FG considers N30 billion gratuity plan for civil servants

The National Pension Commission and the Office of the Head of the Civil Service of the Federation are working together to establish a gratuity scheme for civil servants in treasury-funded federal ministries, departments and agencies under the Contributory Pension Scheme.

The development follows a meeting held in Abuja on 13 June, during which PenCom’s director general, Omolola Oloworaran, paid a courtesy visit to Head of Civil Service Esther Walson-Jack.

At the meeting, PenCom outlined a number of planned reforms to improve pension administration and retirement benefits for federal employees.

Ms Oloworaran said PenCom is developing modalities for the introduction of a gratuity scheme in line with Section 4(4)(a) of the Pension Reform Act 2014.

The proposed scheme, which targets retiring employees of treasury-funded MDAs, is projected to cost the federal government around N30 billion annually if retirees are paid 100 per cent of their last gross annual salary.

She described the proposal as “a modest but impactful intervention to improve the welfare of those who have served the nation with dedication.”

The PenCom DG also addressed the persistent challenge of delayed pension payments caused by late remittance of accrued rights. She said earlier collaboration with the Office of the Head of Service had already resulted in a Federal Executive Council approval of a N758 billion bond to settle outstanding pension liabilities under the Contributory Pension Scheme.

In an effort to account for outstanding obligations, Ms Oloworaran announced plans for a one-time, comprehensive online verification and enrolment exercise. Scheduled to begin in August, the exercise will focus on all federal employees in treasury-funded MDAs who were in service before June 2004.

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She said the verification would allow PenCom to determine the full accrued rights liability and present the figure to the government for possible bond issuance to settle the backlog.

“The accrued rights of each eligible civil servant will be credited to their individual Retirement Savings Accounts,” Ms Oloworaran said. She added that this will allow retirees to start earning investment returns while also insulating their funds from political changes, as Pension Fund Administrators would assume full control.

PenCom is developing a digital platform to support the enrolment process and plans to deploy it by August. The DG asked the Head of Service to issue a circular to all MDAs, mandating their participation in the exercise and submission of required documentation.

Ms Oloworaran also flagged issues with pension remittances in agencies not captured by the Integrated Payroll and Personnel Information System. Many of these MDAs, including tertiary institutions and self-funding agencies, often submit pension contributions without accompanying schedules, leaving employee accounts uncredited.

To address the issue, she said PenCom has introduced a new remittance system that requires all employers to use approved Payment Solution Support Providers for the payment of employee pension contributions. The new system is to take effect from June 2025.

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She urged the head of service to issue directives to the IPPIS office at the Office of the Accountant General of the Federation and to all non-IPPIS MDAs to comply with the updated remittance method.

In her response, Ms Walson-Jack expressed strong support for the initiatives and praised PenCom for its proactive steps.

She said, “Civil servants have been calling for gratuity,” and pledged to issue the necessary circulars and to work with PenCom to develop the modalities and obtain government approval for the new scheme.

Both agencies agreed to set up a standing committee to oversee the implementation of the reforms and respond to emerging issues.