The Federal Government is currently unable to meet its obligation to its retirees because it cannot cash back the Federal Government Retirement Benefits Bonds currently sitting at the Central Bank of Nigeria.
Findings by our correspondent show that the Federal Government is currently owing its former workers accrued rights from January 2016 till date.
Accrued pension rights is the term used to describe what the Federal Government owes its workers who have been in service before the commencement of the Pension Reform Act, 2004.
All Federal Government workers were “retired” and then reemployed to join the service and their pension funded monthly according to the Pension Reform Act, 2004.
The money the Federal Government now owes its workers before the commencement of the act is recognised in form of an amount acknowledged through the issuance of Federal Government Retirement Benefits Bonds.
Upon retirement of an employee, the bonds are to be liquidated and added to the balance of the retirement savings account of an employee to get the total amount he or she is entitled to.
To ensure that government settles backlog of accrued rights, PFAs are not allowed to give access to their retirement savings until the Federal Government releases the accrued rights component.
This means that a retiree cannot access his or her Retirement Savings Account (RSA) through the Pension Funds Administrators without the accrued pension rights component.
So for Public Service Workers who migrated to the Contributory Pension Scheme (CPS) in 2004, shortly before they retired, they were entitled to two components of retirement benefits.
That is the contributions accumulated in their RSA and their accrued right from the time they joined the service to the time they migrated to CPS.
A source at the office of the Accountant General of the Federation that due to the present economic challenges, the government was finding it difficult to cash back the bonds.
It said that the setback was in the liquidation of the bonds issued by the DMO and domiciled at CBN.
“Even from the budgetary stage, what is budgeted for Pension is not enough to meet the needs even if it’s cash backed 100 per cent, so it’s a problem.
“Budget Office has to make provisions for it then we at AGF can pay. But I can tell you that N7 billion was paid to PENCOM at the end of December,” the source said.
Also, a source at PENCOM told our correspondent that a lot of retirees blamed the commission because they did not understand that the funds were not managed by the commission, thus its not its fault.
He clarified that only people that worked for the Fedaral Government before 2004 had such set back, thus it did not affect the private sector retirees.
“Whenever we get the money, we compile our list and give the names and money to the PFAs.
“The simple truth is that it is the Federal Government that is delaying the payment of accrued rights of retirees.
“Initially we were owing from October 2016, but some funds were released recently and two weeks ago we were able to pay workers that retired from November to December 2016,” the source said.
The source revealed that the biggest challenge right now was not just having the bonds cash backed, but rather, how to calculate the accrued pension a retiree was owed.
He said that a worker was “retired” at the level he or she was as at 2004 and that whatever was determined to be the person’s accrued pension rights was then converted to bonds which was expected to mature when a worker retired.
The source said the bonds were supposed to yield interest and boost the expected amount, yet no significant interest was reflected in the amount remitted for each retiree.
The source said each retiree was paid exactly or a little more than what was determined to be his accrued rights as at June 2004.
Mr Mohammed Julde, who worked with the Ministry of Education from 1984 to 2016, called on the Federal Government to heed the cry of its former workers.
He said it was not fair for them to suffer this after judiciously serving in the public service.
He urged public servants still in service in key departments to assist in resolving the issue as it affected every government worker that had been in the employment of the Federal Government before 2004.