Recovery Of Pension Deductions

Sure way to avoid relapse into the old era

More than 14 years after the country transited into the Contributory Pension Scheme, there are increasing signs that the very ills which it was meant to cure are far from being addressed. At a public forum in Lagos last week, the National Pension Commission (PenCom)’s Acting Director-General, Aisha Dahir-Umah, disclosed that its recovery agents had recovered a total of N14.76 billion from employers who, after deducting the pension contributions from their employees, failed to remit same.

The amount is said to comprise the principal contribution of N7.53 billion and penalty of N7.23 billion, an amount which the PenCom boss said has since been credited into the workers’ Retired Saving Accounts, RSAs.

The alarm here is that supposed beneficiaries are led into illusion that they would somehow get their deserved benefits – the very illusions that afflicted the old scheme and the associated regime of endless verifications.

The country certainly didn’t move from the era of defined benefits scheme and its unfunded liabilities in 2004 and its record N2 trillion deficit hole only to relapse into another crippling era of poor remittances by employers who, after making the necessary deductions from the wages of their employees, neither deem it fit to match with their contributions as expected of them, nor remit same to the pension funds custodians –in accordance with the law.

Moreover, in an environment where basic data on business entities are a rarity and employers only too prone to exploit the weakness of our laws and institutions to prey on the hapless employees, we have reasons to fear that the so-called recovery is merely a tip of the iceberg. This of course raises the question of the capacity of PenCom to effectively monitor the industry, considering how vast the country is.

Yes, we appreciate that these are difficult times for employers of labour. At a time most businesses are in the throes of severe cash crunch, with perhaps many more in arrears of their wages obligations, the reality can sometimes present in the form of a difficult trade-off between meeting current obligations of wages and pushing off pension obligations to a later date.

Yet, as tempting as the former option appears to be, it is clearly a case of no-choice as the pension deductions constitute an inseparable part of the employees’ emoluments and should deservedly be treated as inviolate. This is why the law is as unambiguous as the penalties are clear when breaches are established.

The point bears making that many employers actually treat their employees’ pension funds as extension of their assets – or free funds – to be deployed as they pleased. Many, it appears, couldn’t care about the business of deductions which they consider an avoidable burden let alone see the basis for counterpart contributions. This is where the regulatory action becomes both necessary and compelling, to protect the scheme itself and to ensure that the employee has something to fall back on after disengaging from service.

PenCom in the circumstance has its work cut out: to the extent that non-remittance of workers deductions constitutes both a grave moral problem and a crime, it deserves a fitting recompense. And talking of regulatory action, we urge PenCom to see this as going beyond the ritual of catching offenders to enlisting the much needed partnership with the relevant stakeholders, more so as Contributory Pension Scheme has not only come to stay, but is actually proving to be a critical element in capital mobilisation, a catalyst for national development.

  • The Nation editorial

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