The Pension Fund Operators Association of Nigeria (PenOp) has expressed concerns over proposals from the police to exit the Contributory Pension Scheme to the Defined Benefits Scheme.
Oguche Agudah, PenOp CEO, voiced the concern on Tuesday in Abuja during a public hearing on a bill for an act to establish a police pension board.
He said the CPS operates on a pre-funded model with employees and employers contributing a mandatory percentage of the employee’s salary.
Mr Agudah said a minimum of eight per cent from the employee and 10 per cent from the employer, totalling a minimum contribution rate of 18 per cent, is usually gathered.
He said that either party had the latitude to contribute a higher percentage, which allows pension funds to accumulate and be invested for future payouts.
As of September, Mr Agudah said that the National Pension Commission had total pension assets under the pension scheme that had exceeded ₦20 trillion (approximately $12 billion).
He said that PenCom had ensured that the funds were not solely reliant on government budgets, thus reducing vulnerability to fiscal constraints.
Mr Agudah said that transitioning to the DBS would not solve the police’s concerns.
“It will, rather, create deeper financial and operational challenges for the country,” he said.
He said the pension scheme was a transparent, sustainable and resilient system for managing pensions, benefiting retirees and the broader economy.
Mr Agudah said reverting to the DBS model, which relies on government budgetary allocations, would lead to fiscal unsustainability and delayed pension payments.
“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.
Mr Agudah said pension funds under the pension scheme were currently invested in bonds, infrastructure, and other critical sectors contributing to the country’s economic growth.
He said unwinding the investments to accommodate a DBS for the police would erode the value of assets and destabilise the financial system.
Mr Agudah said the pensions scheme currently holds over N21 trillion in assets and remains a critical component of the country’s economic infrastructure.
He said maintaining the police within the pension scheme would ensure long-term sustainability, equity and economic stability.
Ms Agudah said setting a dangerous precedent was not good.
(NAN)
