PARADOX OF THE CONTRIBUTORY PENSION SCHEME

In a recent interview, Adamu Rabiu-Bakondare expressed strong concerns regarding the exemption of certain high-ranking officials from Nigeria’s Contributory Pension Scheme (CPS). He argues that this exemption is unlawful and detrimental to the integrity of the country’s pension system.

“The Contributory Pension Scheme was designed as a critical component of Nigeria’s economic framework, aimed at securing the futures of both public and private sector workers upon retirement. However, the journey toward a sustainable pension system has been fraught with numerous challenges, including compliance issues and legal ambiguities,” Rabiu-Bakondare noted.

The CPS, which was established following significant reforms in 2004 through the Pensions Reform Act (PRA)—later updated in 2014—was a necessary response to the failures of earlier Defined Benefit Schemes that heavily depended on government funding. “The CPS requires both employers and employees to contribute to retirement benefits, creating a more stable and self-sustaining pension system,” he explained.

Since its implementation, the CPS has made notable progress in managing Nigeria’s pension liabilities, fostering domestic savings, and generating long-term funds for developmental projects. As of March 31, 2024, the scheme had accumulated an impressive NGN19.7 trillion in pension assets for investment in Nigeria’s economic growth.

However, Rabiu-Bakondare pointed out a troubling trend where specific categories of federal government employees, particularly the Head of the Civil Service of the Federation and Federal Permanent Secretaries, have sought exemptions from the CPS, often citing concerns over their retirement benefits. “In 2019, President Muhammadu Buhari issued a directive to exempt these officials from the CPS, allowing them to receive full salaries for life, which opens the door to serious ethical questions,” he stated.

He raised critical legal issues, questioning the basis of such exemptions. “How can an opinion from the Attorney General equate to law? The Integrated Payroll and Personnel Information System (IPPIS), designed for active workers, has now been misapplied to retirees,” he argued. He also emphasized that the exemption contradicts established constitutional provisions governing public service pensions.

“The legal framework is clear: the PRA is the principal law overseeing pensions, and all public service matters must align with it. By granting exemptions to these top officials, we effectively leave them without a governing law for their pensions. This is not only unconstitutional but also undermines the principles of fairness and equality that should guide our pension systems,” Rabiu-Bakondare asserted.

He warned that such exemptions could burden the federal government’s fiscal policy significantly. “A Permanent Secretary’s monthly salary is approximately NGN898,000, and post-retirement entitlements can exceed NGN1 million. This not only strains governmental finances but also sets a dangerous precedent for other civil servants,” he said, stressing the potential ripple effect this could have on the national budget.

Rabiu-Bakondare also highlighted the ethical implications, noting that “this exemption creates a privileged class within the civil service, raising questions about the integrity and sustainability of the CPS, which was intended to be uniform and inclusive.”

With so much at stake, he calls for accountability. “The penalties for violating the Code of Conduct for Public Officers are harsh, including disciplinary actions and criminal prosecution. It’s vital for public officials to adhere to ethical standards to maintain public trust,” he readied, emphasizing the need for a fair, sustainable pension system that serves all members of the civil service equally.

As the discussion unfolds, Rabiu-Bakondare asks a poignant question: “Where do we go from here, PenCom?” His remarks reflect a deep-rooted concern for the future and integrity of Nigeria’s pension systems.