Mr Dan Ndackson, Executive Secretary, Kaduna State Pension Bureau, in this interview with EMMANUEL ADO, Syndicated Columnist/Host - Let's Talk - spoke on the eform of the pension administration system in Kaduna State, the introduction of the Contributory Pension Scheme (CPS) by Governor Nasir el-Rufai, and the recently introduced biometric ‘I am alive verification’ system that has replaced the periodic physical verification exercises that were nightmares for pensioners.

What should I be doing in terms of savings for old age, considering that I work for myself?

The National Pension Commission (PenCom), the national regulator on pension, has rolled out the Micro-pension Scheme. The draft guidelines are currently in circulation nationwide for people to review and comment on before the take-off of the scheme nationwide. The scheme addresses your question, as it is designed to create a pension system for those that are not covered by the Pension Reform Act (PRA) 2014. Going by the provisions of the PRA 2014, only organisations that employ three persons or more are required by law to participate in the CPS. But the National Pension Commission recognises that many Nigerians are self-employed, or have one person working for them, as a result of which they have been exempted from the contributory pension scheme. The Commission felt that it would not be fair to exclude these large numbers of Nigerians, which is why the scheme has been introduced. The micro pension scheme will accommodate the artisans, tradesmen, and self-employed individuals like yourself.

Was the reform of the pension system in Kaduna State necessary? If yes, justify the reforms.

If you found yourself in Ikoyi, Lagos, before 2004, one sight that would have definitely greeted you was the number of retired military officers with their mats, camped and waiting for their pension. The situation was very similar in Abuja at the office of Head of Service. I must commend the wisdom of the Obasanjo administration, and coincidentally, the present Governor of Kaduna State, Mallam Nasir el-Rufai, who pioneered the Pension Reform at the national level, when he was the DG of Bureau for Public Enterprises (BPE). Given the challenges the BPE encountered in privatisingsome public corporations due to their huge pension liabilities, the BPE, under the leadership of Mallam el-Rufai at that time, initiated the Pension Reform. This led to the passage of the Pension Reform Act (2004) and the creation of the National Pension Commission, to implement the PRA 2004. The Contributory Pension Scheme provides for the employee to contribute to his/her pension and the employer also contributes to the employee’s pension on a monthly basis.

When the worker retires, he or she has no business with government because his pension had been set aside on a monthly basis prior to retirement and is being managed by a private sector investment manager (the Pension Fund Administrator), who pays the retiree his pension on retirement. The scheme, definitely, relieves workers and the government from the pain that public sector retirees used to suffer before. And it offers the private sector employees some pension, unlike in the past where many private sector employees were not paid any pension on retirement. The Kaduna State public sector employees were suffering the same fate as those of the federal before the pension reform in the state. Therefore, it was commendable that the Governor Makarfi administration in Kaduna State embarked on the pension reform in Kaduna State with the enactment of the Kaduna State Pension Reform Law, 2007, about three years after the commencement of the pension reform at the federal level.

Was Kaduna having problem with pension payment?

Kaduna, like most other states, had similar challenges to those faced by the Federal Government. This explains why the state introduced the pension reform in 2007, soon after the Federal Government. Though contributions under the contributory pension scheme in Kaduna State commenced in March 2008, under the Makarfi administration, the implementation was epileptic. The provisions of the law were not fully respected. For instance, not all contributions deducted from the employees’ salaries were remitted to their Retirement Savings Accounts (RSAs) with the Pension Funds Administrators (PFAs); the employer (government) did not contribute for many employees and where there were contributions, part of it was not remitted, etc. So, after about six years of implementation of the 2007 law, the PFAs were recording nil balances in the RSAs of many workers; and some had only part of the contributions made from the employees’ salaries in their RSAs.

These and many other shortcomings in the implementation of the 2007 law made the Mallam el-Rufai administration to repeal the law in 2016 and enacted the Kaduna State Pension Reform Law 2016. The 2016 law created the State Pension Bureau as the regulator and supervisor of both state and local governments’ pension in the state. The governor also approached the National Pension Commission to release one of its staff to help set up the bureau.

What are the highlights of the new law enacted by el-Rufai’s administration?

