PenCom releases Position Paper on Subject of Pensions in Constitutional Amendment Bill No. 3 on Power Devolution
By NGOZI Onyeakusi —
The National Pension Commission (PenCom) at the weekend released its Position Paper on the Subject of Pensions in the Constitutional Amendment Bill No. 3 on Devolution of Powers.
Here is the paper,
There is no gain saying the fact that the current constitutional amendment exercise being undertaken by the National Assembly would naturally attract the attention and keen interest of Nigerians in view of the importance of that document as the sine qua non of our social contract as a nation. One major area of such exercise that has attracted and is still attracting attention, is the Bill No. 3 on Devolution of powers, which among other things seeks to ensure that the Central Government cedes certain powers to the States.
When, therefore, the Devolution of Powers Bill proposed certain amendments introducing the subject of pensions under the Concurrent Legislative List, one was compelled, as a stakeholder in the pension industry, to interrogate the appropriateness and motive behind the proposal. This interrogation became necessary especially against the backdrop of the existence of provisions on the subject in the subsisting 1999 Constitution as well as the fact that there arecurrently in the public domain, discussions on legislative activities on proposals for reversal of certain aspects of the pension reform embarked upon by Nigeria since 2004.
A natural starting point for an objective analysis on this subject is an in-depth evaluation of the adequacy of the existing provisions on pensions under the 1999 Constitution (as amended). Indeed, a discerning reviewer of the current provisions would unavoidably draw a conclusion that the subject of pensions has amply been addressed under the 1999 Constitution of the Federal Republic of Nigeria (as amended). It is addressed both as an enforceable right accruing to certain categories of employees and also as a persuasive requirement under Chapter 2 of the 1999 Constitution, dealing with Fundamental Objectives and Directive Principles of State Policy, which Governments at all levels and tiers, are encouraged to observe and apply its provisions for the benefit of all citizens.
Firstly, the 1999 Constitution provides under Section 16(2)(d) that the State should strive to provide for the citizens a number of social security benefits, including “old age care and pensions”. Consequently, organs of Governments at all levels (Federal, States and Local Governments) as well as all public authorities are expected to strive to provide these benefits for all citizens regardless of whether they work under the public or private sectors, formal or informal sectors, or do not work at all. However, one must hasten to indicate that the provision of Section 16 of the 1999 Constitution is only persuasive and not enforceable, having fallen under Chapter 2 of the 1999 Constitution dealing with the Fundamental Objectives and Directive Principles of State Policy.
Thus, in what would appear to be a deliberate statement, the 1999 Constitution under Sections 173 and 210 and in similar wordings, unequivocally elevated public sector pensions to the status of enforceable rights accruing to employees of both the Federal and State Governments respectively. Thus, Section 173 of the 1999 Constitution provides as follows:
(1) Subject to the provisions of this Constitution, the right of a person in the public service of the Federation to receive pension or gratuity shall be regulated by law.
(2) Any benefit to which a person is entitled in accordance with or under such law as is referred to in subsection (1) of this section shall not be withheld or altered to his disadvantage except to such extent as is permissible under any law, including the Code of Conduct.
(3) Pensions shall be reviewed every five years or together with any Federal civil service salary reviews, whichever is earlier.
(4) Pensions in respect to service in the public service of the Federation shall not be taxed.
A similar provision was made for the public service of States under Section 210 of the 1999 Constitution.
Indeed, the 1999 Constitution apparently proceeded to reinforce the provision of Section 173 to provide under Item 44 of the Exclusive List, Part 1 of the Second Schedule to enable the National Assembly to make laws on “pensions, gratuities and other-like benefits payable out of the Consolidated Revenue Fund or any other public funds of the Federation”. These constitutional enablement, it is submitted, provided the vehicle for the development of both the legal and institutional frameworks for the administration of pensions in Nigeria. It is further submitted that this responsibility is being discharged by the National Assembly bythe enactment of pension legislations, including the Pension Reform Act 2014, which prescribed, harmonized and standardized the system of administration of pensions for both the public and private sectors in Nigeria.
