Summary of Accrued Right of State Employees as at November 2020
The State government embraced the Contributory Pension Scheme in April 2007 and immediately commenced deductions of 7.5% from State employees’ monthly salaries and employer 10% contributions to the employees’ Retirement Savings Account. In 2008, the State Pensions Reform Law was enacted to back up the commencement of the Contributory Pension Scheme (CPS). At this time, N7,500.00 was the national minimum Wage.
In response to the law, the Office of the HOS issued a circular that, effective 1st March 2010, employees are to retire in the new scheme, and as a follow-up to the circular, the Government engaged B. A Adigun, an Actuarial firm, to determine government obligations for the past services to employees that were migrating into the CPS. That report ratified by EXCO had N181bn as a determined government obligation. The State Pensions Law provides for the aforementioned deductions in addition to 5% of the total wage bill of the state to be set aside to defray the determined accrued obligation.
Sadly, despite the position of the law, the government was unable to set aside the payment of retirees’ past services of 5% prescribed by law. Instead, retirees were being paid piecemeal on a monthly basis, a process that created a huge pension backlog at that time.
It is noteworthy to add that the CPS started in 2007 when the National minimum wage was N7,50000. In 2011, a new minimum wage of N18,00000 was adopted by the state. Labor Unions started to agitate for the review of the Accrued Rights based on the new minimum wage of N18,000.00 as against N7,500.00 because of the default. It was not until 2015, that HR consult under Okowa administration carried out the Actuarial review and reflected the N18,000.00 to be at par with their Local government counterparts who embraced the scheme in 2011. This further created hamonization arrear values of over N16bn for retirees who were paid old rates from inception to July 2020. It is important to note that the magnanimity of this Administration increased the pension backlog from 86b reconciled liability to 126b, meaning paying 5% interest on the old minimum wage of 7500 derived value for all employees, retired and serving.
The reconciliation was necessary largely due to the use of wrong parameters and computational errors in the earlier review. Although the pensions of LGAs are not the responsibility of the STATE Government. Okowa’s administration has also assisted with N3bn to alleviate the suffering of LGA pensioners. This is apart from assistance to clear the outstanding backlog of salaries of the workers.
Please find below a table showing a Summary of the payment of Accrued rights and Hamonization for the period for State pensioners.
Delta State Contributory Pension - Status Update as at 31st October, 2022
Inherited Dept as at 29th May 2015 | ₦181,664,570,000.00
|
Amount Recovered After Reconciliation
| ₦95,088,721,094.00 |
Accepted Reconciled Amount by HR LTD
| ₦86,575,503,240.00 |
Reconciled Amount Rolled Over 5% Interest P.A. Approved by EXCO
| ₦126,609,999,184.00 |
Amount Paid From Inception to October, 2022 | ₦53,289,587,517.40 |
Outstanding Amount
| ₦75,420,411,667.00 |
Total Amount Paid as Old Rate Before Review
| ₦26,950,972,943.04 |
Average Monthly Release | ₦300,000,000.00 |
Intervention From Inception | ₦8,950,000,000.00
|
Note:
- Amount of ₦53,289,587,517.40 paid to October 2022 represents the total amount spent on retirees in the Contributory Pension Scheme (i.e. monthly releases and interventions) up to October 2022 as follows;
- Previous Administration ₦7,704,739,814.00
- Present (Okowa) Administration ₦45,584,847,703.40
- Reconciled amount arose from;
- Pensionable age (45yrs/60yrs)
- Wrong Parameters: (consolidated salary used in old computation as against Basic, Rent and Housing used in the new computation by HR Ltd)
- Data Integrity
- Outstanding Amount of ₦75,420,411,667.00 includes:
- ₦16,016,450,729.54 as harmonized differential (from N7,500 minimum wage in 2007 to N18,000 new minimum wage in 2011) owed to retirees who have already collected the old rate.
- As at 1st June, 2022 ₦10,956,867,077.80 was owed regular retirees earning new rate . Additional submissions from new retirees brought the Debt Stock to ₦13,584,286,490.75 as at 31st October, 2022. With the intervention of ₦2,500,000,000.00 and regular release of ₦ 500,000,000.00 in October, 2022, current Debt Stock was reduced to ₦10,780,979,908.70 for regular retirees, while harmonization difference stands at ₦16,016,450,729.54, reducing the total Debt Stock from 29,645,737,220.20 to ₦26,797,430,638.20 as at 31st October, 2022.
- Balance of ₦48,187,610,720.90 is future benefits of staff yet to retire in the contributory pension scheme.
The rolled-over amount represents 5% markup on reconciled figure agreed with labour to compensate for interest not earned