The Pension Fund Operators Association of Nigeria (PenOp), has expressed concerns over proposals from the Nigeria Police Force (NPF), to exit the Contributory Pension Scheme (CPS) to Defined Benefits Scheme (DBS).
The Chief Executive Officer of PenOp, Mr Oguche Agudah, voiced the concern on Tuesday in Abuja during a public hearing on a bill for an act to establish a police pension board.
He said that the CPS operates on a pre-funded model with both employees and employers contributing a mandatory percentage of the employee’s salary.
Agudah said that usually, a minimum of eight per cent from the employee and 10 per cent from the employer, totaling a minimum contribution rate of 18 per cent, is usually gathered.
He said that either party had the latitude to contribute a higher percentage, which allows pension funds to accumulate and be invested for future payouts.
Agudah said that the National Pension Commission (PenCom), as of September, had a total pension assets, under the CPS, that had exceeded ₦20 trillion (approximately $12 billion),
He said that PenCom had ensured that the funds were not solely reliant on government budgets, thus reducing vulnerability to fiscal constraints.
Agudah said that the transitioning to the DBS would not solve the police’s concerns.
“It will, rather, create deeper financial and operational challenges for the country,” he said.
He said that the CPS had proven to be a transparent, sustainable and resilient system for managing pensions, benefiting both retirees and the broader economy.
Agudah said that reverting to the DBS model, which relies on government budgetary allocations, would lead to fiscal unsustainability and delayed payments for pensioners.
“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.
“It will also divert resources from other critical needs, including minimum wage adjustments and public services,” he said.
Agudah said that pension funds under the CPS are currently invested in bonds, infrastructure and other critical sectors that contribute to the country economic growth.
He said that unwinding the investments to accommodate a DBS for the police would erode the value of assets and destabilise the financial system.
Agudah said that the CPS currently holds over N21 trillion in assets, and remains a critical component of the country’s economic infrastructure.
He said that maintaining the police within the CPS would ensure long-term sustainability, equity and economic stability.
Agudah said that setting a dangerous precedent was not good.
“If the police exit the CPS, other public sector groups may demand similar transitions, fragmenting the pension system and undermining reform efforts.
“And our key aim and our key goal is to ensure that all pensioners are paid on time, all pensioners have a living pension, and everybody gets their pension on time.
“What we heard at the hearing is actually a joy to us because what we are seeing is that even the sponsor of the bill is on the path that it is not really the CPS that is the problem of the police. It is the welfare.
“So, what we have said is, if your salary is small, your pensions will be small,” he said. (NAN)
