The National Pension Commission (PenCom) has reported a successful recovery of N25.13 billion from defaulting employers through its recovery initiative.
This substantial sum was reclaimed between the inception of the initiative in June 2012 and September 30, 2023.
The amount comprises N12.80 billion in principal contributions and N12.33 billion in penalties for delayed payments, according to PenCom.
PenCom emphasized that the Pension Reform Act of 2014 (PRA 2014) mandates all eligible employees to maintain a retirement savings account (RSA) with a pension fund administrator (PFA) of their choice.
Once an RSA is established, employees must provide their RSA personal identification number (PIN) issued by the PFA to their employers.
Employers are required to deduct employees’ monthly contributions within seven working days of salary disbursement, consisting of 8 percent from the employee and 10 percent from the employer.
However, it’s important to note that the 18% total monthly pension contribution represents the minimum, as employers can opt to increase the rate or bear the entire burden on behalf of the employee.
Under the PRA 2014, employers failing to deduct or remit contributions within seven working days are subject to a penalty of not less than 2 percent of the total unpaid contributions for each month or part thereof.
This penalty amount is reclaimed as a debt and credited to the employee’s RSA.
The recovery of outstanding pension contributions began in June 2012, with 28 Recovery Agents (RAs) currently operating under PenCom’s supervision.
This initiative aims to achieve several objectives, including reclaiming all unremitted pension contributions along with penalties, ensuring that affected employees do not suffer income losses from investment delays, enhancing organizations’ compliance with the PRA 2014, and reducing employee complaints regarding non-remittance of pension contributions, thereby bolstering trust and acceptance of the Contributory Pension Scheme (CPS).
Recovery agents (RAs) initiate the recovery process by obtaining a list of delinquent employers.
Subsequently, they secure letters of introduction from the commission to the employers, introduce the RA, and request cooperation in reviewing pension records with the organization’s Human Resources Department to determine liabilities.
Demand notices are served to employers to remit outstanding pension contributions and penalties.
The RAs collect evidence of payments, which is forwarded to the Commission for confirmation by the Pension Fund Custodians (PFCs).
Principal contributions and recovered penalties are then deposited into employees’ RSAs to compensate for the investment income that would have accrued had there been no delays in employer remittances.