Poor police pensions: Exiting CPS not a solution, by Ikechukwu Amaechi

Last week’s protest by retired policeofficers clamouring for exit from the Contributory Pension Scheme, CPS, once again, brought to the fore the knotty issue of police welfare. To be sure, this agitation is not new. It is as old as the scheme itself. So, to the extent that it was about improved welfare for policemen, serving and retired, it was all déjà vu penultimate Tuesday. The goal is to orchestrate an amendment of section 5 (1) of the Pension Reform Act of 2014, to exclude police officers from the scheme.

When the Pension Reform Act 2004 was enacted, the idea was to have a new pension scheme that is not only contributory and fully funded but also privately managed, with funds and assets based on individual accounts under third party custody. The overarching goal was to ensure, unlike in the Defined Benefits Scheme, DBS, that everyone who has worked receives retirement benefits as and when due.

But the government, which modelled the CPS after the Chilean scheme that exempted both the armed forces and the police, insisted that the Nigeria Police will be part of its own scheme while exempting the Army, the Nigeria Intelligence Agency, NIA, and the Department of State Security, DSS. The police hierarchy kicked, but the government demurred, insisting that the institution was so big to be let out of the pension loop.

To assuage the agitators, however, the National Pensions Commission, PenCom, in 2014 licensed a PFA – Nigeria Police Force Pensions Limited – exclusively dedicated to serve the police with a vision “to be the benchmark in Pension Fund Administration in Nigeria.” So, NPF Pensions was a compromise.

But despite the huge achievements of the PFA, the agitation for exit has not abated, and understandably so. When it comes to issues of welfare and salaries, the police hold the wrong end of the emolument stick despite their pivotal role in the nation’s security architecture.

The argument of the pro-exit campaigners is simple: exempting the police from the CPS and ensuring that officers get the same pension packages as their counterparts in the military will be a healthy shot in the arm.

That position is unassailable. There is no arguing the point that the police can, and must get better post-service remuneration. It is a shame as the protesters claimed that a retired Superintendent of Police is paid N2.4 million as gratuity after 35 years of service and a paltry N30,000 as monthly pension. But in looking for solution, care must be taken not to throw away the baby with the bath water, which seems to be at play because the CPS remains a bulwark against inclement retirement weather being the most guaranteed law in the country that protects policemen from old age poverty and destitution as well as financial protection for members of their families in the event of death of their bread winners.

Those who claim otherwise call it “a killer scheme” that has trapped policemen in poverty. But to say so is to display a gross misunderstanding of the prevailing issues. Rather than being a toxic scheme as alleged, the CPS, as many experts have noted, is about the only law in the country that protects policemen from old age poverty and destitution because the Pension Reform Act (2014) created a ready pool of funds for that purpose, thereby ensuring that payment of pensions is no longer left at the mercy of annual budgets.

So, if the problem is not with the CPS, exiting the scheme cannot be a solution. The big elephant in the room is the abysmally low pension of police retirees. And the pension packages are meagre because their salaries while in service remain embarrassingly low. And since pension is a function of salary, what they get in retirement cannot take them home. Any attempt at proferring a solution, therefore, must be located within this praxis, which is: address the issue of low wages through upward salary adjustment.

But there are other measures that can mitigate the crisis, including increasing pension contribution rates, offering additional retirement benefits and implementing periodic pension reviews under the existing CPS framework as has been eloquently canvassed by PenCom.

Not only that, at a three-day investigative hearing by the House of Representatives Committee on Pensions in March 2020, the leadership of NPF Pensions Limited recommended a presidential approval of special gratuity for police retirees at the rate of 300 per cent of their last annual gross pay. The idea is to ensure that the balances in their Retirement Savings Account, RSAs, will be channelled towards their monthly pension payments. The second recommendation is the treatment of retired police officers from the rank of AIG and above as public officers who should retire with their full benefits, as it is the case with permanent secretaries.

Besides, the major challenge faced by pension managers is the backlog of accrued rights owed by the Federal Government. Pension is made up of the accrued rights, which is the service rendered by policemen to the Federal Government from the time they enrolled in the CPS in 2004 and only payable when the officer serves notice of retirement, and the contributions from both the employee and employer. But because the accrued rights are huge, the Federal Government opted to pay in instalments every year. The snag is that unless that is received, the PFAs cannot pay the portion that is with them because the account has to be consolidated. The government must devise a means of paying the accrued rights of retired officers separately to avert delay.

As seducing as the idea of exit may sound, it will not be a solution to the problem. Instead, it will make matters worse. So, while the demand of retired police officers for enhanced retirement benefits cannot be faulted, it behoves the National Assembly to ingeniously find a way of arriving at that same destination but within the ambit of the CPS.

Therefore, there is an urgent need to re-examine the fundamental issues inherent in the welfare and well-being of officers of the Nigeria Police Force. But in doing so, care must be taken not to throw away the baby with the bath water which is what exemption from the CPS entails. Travelling on that route, as seducing as it might seem, will be counter-productive because the destination will be the Defined Benefits Scheme which was abandoned in 2004 because of its impracticability.

Seeking to replace the Nigeria Police Force Pensions Limited, the pension fund administrator, PFA, charged with the exclusive administration of police pensions, with the Nigeria Police Pensions Board, is an ill-wind.

As Mr Oguche Agudah, the Chief Executive Officer of the Pension Fund Operators Association of Nigeria, PenOp, said at the November 20, 2024 public hearing on a Bill for an Act to Establish Police Pension Board at the Senate, the CPS which operates on a pre-funded model is the surest safety net for any retiree. With a minimum of eight per cent from the employee and 10 per cent from the employer, the scheme also gives either party the latitude to contribute a higher percentage, which allows pension funds to accumulate and be invested for future pay-outs.

He cautioned that reverting to the DBS model, which relies on government budgetary allocations, would lead to fiscal unsustainability and delayed payments for pensioners including police retirees. “Moving the police out of the CPS will require a staggering N3.5 trillion annually to fund pensions for approximately 400,000 personnel, in a budget already burdened by deficits. This is simply unsustainable,” he said.

And that takes us to the second leg of the agitation: the scrapping of NPF Pensions Limited, a position which was canvassed by the publicity secretary of the police retirees association, SP Johnson Oyameda. The retired officer claimed that the company is fraudulent. That is uncharitable and the call for scrapping it is grossly misguided.

To be sure, NPF Pensions Limited remains the most successful police investment entity till date. For a company that started with zero Assets Under Management, AUM, in 2014, today its audited AUM has crossed the N1.3 trillion mark, making it one of the four largest in the industry.

In 2017, the company’s board approved a N400 million annual Retiree Resettlement Support Scheme, RRSS, to cater for retirees while awaiting their pension. Today, that fund is a whopping N500 million and it remains the first and only PFA to embark on such corporate social responsibility. All these achievements have been recorded because the company is run by some of the brightest professionals in the industry.

Those clamouring that it should be dismantled in favour of a Police Pensions Board may be saying so out of frustration but it is illogical because NPF Pensions Limited remains an asset to policemen – retired and serving – not a liability, just as it remains an integral element in the quest for better pensions for police retirees.

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