The 2007 law did not vest the implementation of the law on any specific agency and, where it did, the agencies only focused on some aspects of the law. That was a big flaw. From 2007 when the pension reform law was first introduced, amended in 2015 and repealed in 2016, the Office of the Head of Service, the Office of the Accountant-General, the Commissioner for Local Governments and Chieftaincy Affairs, etc., each handled different aspects of the law, without a coordinating agency. This is one major feature of the 2016 law.

It created the Kaduna State Pension Bureau, an amalgam of the defunct Bureau of State Pension and Bureau of Local Government Pension. So, there is now an agency of government whose primary responsibility is supervising and regulating pension administration in Kaduna State: whether under the defined benefits scheme or under the contributory pension scheme. Apart from that, the contribution rates under the 2007 law were 10 per cent by the employer and 5 per cent by the employee. But in the 2016 law, the contribution rates were raised to 13 per cent by the employer and 7 per cent by the employee, giving a total of 20 per cent contribution, the highest by any state in Nigeria. Under the Federal Law, the contribution is a total of 18 per cent. The 2016 law also made a provision for Group Life Insurance, an integral feature of the CPS.

It provides that in the event of death of a worker in the employment of the state government, the insurance company will pay the beneficiaries of the deceased worker 300 per cent of his or her total annual emoluments. The 2016 law also provided a window to accommodate the contributions of people who are yet to open their RSAs with the requirement for the creation of a Transitional Contributions Fund (TCF) by the employer with one of the PFAs. The pension contributions of such employees who are yet to open their RSAs are remitted to the appointed PFA for management by the employer, pending when the employee opens his RSA with the PFA of the employee’s choice after which the contributions are remitted to his/or RSA with his chosen PFA.

Furthermore, the 2016 law provides that employees are at liberty to open their RSAs with any licensed PFAs of their choice. This has been implemented, as any employee who did not have an RSA prior to August 2016 was at liberty to open his/her RSA with any PFA of his/her choice, thereby opening the pension business in Kaduna State public sector to all PFAs licensed by PenCom. The 2016 law also made a provision for Actuarial Valuation, a necessary pre-condition for the transition from Defined Benefits Scheme to the Contributory Pension Scheme for the determination of the benefits of workers under the Defined Benefits Scheme, prior to transition.

Has the Kaduna State Government been faithful to the law, as regards its contribution to the pension scheme?

The Kaduna State Pension Reform Law 2016 makes it mandatory for government to remit pension contributions for state employees to the Pension Fund Administrators, within seven days of paying salaries. It further provides that in case of any failure to do so by those responsible in the state, the Bureau is mandated to notify the governor that the contributions had not been made, and the governor is mandated by law to ensure that state machinery that is responsible for making the payment makes good the payment.

But in the event that he fails, the law further provides that the Bureau should appeal to the National Pension Commission, and the commission will in turn request the Accountant-General of the Federation to deduct at source and remit the unpaid pension contributions of the state’s employees from the state’s share of the Federation Account. The Bureau has not had cause to report the state to the National Pension Commission, because the state has been meeting its obligations under the law with respect to remitting the pension contributions of its workers.

Only a government that has the interest of its workers at heart that would enact such a law, because it’s like ‘handcuffing’ yourself and giving the key to another person.

The government also pays huge amounts as premium to insurance companies as premium for the Group Life Insurance. And as for the payment of monthly pension under the old pension scheme (Defined Benefits Scheme), the government has not defaulted in payment of monthly pension in the last 24 months that I have been at the Bureau as the executive secretary. The Nasir el-Rufai administration has done tremendously well in this regard. The figures are there to be verified by whoever is wishing to do so.

What is the pension bill of Kaduna State like?

The defined benefits pension bill for the state and local governments revolves between N800 million and N1billion every month, and government has been paying this regularly. The government gets about N3.5 billion from the Federation Account, about N2 billion from IGR, which brings its income to about N5.5 billion and then it spends about N2.2 billion on wages and then N1 billion on old pension scheme so that leaves little or nothing for development.

Recently, the National Pension Commission did an evaluation of the level of implementation of the pension reform in Kaduna State and scored Kaduna State 75.7 per cent. Why didn’t you score a 100 per cent?

I am sure if the National Pension Commission had carried out this assessment in 2014 or even 2015, Kaduna State wouldn’t have scored that high. But if you look at what the state government has done within the last two years of implementing the pension reform, you will appreciate the achievements of the state. A lot of the structures that are required for effective pension administration have been put in place. For instance, there is an agency of government whose primary responsibility is to oversee the implementation of the state pension law. The agency also follows up with government to remind it of its obligations as provided in the Kaduna State Pension Reform Law (2016).

