President Goodluck Jonathan has signed the Pension Reform Bill 2014 into law. Presidential spokesman, Reuben Abati, disclosed this in his tweeter handle today.
The Senate had on April 8 unanimously passed the Pension Reform Bill which prescribed severe penalties including a 10-year jail term for defaulters
The Act also imposes a fine of N10 million on any pension fund administrator who fails to meet the obligations of the contributors, while each of the directors of the firm will pay N5 million each as fine.
A document obtained from the National Pension Commission listed the major highlights of the Pension Reform Act 2014 as including:
Upward Review of the Penalties and Sanctions
The sanctions provided under the Pension Reform Act 2004 were no longer sufficient deterrents against infractions of the law. Furthermore, there are currently more sophisticated mode of diversion of pension assets, such as diversion and/or non-disclosure of interests and commissions accruable to pension fund assets, which were not addressed by the PRA 2004. Consequently, the Pension Reform Act 2014 has created new offences and provided for stiffer penalties that will serve as deterrence against mismanagement or diversion of pension funds’ assets under any guise. Thus, operators who mismanage pension fund will be liable on conviction to not less than 10 years imprisonment or fine of an amount equal to three-times the amount so misappropriated or diverted to both imprisonment and fine.
Power to Institute Criminal Proceedings against Employers for Persistent Refusal to Remit Pension Contributions
The 2014 Act also empowers PenCom, subject to the fiat of the Attorney General of the Federation, to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time. This was not provided for by the 2004 Act.
Corrective Actions on Failing Licensed Operators
The Pension Reform Act 2004 only allowed PenCom to revoke the licence of erring pension operators but does not provide for other interim remedial measures that may be taken by PenCom to resolve identified challenges in licensed operators. Accordingly, the Pension Reform Act 2014 now empowers PenCom to take proactive corrective measures on licensed operators whose situations, actions or inactions jeopardise the safety of pension assets. This provision further fortifies the pension assets against mismanagement and/or systemic risks.
Restructuring the System of Administration of Pensions under the Defined Benefits Scheme (PTAD)
The Pension Reform Act 2014 makes provisions for the repositioning of the Pension Transition Arrangement Directorate (PTAD) to ensure greater efficiency and accountability in the administration of the Defined Benefits Scheme in the federal public service such that payment of pensions would be made directly into pensioners’ bank accounts in line with the current policy of the Federal Government.
Utilisation of Pension Funds for National Development
The Pension Reform Act 2014 also makes provisions that will enable the creation of additional permissible investment instruments to accommodate initiatives for national development, such as investment in the real sector, including infrastructure and real estate development. This is provided without compromising the paramount principle of ensuring the safety of pension fund assets.
Enhanced Coverage of the CPS and Informal Sector Participation
The Act expanded the coverage of the Contributory Pension Scheme (CPS) in the private sector organisations with three (3) employees and above, in line with the drive towards informal sector participation.
Upward Review of Rate of Pension Contribution
The Pension Reform Act 2014 reviewed upwards, the minimum rate of Pension Contribution from 15% to 18% of monthly emolument, where 8% will be contributed by employee and 10% by the employer. This will provide additional benefits to workers’ Retirement Savings Accounts and thereby enhance their monthly pension benefits at retirement.
Access to Benefits in Event of Loss of Job
The Pension Reform Act 2014 has reduced the waiting period for accessing benefits in the event of loss of job by employees from six (6) months to four (4) months. This is done in order to identify with the yearning of contributors and labour.
Opening of Temporary RSA for Employees that Failed to do so:
The Pension Reform Act 2014 makes provision that would compel an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee that failed to open an RSA within three (3) months of assumption of duty. This was not required under 2004 Act.
Consolidation of Previous Legislations Amending the PRA 2004
The Pension Reform Act 2014 has consolidated earlier amendments to the 2004 Act, which were passed by the National Assembly. These include the Pension Reform (Amendment) Act 2011 which exempts the personnel of the Military and the Security Agencies from the CPS as well as the Universities (Miscellaneous) Provisions Act 2012, which reviewed the retirement age and benefits of University Professors. Furthermore, the 2014 Act has incorporated the Third Alteration Act, which amended the 1999 Constitution by vesting jurisdiction on pension matters in the National Industrial Court.