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It is quite sad that some people still associate pension with old age. For the larger percentage of employees who have been involved in the pension contributory scheme have a better idea of what the scheme is all about and it is important for every employee in days of active service to concentrate on their pension contributions from the first day of employment, Those who have the archaic believe of pension been a scam or a retirement talk should rather sit up and learn more about the contributory scheme. The New Pension Act 2014 is an eye opener of the obvious benefits in the contributory scheme.
The Pension Act 2014
On 1 July 2014, President Goodluck Ebele Jonathan signed into law the “Act”, which repeals the Pension Reform Act 2004. The new Act serve as the enabling legislation for the administration of the contributory pension scheme. Act has some major amendments which everyone employers and employees should find quite exciting just as I do and benefit from the major changes which were made in this new act to alleviate the sufferings of the Nigerian Employee from the shackles of pension problems which the former Act did not address. Some of the major changes are highlighted below:
Participation and contribution
The scope of participation of the contributory pension scheme for employers in the private sector has been decreased from minimum of five employees to three employees, which enables wider participation for the informal private sector, this is a wonderful development for employees in small scale employment, and they are not left out of the contributory benefit to secure their future.
There is also an increase in the rate of contributions, Under the Act, employers are to contribute 12% of the monthly emolument which was previously 7.5%, and the employees on the other hand are to contribute 8% which was previously 7.5%. For an employer that bears the total pension contributions of its employees they will be expected to make 20% contribution. These contributions are applicable on monthly emoluments only. It is important to note that the scope of the monthly emolument has been given a wider definition than before i.e. Monthly emoluments under the Act is defined as the total emoluments as may be defined in the employees contract of employment but shall not be less than a total of basic salary, housing allowance and transport allowance
Sanctions and punishments
The Act now empowers the National pension commission to institute criminal proceedings against employers for persistent refusal to remit pension contributions subject to the fiat of the Attorney General of the Federation, which will be to the delight of employees right now. Furthermore Pension operators who mismanage pension funds are liable on conviction to not less than 10 years imprisonment and/or fine of an amount equal to three-times the amount so misappropriated or diverted now. As it is clear that the benefit of pension is on the high side, some adamant employees still refuse to join this scheme, the pension act 2014 takes good care of these category of staffs by compelling 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.
Recovery of Pension
The employees who have been involved actively in the contributory pension scheme often complain about recovery of pension after loss of job, the worry centers around the stipulated waiting period after a job loss, the new act has now given us a reason to smile as the act 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. So in a sad case were you lose your job, you can quickly smile to the bank to access your benefits after 4months.
Finally It is clear that the new pension Act 2014 is quite advantageous to the employees as some keys issues have been addressed such as upward review of the penalties and sanctions, enhanced coverage of the contributory pension scheme and informal sector participation, upward review of rate of pension contribution, opening of temporary retirement savings account for adamant employees and access to benefits in the event of loss of job .
*Sogo Akinola Nathan a young commercial lawyer at Gbenga Biobaku and co. He specialises in Taxation,oil and gas law and intellectual property. He is a graduate of obafemi awolowo university and the Nigerian law school lagos campus. He is a member of the nigerian bar association and a member of the Young International Arbitration Group and also an intending associate member of the Chartered Institute of Taxation of Nigeria.*