By Frank ANDERSON
Employers are one of the key stakeholders in pension administration. They are essentially the source of funds and other vital information for the management of pension schemes. Their active involvement cannot be ignored in ensuring effective management of pension schemes and their employees’ well-being on retirement.
Under the National Pensions Act, 2008 (Act 766), employers have been placed with key responsibilities ranging from the registration of pensions schemes to the enrolment and full participation of all their workers. Employers are required to deduct and remit social security contributions of their workers to their respective pension schemes alongside their contribution reports to the trustees or scheme administrators. In fact, even if contributions have not been made, the law requires that the employer sends the contribution data or report to the administrator. This is to help ensure the effective running of the scheme and to determine the contributions in arrears as the case may be.
They are also mandated to keep proper books of accounts and records of contributions made within the company. These vital records will be required for inspection to ascertain whether the right contributions were or are being paid for the workers, and trace any missing contributions. These are part of the primary information that needs to be kept for effective and efficient management of pension schemes.
Despite the punishment that comes with the failure to adhere to these responsibilities, most employers do not give an ear to them. They are only interested in paying the pension contributions because it is punishable by law. Their employees do not have any information on schemes that they are part of. They do not know the trustees administering their 2nd or 3-tier pension schemes, their location, and how they can access their contribution statements. These are basic information that should be provided to the members of the scheme.
The employees who are proactive become victims when they request to know where their contributions are remitted to and some other details of their social security contributions.
Scheme administrators cannot credit the employees on time because their employers may have not submitted the contribution data to the trustees to aid them in allocating the contributions they have received even though it is a punishable offence for not submitting contributions data.
Some employers are also unconcerned about how the scheme is performing. To them, their responsibility ends when the contributions are paid to the schemes. Whatever happens to the contributions with the trustee, or the administrator, is outside their domain.
This is not what is expected of employers. Employers are responsible for providing every piece of information on the scheme to their employees, including information on trustees, scheme rules, trust deeds, and even investment options the scheme funds are invested in, among others.
Apart from performing their functions required by law, employers have a fiduciary duty to ensure that their employees are well-educated and informed on matters relating to the company’s pensions scheme as well as helping them plan and prepare adequately for their retirement.
As a fiduciary, the employer stands in a position of trust and must constantly engage the trustees and scheme administrators on behalf of their workers on matters that ordinarily may not be in the purview of the members to ensure that the scheme is well-managed in the interest of the workers. They must not leave the employees to their fate and only be interested in paying the contributions and not bothered about what goes on in the management of the contributions. They must show interest and provide basic information to keep the employees updated regularly on their pension scheme. For many, the pension benefits may be their only source of regular income on retirement.
After all, employers are in a position to benefit significantly when they show interest in the welfare matters of their employees because they tend to give their best. It could even be a source of competitive advantage in attracting and retaining key personnel. Some employers will be losing critical staff if they continue to ignore their fiduciary role in ensuring that their employees retire comfortably.
The life of a retiree in a society is enough testimony of how an organisation treats its employees. Some employers even go to the extent of paying part of the medical bills of their retirees.
Despite the economic difficulties and unemployment issues, every person will be eager to work with an employer whose retirees are living better on retirement.
It is, therefore, important that employers pay more attention to pension and retirement-related issues of their employees. Payment of pension contributions is just one of the many responsibilities of employers in ensuring retirement income security for their employees.
The writer is the Assistant Manager, Corporate Affairs, National Pensions Regulatory Authority
Email: [email protected]
