Before the enactment of the pension Reform Act which introduced the Contributory Pension Scheme in Nigeria, there was a pension deficit of about N2trn in the country and that hindered many retirees from getting their retirement benefits.
The pension payment then was under the defined benefit scheme (DBS) which was poorly funded as annual budgetary allocation for it is often one of the most vulnerable items in budget implementation. Budgetary provisions were made inadequate and untimely release of funds coupled with embezzlements resulted in delay or outright denial of pension rights. The accumulating arrears and unsustainable payments subjected retirees to undue hardships before getting their entitlements. This necessitated the reforms in the pension sector of the economy.
It is interesting to note that about 14 years in to the scheme more than 28 states of the Federation have domesticated the law and are now contributory pension scheme complaint. Of all the states in the north west only Katsina state is CPS non complaint. The scheme is fully funded through the monthly contributions of both employer and his employees, so upon retirement the beneficiary collects his gratuity and immediately placed on monthly pension because the funds are already available.
Unlike, the present system in the state which has no ready made funds to pay gratuity or pension because it is not designed to deliver current benefits levels when confronted with today’s major demographic and economic changes and to keep afloat will drastically affect public spending on health, education, agriculture, security to mention but a few. For any pension scheme, whether private or public to be successful it has to fully funded to the extent that the pension funds match pension liabilities at any given time. In the circumstance, there is no sure way of making this happen than to go with world best practice by contributing towards your retirement.
The Katsina state Technical Committee on Pension matters has painstakingly done a marvelous job by choosing the Jigawa state model out of the many models as represented by the different states where the CPS is enforced. The Jigawa model which is a Defined Benefit Contributory Pension Scheme DBCPS is a self administered Pension Scheme managed by a Board of Trustees with operational activities conducted through selected Pension Fund Administrators (PFAs) and investment is based the instruction of the Board of Trustees through its Director of Investment.
One interesting aspect of this model is that provision is made for monthly pension for life which is reviewable after 5 years or together with any Civil Service Salary Review (in line with section 210(3) of the Constitution of the Federal Republic of Nigeria 1999) This clearly indicates that no annuity is needed as pension here is for life unlike the Federal laws which stipulates that you have to purchase annuity for at least 18 years.
I understand that the Technical committee has tentatively recommended the rate of contributions to 7% and 13% for employee and employer respectively totaling to 20% subject to actuarial valuation because according to it the state operates a consolidated public service salary structure with no broken down components.
Having said all, I will like to commend His Excellency Rt. Hon. Aminu Bello Masari for having the courage to take this all important decision. I pray that Allah will give him the courage to sustain the tempo. This action has demonstrated again that His Excellency can take big decisions that will have far reaching positive consequences on the people.
He did it with the payment of WAEC/NECO fees and now the students are better off with the decision. I will plead with the Governor that only people of proven integrity and impeccable character work in the Fund. To the civil servants who are the immediate beneficiaries of the scheme, I will urge them to accept that change is a dynamic function of human existence which at the on set in resisted but with time they tend to appreciate its positive impacts.
It is therefore important for them and other stake holders in the state to come to terms with the reality that retirement from service is an inevitable end and when that happens there will be no salary but your pension and gratuity entitlements and as long as the funds to pay are not readily available then there is a problem. The more than N11billion pension and gratuity backlog criminally bequeathed to us by the Shema administration is quite instructive.