Contributory Pension Scheme is failing Pensioners says Public Analyst

By Afolabi Oyekunle

A 𝘗𝘶𝘣𝘭𝘪𝘤 𝘗𝘰𝘭𝘪𝘤𝘺 𝘈𝘯𝘢𝘭𝘺𝘴𝘵 & 𝘎𝘰𝘷𝘦𝘳𝘯𝘢𝘯𝘤𝘦 𝘚𝘵𝘳𝘢𝘵𝘦𝘨𝘪𝘴𝘵, 𝗦𝗵𝗮𝘁𝗮𝗺𝗶 𝗧. 𝗕𝘂𝗺𝗯𝗮 has faulted the inconsistent in the Contributory Pension Scheme.

 He said under the scheme, the senior citizens are being systematically impoverished by a financial model that fails to account for macroeconomic volatility.

He posited that while the National Pension Commission (PenCom) frequently celebrates the growth of total pension assets, now exceeding ₦30 trillion, the purchasing power of the individual retiree is being aggressively eroded. "The system may have eliminated the long physical queues of the old Defined Benefit era, but it has replaced them with a quiet, digitized destitution."  

Consider the empirical flaws currently affecting our retirees:

• 𝗧𝗛𝗘 𝗡𝗘𝗚𝗔𝗧𝗜𝗩𝗘 𝗥𝗘𝗔𝗟 𝗥𝗘𝗧𝗨𝗥𝗡𝗦: In the recent fiscal cycle, many Pension Fund Administrators (PFAs) reported returns on Fund II (the default fund for most workers) at approximately 17.05%. However, when weighed against a national headline inflation rate soaring above 33%, the true result is a negative real return of over 16%. In simple terms, a pensioner's savings are mathematically growing on paper, but drastically shrinking in market value.  

• 𝗧𝗛𝗘 𝗙𝗜𝗫𝗘𝗗 𝗣𝗔𝗬𝗢𝗨𝗧 𝗣𝗔𝗥𝗔𝗗𝗢𝗫: Unlike active civil servants who occasionally benefit from minimum wage reviews to cushion economic shocks, retirees on programmed withdrawals lack an automatic cost-of-living adjustment. A pensioner locked into a monthly payout of ₦40,000 in 2020 is still receiving that exact figure today, despite the cost of basic food and medication tripling. 

 

• 𝗧𝗛𝗘 𝗣𝗥𝗢𝗙𝗜𝗧 𝗔𝗦𝗬𝗠𝗠𝗘𝗧𝗥𝗬: The CPS template inherently protects the administrators more than the contributors. PFAs consistently declare billions in annual corporate profits drawn from management fees. At the same time, the actual owners of the funds, the retirees, are handed monthly stipends that cannot sustain a basic standard of living.  

"We must aggressively advocate for the holistic review of the Pension Reform Act. The National Assembly must mandate PFAs to structure specialized, inflation-hedged investment portfolios for retirees, and enforce a statutory periodic review of monthly payouts. A pension is meant to guarantee a dignified exit, not a slow descent into extreme poverty."