17th July, 2018
The Executive Director, Business Development, South and Strategy, Premium Pension Ltd., Mrs Kemi Oluwashina, on Tuesday, urged state governments to set aside sinking funds to address the backlog of pension issues.
Oluwashina gave this advice in a statement issued after the team’s courtesy visit to Enugu state Head of Service, Mr Chidi Ezema.
According to her, the sinking fund will help the states to address issues of pension entitlements owed its retirees.
”Sinking fund is an account that is used to deposit and save money to repay a debt or replace a wasting asset in the future.
”A sinking fund is essentially established to ease the process of retiring debt or prevent defaulting on debts.
”It can serve several purposes but the main purpose is to lower the outstanding principal before it becomes due.
“Lack of prompt payment of pension entitlements, especially accrued rights to retiring or retired workers, is blighting the successes recorded in the Contributory Pension Scheme in Nigeria,” she said.
Oluwashina said that there was a need for state governments to establish sinking funds to address the problem.
She said that the liability of unpaid pension entitlements would never go away until it was tackled as a matter of urgency.
Oluwashina said that the real value of unpaid pension liabilities eroded with time to the detriment of the retirees who were already passing through untold hardship.
“If anything, things only get worse when the liabilities keep piling up; setting aside this special fund is a midway approach to addressing the liabilities,” she said.
Oluwashina said that accrued rights were the entitlement of workers before the advent of the Contributory Pension Scheme.
She said that its late payment by the various tiers of government rendered pension administration cumbersome or even impossible.
According to her, accrued rights have to be lumped into Retirement Savings Accounts (RSAs) before lump sum and programmed withdrawals could be worked out for retirees.
Oluwashina said that most, if not all, retirees from government establishments, for now, have their entitlements locked in both the old Defined Benefit Scheme and the new Contributory Pension Scheme.
She said the backlog of pension liability was more pronounced in most state governments who have neither been making any serious effort to address the issue nor even keyed into the new scheme by domesticating the Pension Reform Act 2014.
Oluwashina said that most state governments still struggle with payment of salaries, while Federal Government was making efforts to offset the unpaid Pension Accrued Rights from May 2017 to April this year which stood at N97.55 billion.
Ezema, in his speech, said that the state government would always look for creative and professional approaches to offsetting the backlog of its liabilities in spite of the State’s lean resources.
He promised to work with Premium Pension in the smooth delivery of the Contributory Pension Scheme in the State.
The Premium Pension team visit was to appreciate the efforts by the state government to joining the league of states running an unfettered Contributory Pension Scheme.