The Pension Fund Operators Association of Nigeria (PenOp) has expressed concerns over proposals from the Nigeria Police Force (NPF) to transition from the Contributory Pension Scheme (CPS) to the 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, warning that it would erode the value of assets and destabilize the financial system.
Agudah said that the transitioning to the DBS would not solve the police’s concerns, but “will, rather, create deeper financial and operational challenges for the country.”
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.
While noting that the Police exiting the CPS would set a dangerous precedent that could prompt other government agencies to leave, Agudah said:
“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 that the CPS operates on a pre-funded model with both employees and employers contributing a mandatory percentage of the employee’s salary.
According to him, a minimum of eight percent from the employee and 10% from the employer, totaling a minimum contribution rate of 18%, is usually gathered.
The Nigerian Senate is currently considering a bill to establish a board to oversee Police pension, as they plan to exit the CPS managed by PenCom.
This, according to him, places retired police officers in the wrong post-service employment in spite of their crucial role.