To a very large extent, the sincerity and commitment of government is not in doubt. I must commend the governor for his sincerity of purpose. The governor was able to get the World Bank to support the automation of the Kaduna State Pension Bureau. Almost 90 per cent of our operations havebeen automated. We started capturing the biometric credentials of our retirees since November 2016: before they are included in the pension payroll. This invariably reduces the stress that pensioners are subjected to at the Bureau when they have challenges and need assistance.

Furthermore, it makes it difficult for anybody to fake the identity of a pensioner, which also reduces pension fraud. We have a Data Centre that is designed to link up with employers’ data bases, especially to their payroll units; which helps the Bureau to monitor compliance with the provisions of the contributory pension scheme remotely from our office. Pensioners can attest to the improvements that have taken place at the Bureau in the last two years, in terms of payment and documentation.

Was the score of 75.7 per cent part of what led to the proposed amendments of the state’s pension law?

The Bureau never knew that the National Pension Commission was undertaking an assessment of the various pension Bureaux in the country. We didn't prepare for the assessment; and we never knew we were being evaluated. The proposed amendments were the outcome of our experience after over one and the half years of implementing the 2016 law. We realised that there were certain aspects that, if addressed, would enhance the implementation of the scheme. We are working towards scoring 100 per cent though, if possible. All hands are on deck in the state to ensure the score improves in future assessments.

Let's assume you are a worker with Kaduna State Government, what would be your reaction to Governor el-Rufai’s policies, considering all the things you have said about the pension law?

Kudos to him! He is selfless and committed to the welfare of the Kaduna State worker, and has demonstrated this practically. All that a senior citizen desires after serving the state in his youth is to get his benefits as at when due, because he has no other means of supporting himself. What this government has done is to put the financial power of the individual in his old age in his own hand. The contributory pension scheme ring-fences the worker’s Retirement Savings Account. What that means is that nothing would ever happen that would make a worker loose his contributions in his/her RSA under the Contributory Pension Scheme.

Even if a worker is found guilty by a court of law, the law forbids the judge from garnishing the individual’s contributions in the Contributory Pension Scheme as part of payment for a judgment debt. Once money has gone into your retirement savings account, that money remains yours. And, in the event that the worker dies, the RSA balance is paid to the deceased’s beneficiaries. Government has technically granted the worker under the CPS full retirement independence. The fact is that the worker, under the CPS, is paid his retirement benefits on a monthly basis. The only difference is that it is not in an account that he/she can access immediately. It is kept on the worker’s behalf by his/her chosen PFA. So, when he/she retires, he/she has no business with government (the employer).

Let’s talk about your apex initiative - the biometric ‘I am Alive Verification’ system - which your Bureau has introduced in place of physical verification that subjects the old or senior citizens to all manners of indignities. What, exactly, is it all about?

The biometric, ‘I am Alive Verification’ initiative is the high point of the pension reform in Kaduna State. Both the government and the Bureau saw the need to do something about the problems that retirees usually encounter, especially those in their 80s, 90s; those in rural areas, etc. All categories of pensioners were required to appear for physical verification once every two or three years in order for government to confirm that they are alive so as to be paid. The reason is obvious. Government loses large sums of money to families of dead pensioners, because it has no way of knowing that a pensioner is dead; unless the death is reported to the Bureau. So the periodic physical verifications were to help government to remove deceased but unreported pensioners from the pension payroll. By 2016, the Kaduna State Government had taken a decision that no retiree would be paid his/her monthly pension except through a commercial bank. It went further to direct pensioners to forward their NUBAN account numbers and BVN to the Bureau, without which the pensioner would be suspended from the pension payroll.

By complying with these directives of the state government, invariably, every pensioner on the pension payroll of the state has his/her biometric data with the banking system in Nigeria. Given that the Nigeria Interbank Settlement System (NIBSS) has custody of all the bank verification numbers and biometric data of all commercial bank customers in Nigeria, the Bureau decided to leverage on the existing technology in the banking system to offer convenience to our pensioners, while mitigating one type of pension fraud (payment of monthly pension to deceased pensioners). The Bureau, therefore, decided to partner with the Nigerian Interbank Settlement System and some willing banks to periodically confirm that our pensioners are still alive before we continue paying them their monthly pension.

