Police Exit from Contributory Pension Poses Significant Risks, Warns PenOp.


Abuja: The Pension Fund Operators Association of Nigeria (PenOp) has raised alarms regarding proposals from the Nigeria Police Force (NPF) to shift from the Contributory Pension Scheme (CPS) to a Defined Benefits Scheme (DBS). Mr. Oguche Agudah, the Chief Executive Officer of PenOp, shared these concerns during a public hearing in Abuja on a bill aimed at establishing a police pension board.

According to News Agency of Nigeria, Agudah explained that the CPS operates on a pre-funded model where both employees and employers contribute a mandatory percentage of the employee’s salary, with a minimum contribution rate of 18 percent. This system allows pension funds to accumulate and be invested for future payouts, thus ensuring a transparent, sustainable, and resilient pension management system.

Agudah emphasized that transitioning to the DBS would not address the police’s concerns and would instead create deeper financial and operational challenges for the country. He noted that the National Pension Commission
(PenCom) reported total pension assets under the CPS exceeding ?20 trillion (approximately $12 billion) as of September, with funds not solely reliant on government budgets.

Reverting to the DBS model, which depends on government budgetary allocations, could lead to fiscal unsustainability and delayed payments for pensioners. Agudah warned that moving the police out of the CPS would necessitate an unsustainable annual funding of ?3.5 trillion for pensions covering approximately 400,000 personnel, further straining an already deficit-laden budget.

Agudah further highlighted that pension funds under the CPS are currently invested in bonds, infrastructure, and other critical sectors that contribute to the country’s economic growth. Unwinding these investments to accommodate a DBS for the police would erode asset value and destabilize the financial system.

With over ?21 trillion in assets, the CPS remains a crucial component of Nigeria’s economic infrastructure. Agudah stressed that maintaining the police with
in the CPS would ensure long-term sustainability, equity, and economic stability, while setting a dangerous precedent by allowing the police to exit the CPS could lead to fragmentation of the pension system and undermine reform efforts.

The CEO also pointed out that the core issue is not the CPS itself but the welfare of the police force. He noted, “If your salary is small, your pensions will be small,” indicating that salary adjustments could be a more effective solution to the police’s pension concerns.