Below is an opinion wrote by Isa Ahmad (Katsina State Scholarship Board Head)
THE JIGAWA STATE MODEL: CONTRIBUTORY DEFINED BENEFITS PENSION SCHEME (CDBPS)
The Katsina state Technical committee on Pension Administration Matters noted that principally there are two models in operation, while Lagos and Kogi states adopted the Defined Contributory Pension Scheme(DCPS) which is tune with the Federal Pension Scheme, the Jigawa Model adopted the Contributory Defined Benefits Pension scheme(CDBPS).
Based on the above, the committee decided to recommend the Jigawa model to the Government for consideration. To the best judgment of the Technical committee, the choice of the Jigawa model was hinged to the fact that the model took cognizance of our culture, and is almost synonymous with the pay-as-you-go-system.
So, what is this Jigawa model?
This is a hybrid pension scheme which took its origin from both the contribution and the pay-as-you-go system. It is a function of contributions from employee/employer and defined benefit scheme. The system owes its existence from the contributions of employee/employer from the onset while retaining its originality as pay-as-you-go at the exit. The model was introduced as a panacea to its previous defined benefit pension scheme due to its huge pension deficits, the non-payment of pensioners as well as multiple and fraudulent pensioner records.
ADVANTAGES OF THE SCHEME: It is not possible to explain all the advantages and the disadvantages of the scheme on this platform but a few as enumerated by the Technical committee will suffice.
I. The law stipulates for Contributory Defined Benefits Pension Scheme which provides for lump sum payment of gratuity after service years (i.e. on retirement):
II. That provision is made for monthly pension for life which is reviewable after 5 years or together with any civil service salary review: and
III. No provision was made for purchase of annuity for life insurance.
DISADVANTAGES: The committee further explained:
I. Contributory Defined Benefits Pension Scheme(CDBPS) is a going concern where a retire gets his pension till he dies. After death, the beneficiary and his family have no claim on the pension assets contributed.
II. Contributions from members have no direct bearing to their benefits.
III. Retiree’s benefits (pension and gratuity) do not change even when pension assets generate good returns on investments.
While in the other models of Lagos and Kogi, contributors are required to open a retirement saving account(RSA) with any PFA of their choice so that monthly deductions will be remitted, it is not so with the Jigawa model as remittances here go to the pool of the scheme.
Actually, this is one of the most noticeable features of this model, the absence of a RSA account.
As discussed in the other piece that the Jigawa model is a self administered scheme managed by a Board of Trustees with operational activities conducted through selected Pension Fund Administrators (PFAs). That means the Fund Administration and Management of the scheme is directly at the beck and call of the Board.
It is the Board that collects all remittances and distributes same to Fund Managers who are expected to manage and invest the funds. Currently, there are 10 PFAs managing the Jigawa State Pension Fund asset worth more than N29bn. Good returns!
But, my grouse with the Jigawa model is about the role of the Board of Trustees. I feel too much power is placed on the Board and that will make some of the members to compromise their position. Also, I feel the scheme will be more beneficial to those workers who have less number of years to retire since their entitlements are not tied up to returns on investment.
On the other hand, I actually, will go with the other scheme that is in tune with the Federal Pension Scheme but with some modifications that will favor the contributor and guarantee defined gratuity at retirement.
In conclusion, I will like to see a Katsina state model which will be a product of both the Jigawa state and Lagos/Kogi models with much attention given to the contributor.
Pension Fund Administrators should be given the opportunity to come forward to enlighten the members of the public, particularly the civil servants about the pros and cons of the new pension scheme.
Above is an opinion wrote by Isa Ahmad (Katsina State Scholarship Board Head)