Similar powers are being exercised by the respective State Houses of Assemblypursuant to the provision of Section 210 of the 1999 Constitution and other provisions conferring the powers of appropriation of funds for the States to their respective legislatures.
Perhaps, it would be apt to determine the beneficiaries of the pension rights protected under Sections 173 and 210 of the 1999 Constitution. In accomplishing this, recourse must be had to Section 318 of the 1999 Constitution, which among other things, defines the terms “public service of the Federation” and ‘public service of the State’. Since space may not permit a reproduction of both provisions, we are constrained to provide below, only the definition of “public service of the federation”, hoping that the reader will avail himself the definition of the other term from primary source.
The constitutional definition of ‘public service of the federation’ appears to include every employee of the Federal Government of Nigeria, regardless of whether he or she works in the civil service, national assembly service, judicial service, military service, intelligence services, police service, paramilitary service, and indeed employment in any of the Federal Government Paratatals, Extra-ministerial Departments and Agencies. Thus, Section 318 of the 1999 Constitution defines ‘public service of the federation’ as “service of the Federation in any capacity in respect of the Government of the Federation, and includes service as:
(a) Clerk or other staff of the National Assembly or of each House of the National Assembly;
(b) Member of staff of the Supreme Court, the Court of Appeal, the Federal High Court, the National Industrial Court, the High Court of the Federal Capital Territory, Abuja, the Sharia Court of Appeal of the Federal Capital Territory, Abuja, the Customary Court of Appeal of the Federal Capital Territory, Abuja, or other courts established for the Federation by this Constitution and by an Act of the National Assembly;
(c) Member of staff of any commission or authority established for the Federation by this Constitution or by an Act of the National Assembly;
(d) Staff of an area council;
(e) Staff of any statutory corporation established by an Act of the National Assembly;
(f) Staff of any educational institution established or financed principally by the Government of the Federation;
(g) Staff of any company or enterprise in which the Government of the Federation or its agency owns controlling shares or interest; and
(h) Members or officers of the armed forces of the Federation or the Nigeria Police Force or other government security agencies established by law.
In an apparent desire to insulate both the federal and state judiciaries from legislative and executive arbitrariness on issues of pensions, thereby securing their independence, Section 291 of the 1999 Constitution expressly prescribed the bases for the payment of pensions of eligible judicial officers. The 1999 Constitution further provided under Section 291(3)(c) that judicial officers “in any case, shall be entitled to such pension and other retirement benefits as may be regulated by Act of the National Assembly or by a Law of a House of Assembly of a State”. The National Assembly has, in compliance with Section 291(3)(c) of the 1999 Constitution enacted the Pension Rights of Judges Act, Cap P5 LFN 2004, which was recently amended by the Pension Rights of Judges (Amendment) Act 2017.
The foregoing, we believe, has amply demonstrated the enormous attention given by our 1999 Constitution (as amended) to the subject of pensions, especially considering the fact that the constitution is supposed to be a concise document that addresses issues in a general nature. Detailed prescriptions on issues, including pensions, are normally left to statutes enacted by the National Assembly and State Houses of Assembly. It is against the backdrop of this understanding that one sees the unsuitability of the proposal for the introduction of additional provision on pension in the Bill No. 3 on the devolution of powers, which is being considered by the National Assembly in the ongoing constitutional amendment exercise.
It is appropriate at this juncture to reproduce the proposed amendment on pensions in the Bill No. 3, in order for the reader to clearly see its needlessness. It provides as follows:
(1). The National Assembly may make laws for the federation or any part thereof with respect to –
(i) the regulation of matters relating to pension and gratuity of federalemployees, persons in the public service of the federation,employees of federal statutory institutions and parastatals and other persons subject to federal regulation including employees ofincorporated companies regulated
by federal enactments;
(ii) setting of standards for management of pension matters throughout the
federation in respect of workers whether in private or publicemployment;
(iii) making laws for the regulation of pension matters in relation to persons in military service, the police force and other paramilitary and security agencies in the federation.
(2). The House of Assembly may subject to paragraph 1 hereto make laws relating to the regulation of matters on pension and gratuity of state employees, persons in the civil service of the state, employees of state institutions and parastatals, employees of local governments within the state and other persons subject to state regulation including employees ofbusiness enterprises resident within the state and subject to state regulation.
