Elizabeth Christopher
The proposed bill to establish a Police Pension Board is expected to significantly increase the financial burden on the federal government of Nigeria, potentially destabilizing the country’s financial system.
The bill, if passed, aims to exclude the Nigeria Police Force (NPF) from the current Contributory Pension Scheme (CPS) and revert the force back to the old Defined Benefit Scheme (DBS).
With over 300,000 personnel in the police force, stakeholders are concerned that the bill will add trillions of naira to the government’s liabilities. Under the Defined Benefit Scheme, the government will bear full responsibility for pension payments, unlike in the current Contributory Pension Scheme where employees and employers contribute towards pension funds.
Expressing their opinion on the matter, Oguche Agudah, the Chief Executive Officer of the Pension Fund Operators Association of Nigeria, emphasized that this move undermines the progress made in pension reform over the years.
“The withdrawal of the police from the CPS would mean a return to the defined benefits scheme, which would lead to the dismantling of the institutions, systems, and processes that the government had put in place to effectively manage pensions. This reversal is highly counterproductive,” said Agudah.
Agudah further highlighted the transparency of the current Contributory Pension Scheme, stating that “there is clear visibility into the amount of retirement benefits disbursed by all the Pension Fund Administrators (PFAs). In contrast, other pension schemes operated in the past, outside of this framework, lack such transparency. The police are pushing to go back to this non-transparent system.”
According to Mr. Agudah, implementing a separate Pension Board for the police is financially unsustainable. “This would only add more financial burden on the government through unsustainable pension obligations that it has already made provision for through a private sector-managed pension scheme. It also destabilizes the financial system, unwinds investments, diminishes assets, and jeopardizes the retirees themselves. Moreover, it disrupts fiscal policy and creates an unstable financial system,” he warned.
Agudah concluded by emphasizing the benefits of the Contributory Pension Scheme as a collective system. “The beauty of the CPS is that the benefit that accrues to one member within the scheme can be enjoyed by all the members. A standalone pension management system, as advocated by the police, will not benefit from this pooling effect,” he stated.
