The Director-General of the National Pension Commission (PenCom), Omolola Oloworaran, has called on state governments across Nigeria to adopt the Contributory Pension Scheme (CPS) to protect the welfare and dignity of retired civil servants.
Speaking in Abuja over the weekend during the Pension Awards night, which was part of the activities marking the National Pension Week, Oloworaran emphasised that the adoption of the scheme is the only reliable way to guarantee a decent standard of living for retirees.
She noted that the transition to the CPS is essential to prevent the financial hardships often faced by elderly citizens who have completed their years of service in the public sector.
Addressing the risks of the Defined Benefit Scheme
Currently, a significant number of state governments in Nigeria continue to operate the older Defined Benefit Scheme (DBS) rather than the CPS mandated by the Pension Reform Act 2014. Under the DBS, the state government bears the sole responsibility of paying pensions from its consolidated revenue fund.
This model has frequently led to significant challenges, including delayed payments, mounting pension arrears, and total failure to meet obligations in several states. These systemic failures often leave retirees in a precarious position, struggling to meet basic needs due to state budgetary constraints or administrative inefficiencies within state pension boards.
In contrast, the Contributory Pension Scheme requires both the employer and the employee to make regular, mandatory contributions into a Retirement Savings Account (RSA). These funds are managed by professional Pension Fund Administrators (PFAs), making the system more sustainable and less dependent on the fluctuating fiscal health of individual state governments.
By migrating to the CPS, states can effectively offload the long-term liability of pension payments from their annual budgets. Instead of dealing with unpredictable pension debts, states create a structured fund that grows through investment, ensuring that the money is available when workers retire.
The implementation of the CPS remains a key objective for PenCom as it seeks to harmonise the pension landscape across all tiers of government in Nigeria. While some states have successfully transitioned to the scheme, others have been slow to pass the necessary state legislation required to align with the federal Pension Reform Act.
The Commission is expected to continue its engagement with state actors and legislatures to ensure that the legal frameworks for the CPS are established and enforced across all 36 states.
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