New Pension Act – Reform in the Right Direction
Earlier this week the President signed into law the Pension Reform Act 2014 that repeals the old Pension Act of 2004. Overall, the provisions of the new pension act are a step in the right direction but however requires strict enforcement for it to make a difference.
Nigeria’s contributory pension scheme has grown at an average rate of 27.05 per cent annually in its ten years of existence. It has accumulated over N4 trillion as at this year with almost 6 million Nigerians registered for the scheme.
The importance of one’s savings to a person can’t be over emphasized. In Machiavelli’s The Prince, he said that people would more readily forgive you for killing their parents than for wrongfully commandeering their property. This is even more so given the lack of other social safety nets in Nigeria.
The new act rightly prescribes that “Operators who mismanage pension fund will be liable on conviction to not less than 10 years imprisonment or fine of an amount equal to three-times the amount so misappropriated or diverted or both imprisonment and fine”.
It also empowers the National Pension Commission (PenCom), subject to the fiat of the Attorney General of the Federation, to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time. This was not provided for by the 2004 Act.
I hope that the new provisions of the law would serve as real deterrents to both employers and pension fund administrators who mismanage pension funds. However, as with most laws, it is only as strong as its enforcement. If offenders feel that the law will not be applied, it’s dissuading effect will be week.
PenCom has to create effective mechanisms to monitor compliance with the law and should intervene when a deviance occurs. For example, PenCom should create a portal on their website where employees can easily and confidentially report cases when their employers fail to remit pension contributions. This complaints should be verified within a reasonable (and specified time), and action taken. Together with other measures, this frequent and easy reporting of malfeasances will improve probity in the management of pension funds.
Most importantly, PenCom should without fear or favor prosecute offenders. A few successful convictions will send a strong cautionary message.
In sum, this new reform act is a step in the right direction to ensure pension security in Nigeria. We look forward to it being implemented with verve.