THE Lagos State Government under the leadership of Mr. Akinwunmi Ambode, has long demonstrated its full and unalloyed commitment to its pensioners, to the government’s pension obligations and to the implementation of all the provisions of the Pension Reform Act of 2004.
Therefore, I am here today on behalf of His Excellency to thank the organisers of this programme for the Award for Excellence on Pension Matters given to the Lagos State Government. In addition to expressing the gratitude of the government and people of Lagos State, I am also here to re-state, on behalf of the governor, the continuing and irrevocable commitment of this present administration to the welfare of pensioners, the dutiful discharge of pension obligations, and the regular reform and retooling of the government’s pension systems from time to time and as the exigencies of the times may demand.
I am pleased to note that the theme of this event is wide enough to encompass the intersections between government policies and the level of returns on the investment of pension and insurance funds. The theme, Government Policies as it Affects Various Investment Options of Pension and Insurance Fund, clearly shows that the organisers are well acquainted with the interests that should be catered for in order to have a robust and sustainable pension and insurance system. I wish to briefly reiterate the convictions that ought to be deeply appreciated and kept in view by all the stakeholders in the pension administration system. These convictions relate to the holistic and multiplier benefits that a properly managed and administered pension system has to offer all stakeholders. I propose, therefore, to briefly address in a panoramic manner, the general benefits of the enabling law that anchors the Lagos State Government’s award winning pension system. First, the Lagos State Pension Reform Law allows for the maintenance of a Retirement Savings Account by each employee, which gives the workers responsibility over their retirement savings. Pensioners will no longer be at the mercy of employer, and participants are assured of regular payment of retirement benefits.
Furthermore, workers could choose how to allocate their retirement savings and diversify their investments over a range of investment instruments. It is also argued that personal accounts would provide all workers a higher rate of return than can be paid under the Direct Benefit plan. This approach also affords participants an opportunity to pass wealth to survivors in the event of death. In addition, RSA maintained by millions of workers tend to generate massive long-term funds, which are available for investment. Owing to economies of scale, the cost of investing such funds tends to be relatively lower than if an individual worker were to undertake the investment on his or her own account. Finally, having a pension scheme that pays out benefits in the form of a life annuity affords workers with protection against longevity risk, by pooling mortality risk across others. On a holistic note, the provisions of the law encourage labour market flexibility.
The worker is free to move with his account as he/she moves to another place of employment and/or residence. In this way, it is an important tool for enabling workers and employers to adapt to changing circumstances especially in a global environment in which change is a constant aspect of social and economic life. The government also stands to enjoy benefits under the law. The law will stem further growth of pension obligations and provide a platform for addressing this liability. It will also impose fiscal discipline in the budgetary process because pension obligations would be accurately determined. Also, the health of the economy is always a major concern of the government. Thus, aside from the law’s potential to promote national savings and by implication, economic growth, funded pension schemes have the capacity to promote capital market development. Moreover, it is often argued that funded schemes have the capacity to promote economic reforms generally. Another area in which the government stands to benefit from the law is through the scheme’s ability to support the overall macroeconomic policies of reform. The last two decades have witnessed a growing support to the idea that enterprises are better run by private individuals and the role of government should be limited to providing a conducive regulatory and institutional framework that will enable the private sector to thrive.
Many countries around the world have adopted privatization as an avenue for reform and have often employed similar laws to support the process. This law will thus facilitate such reforms better than the prior arrangement. Before the 2004 Federal Pension Reform Act, most state governments and companies in Nigeria operated under the Defined Benefits Pension Scheme, popularly referred to as the ‘Pay as You Go’ scheme. This scheme relied on methods that utilised the parameters of length of service to determine the final emoluments of employees. The benefits were thus easily calculated by employees. Broadly speaking, employees who had spent five to nine years in service were entitled to a lump sum payment referred to as gratuity, while those who had spent ten years and more were entitled to both the gratuity and monthly pension payment.
The available data and documented history reveal that the model woefully failed as a result of the inability or wilful refusal of employers to budget for and/or properly utilise funds to service pension obligations. The Lagos State Government considers it morally reprehensible for any employer to neglect or refuse to plan and cater for the retirement benefits of its employees who gave the prime of their active years to the employing institution. The Lagos State Government thus demonstrated its virtuous moral compass such that, under the administration of Mr. Ambode, in particular, the Lagos State Government has faithfully honoured its obligations under the Law. The vehicle for demonstrating this commitment has been the Lagos State Pension Commission, LASPEC, which was established as a corporate entity to regulate, supervise and ensure the effective administration of pension matters in the Lagos State Public Service.
The passage of the law itself was in response to the new model and standards of pension administration formulated under the federal Pension Reform Act 2004. Without an iota of doubt, LASPEC has performed brilliantly and commendably in discharging the trust entrusted to its care. Furthermore, and as you well know, the Lagos State Government has been consistently winning the National Pension Commission’s award for the Best Pensions Compliant State in the Federation.
We aim to maintain this rating by continuing and improving on the timely payment of all pensions and other applicable benefits to our retiring workers upon disengagement from service. In the implementation of the schemes by the Lagos State Government through LASPEC, it is on record that the following successes, among others, have been recorded: a.)In spite of the onerous funding obligations under the Contributory Pension Scheme, the administration of Governor Akinwunmi Ambode has been dogged in meeting the funding obligations; b.)The State Government has never failed to remit monthly contributions into the Retirement Savings Account of workers and, as at March, 2017, about N78,592 billion had been credited into employees’ Retirees Savings Accounts maintained by our 10 Pension Fund Administrators; and c.)
The Lagos State Government has also been consistent in setting aside funds for the payment of accrued rights as provided for in the Pension Reform Law such that the State government has paid accrued pension rights of about N61 billion since the commencement of the Retirement Benefit Bond Certificate Presentations in 2010. With the institution of such elaborate schemes by the Lagos State Government, it is not surprising that retiring public officers now look forward to retirement with more confidence and joy. This is how it should be. Furthermore, let me assure you that the Lagos State Government through LASPEC will continue to ensure that public service retirees not only get what is due to them statutorily, but also continue to receive, through other agencies and programmes) further and additional support and assistance that will add value to their lives in retirement.
Among others, this commitment is in fulfilment of the declaration by His Excellency who, in his Inaugural Speech said: “I shall run an open government of inclusion that will not leave anybody behind. No matter your age, sex, tribe or any other status as long as you reside in Lagos, we will make Lagos work for you”. Dr. Akintola, Benson Oke, Honourable Commissioner, Lagos State Ministry of Establishments, Training and Pensions. Being text of speech delivered by Dr. Benson-Oke, Lagos State Commissioner for Establishment, Training & Pensions on the conferment of award on the State govt by Peninscope Professional Warranty Ltd. Vanguard