I should be excused if anything written herein does not resemble the original or if something has been done already along the lines suggested here. Issues of pension are sometimes managed by insurance companies and as far as the memory can carry this writer, insurance companies are best known for their penchant to couch terms and conditions of a relationship in the most obscure language possible. Subscribers are thus left to hope for the best when there is need to request for payment of what is due.
Pension is a fixed amount of money paid to an individual who has retired from service whether in the public or private sector. It could be a defined contribution plan or a defined benefit plan. What is important is that an employee has hope that on retirement, he or she will be receiving something ‘to keep body and soul together,’ for some payments can be laughable.
In the Federal Public Service, 7.5% of the monthly salary of a worker is deducted and forwarded to a Pensions Fund Administrator (PFA) selected by the individual worker. The Federal Government from its source provides 7.5% of the worker’s salary by way of matching and remits the same to the PFA that the worker had selected. If a workers salary of for instance N100,000 a month, N7,500 is deducted and the FGN adds its own N7500 making it N15,000 per month. The PFA is expected to invest such money and credit the worker’s account with whatever it determines is due from the earnings on the invested amount. A monthly statement is sent to the worker.
The key issue, however, is that in spite of whatever has been determined and its worth in real terms, it is fair and just to release the agreed amount to the retiree as and when due. It is totally incomprehensible that a retired person has to wait for one year before the few kobos that had been pre-determined sometimes for decades begin to come in. This is why governments that pay retired persons the month after disengagement must be commended. Akwa Ibom State government is one such government and we hear the FGN is trying to introduce it.
The most interesting thing is that twelve full months before retirement, the propective retirees are invited for screening and updating of records. Yet it takes the pensions fund administrators twelve months to handle documentation (when the staff is still working) and another twelve months of further documentation (after the staff has disengaged) before payment commences. The simple questions are: why does it take twenty-four months to document pensions in a computerised system, and critically important, how should the retired person run his or her family for one year before pension is paid?
This should naturally take us to the issue of morality in the Nigerian public service system. How do people go to bed knowing that because of what they have done or are not doing several families have gone to bed hungry while some children are out of school because their retired parents cannot pay their school fees? Meanwhile, the persons administering the funds are meeting their parental and social responsibilities and much more.
Is it true that pension fund administrators sit on the contributions of government and staff? Is it true that this is done because they want to continue to invest such contributions and increase their earnings? They do pay something to the contributors but who has ever been told of the sharing formula? Should workers through their unions not insist on transparency on the management of investments and the proportion of profits that go to the contributors?
The next issue with respect to morality has to do with the probability of workers about to retire having to behave like rational beings by preparing themselves for the one year of dryness. Might workers who have access to money and whose organizations actually have money not make an effort to take something for the ‘rainy day’ which in fact would be a rainy year? One is not sure that the ‘anti-graft’ agencies in Nigeria ever give a thought to issues of this nature. Why would a former Governor of a State steal money when he or she is statutorily due for full salary, security, vehicles, etc for life? The other public servants? They are on their own.
It is hereby suggested that the practice of pensions commencing the month regular salary is stopped should be carried through without delay. There is no doubt that those who are benefiting from the delay in commencing payment will fight against the idea. Are we not told that Nigerians do not allow local refineries to work because those concerned import refined petroleum products? And do we not hear that public supply of electricity will never stabilize because of importers of generators and gasoline block government efforts to get the power sector to work? Workers unions would do well to take up this matter rather than fighting over the increase in petroleum products prices which should be left to market forces.
There is however an alternative for the public servant who has not been able to suppress his or her conscience which cries out against corruption. This is through an annuity. Insurance companies collect contributions or subscriptions from people and enter into a contract to pay fixed amounts annually or on agreed periods to the contributors. There are various forms of annuity but the one recommended here is that which a worker makes a lump sum deposit to a reputable insurance company to be paid monthly till the money is exhausted. In some varieties, interest is not paid to the subscriber. An example will suffice.
In some organizations, lump-sum payments such as promotion arrears are made periodically. In most organization both public and private, cooperative societies are very strong and virile entities. Members can borrow lump sums therefrom annually. As someone is getting close to retirement, he/she can borrow a sum that when divided by twelve will meet the minimum or floor personal expenses.
If for instance, the worker has determined from experience that the sum of N100, 000.00 is the lowest he or she needs for the descent, minimum stress-free life, then a lump sum of N1.2million should be raised and deposited with a reputable insurance company. This form is different from the monthly subscription to insurance companies known as life insurance. It is a better option in that the monthly premium can be a source of stress during some ‘tight’ months.
One more thing: retirement planning is best done long before the retirement day. This should include not starting expenditure items that retirement money will not be able to cover. For instance, I think it is inappropriate to start financing the education of someone other than a biological child if the tenure of schooling will extend into the retirement period. One should not take up a JSS1 student or a degree student in year 1 if that person is retiring in one or two years. Even a business investment a few years before retirement is inappropriate. Many businesses including buying and selling require a long gestation period to stabilize and become profitable. Putting a business in the nursery after retiring is an invitation to poverty and chaos.