Industrial Court Faults Pension Law on Retirement Savings

National Industrial Court

Justice Nelson Ogbuanya of the National Industrial Court of Nigeria, Lagos Division, has identified a gap in the Pension Reforms Act (PRA) 2014 on the opening of the Retirement Savings Account (RSA).

He noted there was no provision in the law on how to deal with the post-employment issue of deduction without remittance of a pension fund where both the employer and employee did not comply with the provision mandating the opening of the RSA.

According to the judge, the combined provisions of Section 11 (3)(4)(5)(6) and (7) deal with the opening of the RSA by an employee within six months of employment, failing which the employer should open one for him.

The judge noted the gap while delivering judgment on a suit numbered NICN/LA/580/2017.

It was filed by a British national, Jorge Traquini against ASC Nigeria Ltd, a subsidiary of Energy Resources International Ltd, a member of Onstream Group.

Traquini, who served as Managing Director of the Nigerian subsidiary, claimed USD25,300, being deducted contributions of his annual salaries as pension contribution, which was not remitted into any account by the defendant.

Although the defendant, through its counsel, Folabi Kuti, did not deny deducting some money from the claimant’s salary for three years, the defendant contended that such pension fund cannot be paid over directly to the claimant, as the pension law requires that it should be paid into the RSA.

The court, on reviewing the provisions of the Act, noted that it requires an employee to open the RSA within six months of the employment or the employer should open a nominal account for him and remit such deducted money.

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This, he said, was not done until the employment was terminated.

Justice Ogbuanya said: “I find that both the claimant and defendant failed in their respective legal obligation thereto, but what happens to the money deducted from the claimant’s entitlements and warehoused by the defendant?.

“The pertinent question remains: will the defendant be allowed to keep the money belonging to the claimant who is no longer its employee, in the absence of any provision in the extant law guiding how to open the RSA, while parties are no longer in any employment relationship?

“There is an observed lacuna in the Pension Reforms Act 2014 in this regard. That is the crux of the recondite issue of which I had invited both counsel to make legal presentations on the way forward.”

In resolving the legal logjam, the court resorted to the English case of Halcyon Skies (High Court) (1977)1QB 14, 20-26, (Halcyon Skies’Case).

The English court held that in such circumstance, “the employers’ contributions to pension schemes, as well as employees’ contributions, could properly be regarded as part of the employee’s total wages in the broad sense of the word”.

Justice Ogbuanya then held: “It seems to me that the said pension sum could be treated as constituting terminal benefit of the claimant for which he is entitled to be paid directly in the circumstance of the suit.

“As such, deduction from earned sum constitutes terminal benefit which would eventually be paid over to the claimant as the amount due as an entitlement from his employment.”

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The judge further held that the defendant cannot be automatically classified as an employer within the purview of the pension regime under the Pension Reforms Act 2014 without evidence of its number of employees being shown to be at least three.

In awarding the claimant the proved amount $20,875.00, Justice Ogbuanya concluded: “To my mind, an elucidated outcome of the judicial interpretation of the issue regarding payment of the claimant’s pension fund under Clause 12(d) of the Contract of Employment is that the Pension Reforms Act is not applicable to the circumstances of the parties’ employment contract and that the claimant is entitled to be paid directly his earned pension fund as a terminal benefit.

“Accordingly, Relief 4 succeeds to the extent that the defendant is hereby ordered to pay directly to the claimant’s domiciliary account the sum of USD 20, 875.00 or its equivalent in Euros, being the accumulated sum representing the five per cent unremitted contribution pension fund due to the claimant but deducted from his annual salary by the defendant for the period of three years, to wit: 17th March 2014 to 7th October 2017. I so hold.”


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