Impunity Making Employers To Withhold Pension Deductions—PenCom DG

The Director-General of the National Pension Commission, Mrs Aisha Dahiru-Umar, has blamed the culture of impunity as one of the major reasons that is making employers to refuse remittances of pension deductions of their employees under the Contributory Pension Scheme.

She made the disclosure in a book authored by her titled “Fighting for the future: Nigeria’s pension reform journey”

In the 173-page book, a copy of which was made available to THE WHISTLER, she narrated the turning point in the pension industry, the policy pillars of the industry, the pushbacks she faced when she was acting DG of PenCom and after her confirmation, the media war she contended with, how she managed stakeholders in the pension, success stories of the industry and how she confronted the challenges faced by her administration.

The Pension Reform Act makes it mandatory for remittances to be made into the Retirement Savings Account of workers under the Contributory Pension Scheme.

The minimum rate of contribution is 18 per cent of the employee’s monthly emoluments where 10 per cent is contributed by the employer and 8 per cent is contributed by the employee.

But many employers of labour have been violating the provisions of the law, blaming the current harsh economic condition being experienced in the country.

Dahir-Umar in her book noted that the infractions are damaging contributors’ confidence and impacting negatively on the pension industry.

She said the Commission have been taking administrative and legal actions against violators as appropriate, adding that from the inception of the CPS, over N20bn has been recovered from employers who deducted monthly pensions from staff salaries without remitting to their RSAs.

She said, “We also have to protect contributors from employers who default in pension remittance. This is a big issue. Some employers are in the habit of deducting employees’ contributions without remitting to the PFCs, in addition to failing to remit their own contributions.

“These are infractions that damage contributors’ confidence and impact negatively on the Pension Industry. On a regular basis, we go on recovery missions, using the legal instruments at our disposal by engaging recovery agents to make the employers fulfil these obligations.

“We take administrative and legal actions against them as appropriate. From the inception of the CPS, we have recovered over N20bn from employers who deducted monthly pensions from staff salaries without remitting to their RSAs.

“This sordid practice was double jeopardy for the employee. It is as good as not having a pension at all. Why would you deduct without remitting, much less making your own matching contributions?

“There are enough laws and measures to deal with this infraction, but some employers are notorious. Some of their excuses would appear genuine on the surface: economic challenges.

“They paint the picture that the option is to lay off the workers in order to be able to balance the books, but even when the economy was not going through a rough weather, the practice of non-remittance was still common. There was an avalanche of complaints against employers over non-remittance of pension contributions, the Nigeria Social Insurance Trust Fund (NSITF) pension payment, other benefits and pension payment under the pension transitional arrangement.

“Some of the employers are not used to doing things the right way. It is borne out of a culture of impunity. Some business owners and shareholders would first make themselves comfortable before thinking of the future of the employees.”

The PenCom DG said the Commission has been issuing demand notices to the defaulting employers as provided for under Section 11 of the PRA 2004.

The section states that. “An employer who fails to deduct or remit the contributions within the time stipulated in subsection (3) (b) of this section shall, in addition to making the remittance already due, be liable to a penalty to be stipulated by the Commission.

“The penalty referred to in subsection (6) of this section shall not be less than 2 percent of the total contribution that remains unpaid for each month or part of each month the default continues and the amount of the penalty shall be recoverable as a debt owed to the employee’s retirement savings account, as the case may be.”

Dahir-Umar explained further that the Commission has also engaged recovery agents to establish the outstanding contributions, adding that from inception to 30 June 2023, it has recovered contributions of N12.80bn and imposed penalties of N12bn.

“Before slamming the hard penalties, we deploy our soft powers which are always effective. We usually wait for the defaulting organisations when they apply for Pension Clearance Certificate (PCC), which is critical to some of them as the certificate is important for other regulatory clearances and their business undertakings.

“We turn down applications down owing to non-remittance of pension contributions for the appropriate period and/or non-provision of Group Life Insurance policy for their staff,” she added.