The biometric I’m Alive Verification system simply requires a pensioner to walk into the branch of any of the participating banks with his BVN and give his/her thumb-print. Once the pensioner thumb-prints, it will register with NIBSS, and NIBSS would communicate this electronically to the Bureau’s Pension Management Information System (PMIS), to confirm that the pensioner is still alive. The Bureau would pay him/her pension for the next three months, before he/she thumb-prints again. Currently, we are partnering with UBA Plc, Keystone Bank Plc, and Zenith Bank Plc on the initiative. Kaduna State pensioners anywhere in the country can walk into any branch of these banks nationwide to give their thumb-prints once every 90 days. Failure to do this within 90 days from the date of last thumb printing by a pensioner will result in automatic suspension from the monthly pension payroll, until the pensioner thumb-prints again.

The initiative is for pensioners under the old pension system, Defined Benefits Scheme, who are paid pension by the state or local governments. The verification system covers all those who retired from Kaduna State public sector before or on December 31, 2016 and are already on the pension payroll. For those who retired under the old pension scheme but are yet to be put on the pension payroll, they should wait until they are enrolled before they can start thumb-printing every 90 days. The scheme has gone a long way in minimising the hardship that pensioners use to encounter. The initiative is people-centred, because it is set to address a major challenge of the senior citizens in the state.

What are the achievements of your Bureau? I am aware you have paid about N346 million to families of 167 deceased employees under the state Group Life Insurance policy of the CPS. You are regular and prompt in payment of pensions....

It is the insurance company that paid this money to beneficiaries of deceased workers under the CPS between June 2017 and May, 2018: not the Bureau.

The achievements of the government in the State Pension reform initiative of Governor el-Rufai include compliance with the statutory requirement for Actuarial Valuation by an actuary firm approved by the National Pension Commission since December, 2016. The report of this consultant provides the information that the Bureau uses to determine the liability of government to workers under the old defined benefits pension scheme, before their migration to the CPS. Some of our other achievements include the creation of the Transitional Contribution Fund (TCF), so that workers who do not have retirement savings accounts do not lose their contributions, as it was the case between 2008 and 2016 under the Kaduna State Pension Reform Law 2007.

Their contributions are now remitted to a holding account called the Transitional Contribution Fund maintained by one of the PFAs appointed by the state government (the employer), from where their contributions shall be remitted when they open a retirement savings account with any PFA of their choice. Another provision of the Contributory Pension Scheme is the opening of the Retirement Benefits Bond Redemption Fund (RBBRF) with the Central Bank of Nigeria. This fund is where the employer (state, local governments and self-funded agencies in the state) remits 5 per cent of its total monthly wage bill towards the payment of Accrued Rights. The sum of N5 billion has been paid as Accrued Rights from commencement of the new CPS in Kaduna state in January, 2017 to May, 2018.

The El-Rufai’s administration must be commended for its foresight in enacting the law and for adhering to the law. I want to clarify one issue. The bureau and the state government do not have the power to approve the change of pension fund administrators for a worker. This power rests with the National Pension Commission. It is the National Pension Commission that issues the pension personal identification numbers, and it is the custodian of all the pension PINs. So, it is only when the Commission opens the transfer window that people can change their RSAs from one PFA to another. But as at now, that window has not yet been opened, those people that were forced to open their retirement savings account with some PFA’s since 2008 should exercise some patience and remain with those PFAs for now.

Whenever the transfer window is opened by the National Pension Commission, it will be announced. Everybody will know that the transfer window is open, and those that are dissatisfied with their present PFAs will have the liberty to change to the PFA of their choice. The state government has given its new employees or employees yet to open their RSAs by August 2016 the freedom to open their RSA with any PFA of their choice. This is something this government has done and should be commended. In compliance with the State pension law, they have not forced any PFA on workers. The support of the government in transforming the Bureau is another achievement worthy of commendation.

When the implementation of the reform under this administration commenced in June, 2016, the Bureau was near zero in information technology minimum standards set by the National Pension Commission for pension Bureaux. As soon as the attention of government was drawn to the minimum requirements of the National Pension Commission with regards to automation of the Bureau, His Excellency, Governor Nasir el-Rufai, gave the Bureau all the support needed, with the supply of computers and other automation facilities needed to meet the PenCom standards. I am happy to say that our operations in the Bureau today are automated and everybody in the Bureau is computer literate.

