Uncertainty prevails over pension scheme for university staff

An academic staff pension scheme has been set up by the Academic Staff Union of Universities (ASUU) as an alternative to the existing compulsory contributory fund which has become increasingly dysfunctional as a result of government’s failure to subsidise it. Until the new scheme is formally up and running, however, uncertainty among staff members continues.

The new pension scheme, known as NUPENCO, was set up by ASUU in terms of the law establishing a Pension Fund Administrator (PFA) which states that any trade union organisation could apply for the establishment of a PFA. According to union members, application fees have been paid, and all other conditions have been fulfilled. But for over three years, the certificate to operate the union’s PFA has been stalled by powerful lobbyists.

According to Dr Wale Suenu, deputy chairman of the local branch of ASUU at Lagos State University, sources close to the government say that both the banks and the political class are opposed to this initiative for two reasons.

“First, the political class is genuinely worried that NUPENCO would provide an avenue for university teachers to become more financially independent of the state. Second, the private banks fear that the enormous profits they make from housing university pension funds would no longer be there and would go to NUPENCO.”

Suenu said ASUU would soon issue an ultimatum to the government threatening industrial action if a certificate of operations for NUPENCO is not issued. Local news reports show that ASUU last threatened strike action in November 2017 after the federal government failed to register NUPENCO.

Old and new schemes

The current pension scheme is a contributory and privately managed scheme introduced in 2007, but only implemented in 2017 by universities. The new scheme marks a fundamental shift from previous pension schemes in that it gives employees the freedom to choose any pension fund administrator.

At the same time the employer is obliged to deduct a monthly contribution from both the employee and the employer and pay these amounts into a retirement savings account managed by the pension fund administrator. The fact that the older pension scheme involved a gratuity component (a lump sum pay-out excluded in the new system) meant added financial pressure on the fund.

Today the fund is in crisis for a number of reasons, one of which is that universities, which lack adequate funds for their daily operations, are alleged to be routinely dipping into pension funds to pay salaries and run their administrations in the expectation that state will eventually pay the statutory funds owed to universities.

According to a senior university administrator who attended a meeting of the ASUU national executive committee on 14 June, the committee was reliably informed that some universities were diverting monies intended for the pension fund. Speaking on condition of anonymity, he said the issue of pension schemes in universities was discussed extensively at the meeting presided over by Professor Shehu Galadima and attended by pro-chancellors and vice-chancellors of public universities.

“Four pro-chancellors admitted that they gave permission to their vice-chancellors to dip their hands into the pension funds with a view to providing emergency fund to run the university administration, pending some kind of bailout loan from the central government,” he told University World News.

The universities included: Imo State University, Kogi State University, Ladoke Akintola University of Technology, and Plateau State University.

According to the source, all institutional leaders pleaded with the council chairman to meet with the Nigerian president and state governors concerned to find a practical solution to the problem and avert the collapse of the pension fund scheme.

Other pro-chancellors hinted that the same problem might soon face their own universities if university subventions were not increased as soon as possible, the source said.

Further challenges

In addition to illegal use of pension funds, universities themselves have been defaulting on their contributory pension responsibilities as employers, further putting the fund at risk.

A further impediment to the proper implementation of a contributory pension scheme was the introduction of a treasury single account (TSA), a public accounting system using a single account or set of linked accounts to ensure all revenues and payments are done through a consolidated revenue account at the Central Bank of Nigeria.

The system does not recognise the special nature of some of the functions of the university system, especially when it comes to remitting contributory pension funds to the Pension Fund Administrator. “The TSA in practice is a great distortion of the contributory pension scheme. Until the software of TSA is modified to suit the needs of the tertiary institutions, we shall continue to witness lateness and at times failure in the remittance of the contributory funds as and when due,” said a sitting vice-chancellor who asked for anonymity.

The pension scheme faces extra pressure after the recent introduction of a law which stipulates that professors who retire at 70 years will continue to enjoy full salaries and allowances after retirement, as is the position with all retired military generals.

At a recent meeting of the Committee of Vice-Chancellors, they painted a bleak picture of the financial health of their respective universities, warning that if the government fails to increase the revenue base of the universities, they may fail to comply with their obligations concerning the compulsory pension contributory scheme.

It appears that academics have little option but to pin their hope on the new pension scheme. Professor Hakeem Abdullahi from the sociology department at the University of Maiduguri said ASUU’s efforts to establish an independent pension company was “fast yielding results” and had reached the final stages. “The joint pension contributory is already a reality. However, there is a need to put in place a system whereby those exiting staff would collect their entitlements as and when due,” he said.

Professor Isa Labaran from the forestry department at the University of Agriculture, Makurdi, said the full benefits for retired professors negotiated for by ASUU had been successfully implemented in his university, but the “safety of the pension funds” in the custody of each university administration was “of major concern” and he appealed for the principles of transparency to be observed.

Trust breakdown

According to Professor Ahmed Sanusi of the physics department at Bayero University Kano, the inability of some academics to trust universities in the face of inadequate funding has forced them to register with other pension organisations “with the sole intention of later transferring their funds to NUPENCO”.

Professor Wangai Ibrahim based in the history department at Abubakar Tafawa Balewa University, Bauchi, said the “politics of inadequate funding” which was a “serious problem” in Nigerian universities was also affecting the pension funds. “In order words, funds meant for the pensioners are not guaranteed until they are paid.” He called on the union to ensure that universities pay full gratuities to retired professors as negotiated.

Professor Ikhang Ibanga of the psychology department at University of Calabar said the reconciliation of the old and new pensions contains “grey areas”.

“According to credible information at our disposal, we understand that it is difficult to guarantee that the pensions in the custody of universities are safe for so many reasons ranging from lack of transparency and inadequate funding. The pension outfit, NUPENCO, is almost ready and those retiring may assist themselves through other outfits and then transfer to the union's own later if they are still in employment. The pension scheme in Nigeria is obviously problematic and the reconciliation of the various schemes presented in 2014 still appears to have grey areas in my estimation because we don't know how the pre-2014 scheme is being worked out. It has been a sad story.”