The Pension Fund Operators Association of Nigeria (PenOp) has raised concerns over proposals by the police to leave the Contributory Pension Scheme (CPS) and revert to the Defined Benefits Scheme (DBS).
Oguche Agudah, CEO of PenOp, voiced these concerns during a public hearing on a bill to establish a police pension board held on Tuesday in Abuja.
Agudah explained that the CPS operates on a pre-funded model, requiring mandatory contributions from both employees and employers. The minimum contribution rate is 18 percent, with eight percent from employees and 10 percent from employers. This system allows pension funds to accumulate over time and be invested for future payouts.
He highlighted that the CPS has proven resilient, with pension assets exceeding ₦20 trillion (approximately $12 billion) as of September. He credited the National Pension Commission (PenCom) for ensuring the scheme’s independence from government budgets, reducing vulnerability to fiscal constraints.
Agudah argued that transitioning the police to the DBS would exacerbate financial and operational challenges rather than address their concerns. He warned that the DBS, which relies on government budgetary allocations, would lead to fiscal unsustainability and delayed pension payments. Funding pensions for approximately 400,000 police personnel under a DBS model would require an estimated ₦3.5 trillion annually, an unsustainable burden on an already deficit-ridden budget.
He emphasized that such a move would divert resources from other critical needs, such as public services and minimum wage adjustments. Additionally, unwinding existing CPS investments in bonds, infrastructure, and other sectors to accommodate a DBS for the police would erode asset values and destabilize the financial system.
With over ₦21 trillion in pension assets, Agudah described the CPS as a transparent, sustainable, and resilient system that benefits retirees and contributes to the broader economy. He cautioned that allowing the police to exit the scheme would set a dangerous precedent and undermine long-term economic stability.
Agudah concluded that maintaining the police within the CPS is essential for ensuring sustainability, equity, and continued economic growth, urging stakeholders to prioritize solutions that align with these goals.