Fraud is usually associated with pension administration, so what have you done to ensure that the scheme does not suffer such a fate?

I think government deserves commendation for the frontal attack on corruption in pension administration in Kaduna State. Allow me to commend former President Obasanjo for championing pension reform in Nigeria and former governor Makarfi for the courage to introduce the Contribution Pension Law in Kaduna State in 2007. In particular, I commend the commitment of Governor el-Rufai towards sharpening the pension reform in Kaduna State. If the reforms had not taken place, pension administration would have been a lot more chaotic than it is at the moment at the Federal level and in Kaduna State. There is no gainsaying the fact that states that have embraced the reform are doing better than those that are yet to embrace the wave of pension reform.

The Reform in Kaduna State has ensured that pensions are paid more regularly even under the old scheme. It has helped government to save money as it has a better idea of its obligations under the old pension scheme. The Contributory Pension Scheme has cut down corruption significantly in pension administration. In the Contributory Pension Scheme, the employer, the pension fund administrator, the pension bureau, the government agencies, and all other pension stakeholders cannot tamper with the pension contributions. The institutional and administrative structure of the Contributory Pension Scheme adopted in Kaduna State is such that once the employer deducts and remits contributions to the employee’s RSA, the contribution is safe. Furthermore, where the employer fails to do so, there is a self-cleansing mechanism built into the State Pension Law for redress. The scheme, at the federal level, is a witness to this claim of safety of pension funds from fraud. In the 13 years of the Contributory Pension Scheme at the federal level, no kobo has been lost to fraud. It is, therefore, instructive that where a government wants to get rid of fraud in its pension administration system, it is advisable to adopt the Contributory Pension Scheme.

Besides the provisions of the Contributory Pension Scheme that assists in ridding the system of fraud, the automation of the Bureau’s pension administration system has drastically reduced the vulnerability of the Defined Benefits Scheme to fraud.

So, is it secured? Why and how is it secured?

The CPS is secured because in the administration of the CPS, most stakeholders involved in the process do not see or touch the pension funds; it is more of paper work. Relevant stakeholders get information on how much has been remitted in favour of an employee, the funds are remitted to the account of the Pension Fund administrator maintained with a Pension Fund Custodian (PFC). The PFC’s role in pension administration is strictly to keep custody of pension assets. It only deals with these assets as directed by the PFA under very strict guidelines, regulations and supervision of the National Pension Commission. Should a PFA give a directive to a PFC that is contrary or contradicts PenCom guideline, that PFC has the right and responsibility to ignore the PFA.

Finally, let’s talk about the State Pension Management Information System.....

The State Pension Management Information System (PMIS) is part of the office automation process that is going on at the State Pension Bureau. What the Pension Management Information System sets out to achieve is automatic generation of the monthly pension payroll for the Defined Benefits Scheme and off-site pension supervision for the Contributory Pension Scheme. The PMIS, for the Defined Benefits Scheme, commences with the biometric data capture of the pensioner once the pension computation for a retiree has been done by the Bureau and certified by the auditor-general. At the biometric data capture, all details about the retiree are captured together with all required documentation for pension records are scanned and saved.

The 10-finger-prints are captured, including the retiree’s facial image. The retiree’s computed monthly pension and gratuity are also captured. While the scanned documents of the retiree are saved in a secure server, the financial data are exported to the Bureau’s monthly pension payroll application, as the retiree is enrolled on the monthly pension payroll. Once enrolled, inclusion in subsequent monthly payrolls is done automatically by the PMIS,unless he/she is suspended from the payroll due to an infraction.

With the biometric I’m Alive Verification system, the PMIS automatically suspends any pensioner on the payroll who has not thumb-printed after 90 days of his/her last thumb-print. This pension payroll management is done without human intervention, except where a suspended pensioner is to be re-introduced into the pension payroll, after all the re-entry protocols have been met. The gratuity entitlement of the retiree, on the other hand, is batched and forwarded to His Excellency, the Governor, for funding separately.

As for the CPS, the PMIS seamlessly taps data from the payroll database of the employer to verify contributions and remittances made to employees’ RSAs. Once the PMIS accesses payroll and remittance data from the employer’s database, the Bureau uses the data to generate different reports for its use, or to the National Pension Commission for pension supervisory activities.

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