PenCom’s Recovery Initiative Reclaims N25.13bn Unremitted Pension Contributions, Penalties

The National Pension Commission (PenCom) plays a crucial role in ensuring the timely remittance of pension contributions and imposing penalties on defaulting employers. From the inception of the recovery initiative in June 2012 through September 30, 2023, PenCom has successfully recovered N25.13 billion from defaulting employers.

This sum is comprised N12.80 billion, principal contributions, and N12.33 billion, penalties for delayed payments. The Pension Reform Act of 2014 (PRA 2014) stipulates that all eligible employees must maintain a Retirement Savings Account (RSA) with a Pension Fund Administrator (PFA) of their choosing. Once an RSA is established, the employee must furnish the employer with their RSA Personal Identification Number (PIN) issued by the PFA.

Subsequently, the employer must deduct the employee’s monthly contributions within seven working days of salary disbursement, comprising 8 percent from the employee and 10 percent from the employer. However, it is essential to note that the 18% total monthly pension contribution represents the minimum, as employers can opt to increase the rate or bear the entire burden on behalf of the employee.

Under the PRA 2014, an employer who fails to deduct or remit contributions within seven working days is subject to a penalty of not less than 2 percent of the total unpaid contributions for each month or part thereof. This penalty amount is reclaimed as a debt and credited to the employee’s RSA.

Recovery of outstanding pension contributions started with appointed Recovery Agents (RAs) in June 2012, and as of September 2023, 28 RAs are operating under PenCom’s supervision. This recovery endeavour aims to achieve several objectives, including reclaiming all unremitted pension contributions along with penalties, ensuring that affected employees do not suffer income losses from investment delays, enhancing organisations’ compliance with the PRA 2014, and reducing employee complaints regarding non-remittance of pension contributions, thereby bolstering trust and acceptance of the Contributory Pension Scheme (CPS).

The Commission empowers Recovery Agents to pursue defaulting employers diligently. The RSs start the recovery process by obtaining a list of delinquent employers from PenCom. This is followed by securing letters of introduction from the Commission to the employers, introducing the RA and requesting cooperation in reviewing pension records with the organisation’s Human Resources Department to determine liabilities. Subsequently, demand notices are served to employers to remit outstanding pension contributions and penalties.

The RAs then collect evidence of payments, which is forwarded to the Commission for confirmation by the Pension Fund Custodians (PFCs).
It’s vital to highlight that the principal contributions and the recovered penalties are deposited into employees’ RSAs to compensate for the investment income that would have been accrued had there been no delays in employer remittances. Both PenCom and PFAs cover the recovery costs incurred by RAs, making it a cost-free process for RSA holders.

Pension contribution recovery efforts continue to yield significant results, with notable achievements in recovering primary contributions and associated penalties from non-compliant employers. As a case in point, during the third quarter of 2023, a total of N326.16 million was successfully retrieved. This sum breaks down to N276.52 million in contributions and N49.64 million in penalties, collected from 24 employers who had defaulted on their obligations.

Furthermore, PenCom actively pursues legal action against persistent defaulters who consistently fail to remit pension contributions, ensuring accountability and adherence to the CPS. The commitment of employers to comply with the CPS is highly commendable. PenCom issued an impressive 6,053 Pension Compliance Certificates (PCCs) to employers in the same period, signifying their commitment to the system. The sum of N35.59 billion was remitted into the RSAs of 98,887 employees working within the organisations granted PCCs, underlining the positive impact of these efforts.

In conclusion, PenCom encourages employees to report employers who are non-compliant with pension contributions or are not adhering to the specified rates (10 percent employer and 8 percent employee) outlined in the PRA 2014. PenCom reiterates its commitment to effectively regulating and supervising the pension industry to ensure retirement benefits are paid as and when due.