The 2004 Pension Reform Act was on Tuesday effectively repealed following President Goodluck Jonathan’s assent to the 2014 Pension Reform Bill.
The new pension law prescribes among others, upward review of penalties and sanctions to pension defaulters and employers which fail to remit deducted monies of their employees.
The new law was passed between May and June, this year by the National Assembly and subsequently forwarded to President Jonathan for assent. The House of Representatives passed the bill on May 27, while the Senate passed it one week later.
According to the signed document, “The Pension Reform Act 2014 also makes provisions that will enable the creation of additional permissible investment instruments to accommodate initiatives for national development, such as investment in the real sector, including infrastructure and real estate development. This is provided without compromising the paramount principle of ensuring the safety of pension fund assets”.
Highlight of the new pension law indicate that the sanctions provided under the Pension Reform Act 2004 were no longer sufficient deterrents against infractions of the law.
“Furthermore, there are currently more sophisticated mode of diversion of pension assets, such as diversion and/or non-disclosure of interests and commissions accruable to pension fund assets, which were not addressed by the PRA 2004. Consequently, the Pension Reform Act 2014 has created new offences and provided for stiffer penalties that will serve as deterrent against mismanagement or diversion of pension funds assets under any guise”.
The law provides that, “Persons who mismanage pension fund will be liable on conviction to not less than 10 years imprisonment or fine of an amount equal to three-times the amount so misappropriated or diverted or both imprisonment and fine”.
The 2014 Act also empowers PenCom, subject to the fiat of the Attorney General of the Federation, to commence criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time. This provision was absent in the repealed 2004 Act.
The Pension Reform Act 2004 only empowered PenCom to revoke the licence of erring pension operators but does not provide for other interim remedial measures that may be taken by PenCom to resolve identified challenges in licensed operators.
