penalty shall be recoverable as a debt owing to the employee’s retirement savings account, as applicable. The pension law stipulates that the penalty shall not be less than 2 percent of the total contribution that is unpaid for each month, or portion of each month that the default continues.
Chukwuemeka Iloh, a retired individual and former employee of a textile factory in Lagos’ Ilupeju neighborhood, stated that the job being done by pension recovery agents is admirable and ought to be supported in order to provide workers with a retirement income.
He remarked, “I lost all of my entitlements in my company as at the time I was retiring in 2019, so I was not fortunate enough to get this opportunity.”
He claimed that the company was unable to pay its debts, including salary and pensions, at the time he was quitting and that his pension contributions had not been sent to the Pension Fund Administrator on a regular basis while he was there.
“So, the company shut down operations three years ago, and we were retired with promises that never materialized.”
According to him, the company’s demise meant that their pension was no longer available, and the recovery agents were unable to assist them.
PenCom reported that in Q3 2023, it processed and issued Pension Clearance Certificates (PCCs) to 6,053 organizations that satisfied the requirements for issuance. Of the 6,053 organizations that received PCCs, 98,887 employees’ Retirement Savings Accounts (RSAs) received N35.9 billion.
Since those without the certificate are ineligible to engage in any federal government contract, the commission claims that this move is part of its endeavor to improve compliance by labor companies.
PenCom stated that the Bureau of Public Procurement is in charge of enforcing this policy and that it is housed within all government entities.
Pension remittances, according to pension and environmental expert Paddy Ezeala, are essential to the reform process’ viability and highlight the significance of ongoing awareness-raising and enlightenment campaigns.
Ezeala pointed out that since the pension system is the sole social safety net accessible to Nigerian workers, employer compliance—more than that of any other stakeholder—is crucial to the scheme’s success.
Despite the challenging economic conditions, he advised firms to give employees’ pensions careful consideration because they are a major source of motivation for raising output.
PenCom director-general Aisha Dahir-Umar has emphasized that firms must promptly remit their employees’ pension deductions.
According to Dahir-Umar, companies are required by the Pension Reform Act to make sure that employees’ pension contributions are remitted into their RSAs no later than seven days following the delivery of their salaries. “Within seven days of salary payment, pension contributions are expected to be remitted into the RSAs of employees,” she stated.
Employers must open nominal RSAs for employees who refuse to open their own in order for pension plans to be considered smart. After the nominal RSA is opened on behalf of an employee, pension contributions must be remitted into the account until the employee opens one.