A brief but critical analysis of the foregoing provisions of the Bill No. 3 on Devolution of Powers will unavoidably lead to the following conclusions:
i. Items 1(i) & (ii) above merely restated the essence and purport of the provisions of Section 173 and 210 of the 1999 Constitution as well as Item 44 of Part 1 of the Second Schedule to the 1999 Constitution (Exclusive Legislative List) relating to the responsibility of the National Assembly to make laws providing for and regulating the pension rights of employees in the public service of the federation. This, in our considered opinion, is needless and does not justify the time and resources deployed in constitutional amendment process.
ii. Item 1(iii) above is completely unnecessary and adds no value whatsoever. Firstly, the services and agencies listed under that provision squarely fall within the ambit of the definition of ‘public service of the federation’ under Section 318 of the 1999 Constitution. Hence, these have been captured under Section 173 of the 1999 Constitution. Indeed, the preceding provision of Items 1(ii) & (ii) of the same proposed provision on pension under the Constitution Amendment Bill No. 3 on Devolution of Powers have adequately captured these agencies and clearly expressed the powers of the National Assembly to make laws for the administration of their pensions.
iii. The introduction of a superfluous provision in the Constitution such as Item 1(iii) would unnecessarily compel the understanding that the National Assembly has another constitutional responsibility of law-making on the subject of pension, which is distinct from the one prescribed under Section 173 of the 1999 Constitution and Item 44 of the Exclusive List. This understanding would have been both wrong and absurd, in view of the fact that the definition of ‘public service of the federation’ in Section 318 of the 1999 Constitution has settled the extent of legislative powers and duties of the National Assembly with regards to protection of pensions for public servants, including the police and other uniformed services, under Section 173 of the Constitution.
iiii. Thus, when viewed against the above exposition, one would be at liberty to speculate that a proposal seeking to distinguish certain categories of federal public servants on the issue of pension would appear to be suspect especially in the face of a Bill sponsored by a member of the House of Representatives seeking to exempt thepersonnel of such agencies from the Contributory Pension Scheme.
v. Item 2 of the Constitution Amendment Bill No. 3 on Devolution of Powers is equally unnecessary and a non sequitur. This is based on the provision of Section 4(7)(a) of the 1999 Constitution (as amended) as well as an established constitutional law principle thatany residual matter that is neither in the Exclusive nor the Concurrent Legislative Lists is exclusively left to the State Houses of Assembly to legislate upon. Thus, by introducing same as an item under the concurrent list, the proposal unwittingly hamstrings the State Houses of Assembly on such matters through the operation of the constitutional law doctrine of “covering the field”. The “federal might” could be exercised by the National Assembly to narrow the extent of legislation by State Houses of Assembly on such matters.
vi. Item 2 of the proposed amendment further complicated matters by introducing terms and concepts that suggest that State Houses of Assembly could legislate on “regulatory issues” in the pension industry. This is clearly a recipe for chaos and regulatory arbitrage, which would naturally bring unintended negative consequences that will require another round of tedious Constitutional amendment to address. Indeed, this glaringly offends the provision of Section 4(5) of the 1999 Constitution (as amended) which provides that “if any Law enacted by the House of Assembly of a State is inconsistent with any law validly made by the National Assembly, the law made by the National Assembly shall prevail, and that other Law shall to the extent of inconsistency be void”.
vii. Flowing from the above, it is pertinent to note that by virtue of Section 18 of the Pension Reform Act 2014 (PRA 2014) the National Assembly has conferred on the National Pension Commission the responsibilities of regulating, supervising and ensuring the effective administration of pension matters and retirement benefits in Nigeria. These include pension and retirement benefits established for the benefits of employees of States and Local Governments in Nigeria by virtue of Section 2(1) of the PRA 2014. Thus, acceding to the proposed amendment allowing State Houses of Assembly to enact laws establishing regulatory agencies on pension matters would directly be in conflict with the PRA 2014 and, therefore, invalid for reasons of its insistency with the provision of Section 4(5) of the 1999 Constitution (as amended).
National Pension Commission