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FG proposes Contributory Pension Scheme to replace NSITF
By Ifeanyi Ugwuadu, Vanguard
September 09, 2003
The Federal Government has sent a bill to the National Assembly repealing all existing pension schemes including the Nigeria Social Insurance Trust Fund (NSITF). The bill pegs the asset base and minimum capital of fund custodians at N250 billion and N2 billion respectively thus excluding many players from pensions management. For the Federal Government employees, they are to contribute a minimum seven and half percent of their total monthly emoluments for their pensions while the government is to pay a minimum of twelve and half percent. For those in the military, it is a minimum of 15 percent by the employer while a minimum of five percent is to be contributed by the employee. In all other cases, seven percent applies for the employee, or as agreed by both parties.
Private sector employers who have employees up to 20 or turnover of not less than N25million are also to put in place a pensions scheme in line with the Act. The contribution of the employees is pegged at a minimum of seven and half or as may be agreed by both parties.
When the law is finally effected, it would have solved the problem of unfunded public sector Pensions which runs into trillions of naira.
The bill seeks to repeal the Pension Act of 1990 and establish a National Contributory Pension Scheme for private and public sector employees. It will also abrogate the Nigeria Social Insurance Trust Fund Act 1993 and all other related enactments. Also repealed by the new Pension Bill initiated by the executive are the Police and other Agencies Pension Offices Act 1990.
Besides, the all sweeping bill seeks the dissolution of the management board of the NSITF. The Pensions Reform Bill as it is known provides that any company wishing to be registered as a custodian of pension funds shall have a minimum paid-up capital base of N2 billion as well as belonging to a "group whose consolidated balance sheet is not below N250 billion".
For companies, schemes or trusts wishing to participate in pension funds administration, the minimum paid-up capital required under the bill is put at N500 million including additional requirement that such company be listed on the stock exchange.
Under the new law, a ‘custodian’ registered by a commission established for pension purposes, shall hold the pension fund assets on trust for its clients while a fund administrator manages the funds in accordance with the Act.