Payment of 50 per cent lump sum to retirees: Matters arising

Retirees under the Contributory Pension Scheme (CPS) are still waiting for the outcome of the appeal filed by ARM Pensions and National Pension Commission, challenging the May 18, 2020 judgment of the Abuja Division of the National Industrial Court of Nigeria (NICN).

The matter is a test case in the agitation by retirees under the CPS to stop the “slave money’’ paid to them as retirement benefits.

It should be recalled that Justice Oyebiola Oyewumi in the landmark judgment held that retirees above 60 years are entitled to 50 per cent lump sum on retirement.

Pension managers at the moment pay 25 per cent lump sum to retirees.

Oyewumi made the pronouncement, when he delivered judgment in a suit filed by Mr Giwa Abdul Maroof against the ARM Pensions (PFA) and National Pension Commission.

The claimant in the suit sought a declaration that: “ The computation of his lump sum/benefits by the defendant done on the basis of 25 per cent of his total retirement savings domiciled with the ARM Pensions is in bad faith, wrong, defective, ran foul of the law, offends the principle of justice, fair dealing and good conscience, therefore null and void of and no effect whatsoever.

“An order directing the defendants to pay him N15.898million representing 75 per cent of his retirement savings account domiciled with ARM Pensions.’’

The claimant said that he retired from the public service on Dec. 24, 2017, while as at May 29, 2019 the total balance in his retirement savings account was N21.197million.

He said that on Jan. 10, 2019, he approached ARM Pensions to apply for his pension and withdrawal benefits but was offered N5.066 million, representing 25 per cent of his total retirement savings, which he rejected.

ARM Pensions, in response said all its actions in relation to the claimant complied with the Pension Reform Act, 2014.

In the judgment, the judge held that the Act did not give a specific percentage a retiree of 60 years is entitled to withdraw as lump sum upon retirement.

“In other words, Section 7(2) of the Act that specifies that a retiree under or at age 50 is entitled to withdraw 25 per cent lump sum from his RSA account, that I must say, does not apply to the peculiar case of the claimant in this case.

“I have said earlier in this judgment that the claimant’s legal right to his pension is sacrosanct and nothing can withhold or alter it.

“The claimant’s right to his pension is inalienable, immutable and inviolable.

“In conclusion, the claimant case succeeds in the most part. I therefore make these declarations and orders.

“ That the 25 per cent lump sum calculated by the 1st defendant as claimant’s pension is unlawful.

“That the claimant is entitled to withdraw 50 per cent lump sum pension and this is to be calculated and paid to the claimant within 14 days of this judgment.’’

The money is yet to be paid as the respondents in the suit appealed against the judgment.

But stakeholders are happy about the judgment and optimistic that the claimant will triumph at the end of the day.

They noted that the CPS was introduced via the Pension Reform Act, 2004, in order to address problems of late payment of pensions and gratuities to retires.

However, the problems associated with the old scheme have started to rear its ugly head. In fact monthly take home pension is better under the old scheme.

Ideally, under the CPS, retirees are supposed to be paid their entitlements, three months after retirement. That was so at the incipient stage, but not now.

In addition, the monthly pension is nothing to write home about, which had ignited the call for a review of the scheme.

An unsigned article, circulated recently in the social media also drew attention to the exploitation of retirees by Pension Fund Administrators (PFAs).

They gave an example of what they said should be addressed.

The document titled Pension Fund Administrators Are Exploiting Us, states inter alia: “After attaining the age of 60 or spending 35 years in service, gathering all types of experiences, PFAs still term you as novice; you don’t know how to handle your hard earned entitlements.

“I will make a simple illustration here: Mr A retires at 60 and has N20million as his savings. He accesses 50 per of the N20million which equals N10million.

“The balance of N10million is to be spread over 180 months (15years) and Mr A earns N55,555 monthly for 15years and he stops earning anything because he is expected to die at 75.

“If Mr A will be allowed to have his total sum of N20 million, ceteris paribus (all things being equal), he could invest in the money market or government treasury bills.

“Currently and authoritatively, N20 million can fetch up to a maximum of 15 per cent per annum on a span of four consecutive 90 days tenor.

“Meaning N20 million gives about N3million per annum.

“Divide N3 million by 365 days and multiply by 30 days, gives Mr A, a monthly earning of N246,575 without depleting his capital of N20million.

“The sum given to an average pensioner is not up to the interest the administrators make on his/her savings.

“This manipulation/exploitation made PFAs among the most lucrative businesses in Nigeria.’’

It is this exploitation that Maroof challenged at the NICN, which the court agreed should not continue.

Ahmed Dada, who retired as an Assistant Director on Jan. 8, 2020, from a parastatal agency under the Federal Ministry of Information and Culture, after 28 years in service, was paid his gratuity early 2021.

He lamented the small amount paid as lump sum , 'slavish’ monthly pension, delay in the payment of lump sum and other issues associated with the CPS.

He said that the 13 months of waiting without salary was not easy.

Dada said that as a result of the delay, what ought to be a comfortable life after public service is now usually greeted with fear.

“For instance, it took me 13 months to receive my retirement benefit. At the peak of my travail of retirement, I became a borrower and sorrower and even made unsuccessful attempt to sell my car to feed my family.

“However, the bitter experience I went through before I could access my retirement benefits is better said than experienced.

“Besides the unjustified delay in paying pension entitlements, the take home of an average retiree in the federal service, particularly from the rank of deputy director downward, is nothing to write home about.

“It is simply unimaginable to realise that an assistant director who was receiving say about N240,000 per month while in public service, now receives a paltry N55,000 monthly, depending on step.

“This is another nightmare for retirees in this category,’’ he said.

Dada said that to make life worth living after retirement, the Federal Government should take a second and critical look at the entire pension policy.

“There must be timely payment of pension to those concerned, to enable them enjoy their life and have a sense of fulfilment and belonging that they served their fatherland and get commensurate remuneration for their meritorious service.

“There should also be increased monthly pension for retirees.

“A Federal Government worker, who retired with the last salary payment of say N250,000 monthly, should receive at least N150,000 or more as pension, depending on the step and other variables.

“Once a worker knows that when he or she retires, there will not be any delay in the payment of his or her entitlements, he or she will not indulge in corrupt tendencies such as changing the date of birth and embezzlement of public funds among others,’’ Dada emphasised.

Also, Mr Morayo Omolade, who retired from the Federal Public Service on Aug. 25, 2019, but paid his entitlements in October, 2020, said retirees should be given lifeline immediately after retirement.

He suggested that retirees should be given monetary lifeline from their personal savings, pending release of funds by the government.

He said that since the Pension Act did not envisage this delay, the law should be amended to reflect the reality.

“The situation is precarious; you know for state workers that had not joined the CPS, they start receiving pension immediately, while payment of gratuity commences later.

“Something should be done to check delay in the payment of entitlements under the CPS.

“After all, the CPS was introduced by the Olusegun Obasanjo administration to solve the problem associated with the old pension scheme, characterised by endless wait by retirees for the payment of their retirement benefits.’’