A STUDY OF IMPACT AND IMPLICATION OF RESTRUCTURING THE NIGERIA PENSION SCHEME (A CASE STUDY OF ENUGU STATE)
1.1 BACKGROUND OF THE STUDY:
A pension scheme is a planned program, which enable corporate
organization to acquire and set aside fund to cater for the well being
of their staff after retirement from active service. The scheme enables
pension to benefits to be paid to the beneficiaries. It could be paid
to retired employee, a widow or a disabled person. There are legal and
administrative procedures and processes made to facilitate the
realization of this objective in both to public and private sectors of
our economy. Pension benefits are given for meritorious services to the
The scheme is classified into two parts:
(a) A non-funded plan where the fund is under the control of
employer. This is where payment to retired employees are made directly
from operations by the organization as they become due without
accumulation of funds. This is obtainable in the public services system
(b) Contributory plan – where the employees bears parts of the
cost (i.e. employees pay some portion for example, 10% of their gross
monthly income, while the employer pays 15% of the gross monthly
income. Organizations specific in their pension plan, the number of
years an employee has to service before he/she qualifies for pensions.
In Nigeria, most organization currently allows a minimum of five and ten
years for gratuity and pension respectively.
The organizations that run a pension fund scheme usually have a
pension board, such as the local government staff pensions board. There
is also the Nigeria Social Insurance Trust Fund (NSITF), which now
replaces the former national provident fund. This caters mainly for the
needs of the private sector. When establishment pension plans through
“retirement plans”, that qualify under the international Revenue Code,
approval would be sought from the Joint Tax Board, so that the
deductions would be tax-free.
Those expected to run the contributory pension schemes are:
i. Every worker who is employed by a company incorporated or
deemed to be incorporated under the Company and Allied Matters Decree
ii. Every workers employed by a partnership irrespective of the
number of workers employed is not less than five including owners.
The two types of pension scheme used in Nigeria are:
(a) The self-administered pension scheme, which is managed and
administered by the trustee of the scheme. It is their responsibility
to pay retirees their pension regularly and invest the balance surplus
(b) The insured pension fund scheme is managed and administered
by an underwriter on behalf of owners of the scheme i.e. the Board of
The underwriters (actuaries) invest the contributory funds into some
government bonds or gilt-edge securities, commercial stocks, and today,
they are in real estate and transport services. They by this contribute
to the economic development of the country; collect the principle
contributions, while the fund continue to generate more money through
Government scheme, which is a non-funded scheme, is the core public
service plan. It is planned to totally dependent on funding from the
treasury to the extent law permits this arrangement. It is charged to
the consolidated expenditure. It will be worthy to note that pension is
a liability already incurred and as such, the fund to meet this
obligation should be secured and made available always.
The objective of pension scheme is to ensure a health, stable,
economic and social atmosphere that will promote harmony and given a
sense of belonging to the retirees. This is achieved through:
(i) Maintaining unbroken service, by retaining experienced
staff, high rate of productivity and operational safety is achieved
through good quality of labour force and efficiency.
(ii) Confidence in serving officers that their status would still
be maintained even after their service, by providing them a regular
periodic payment to prevent them from slipping into destitution.
(iii) To ensure loyalty and orderliness in the public trust would work conscientiously of the expected pension benefits.
(iv) The pension fund is also used to make investments-cost saving to generate more money and employment in the economy.
As to the extent to which those objectives have been achieved or
successful, this project addressed the results and identified the
The history of pension in Nigeria was dated back to 1946 with the
first pension legislation enacted in 1951, referred them to as pension
law was primarily designed for the United Kingdom Officers who will move
from post to post in vast British Empire. Its objective was to
maintain continuity of service wherever they are sent to serve. When
the law became applicable to the indigenous staff, it had limited
application to the extent that it was granted at the pleasure of the
Under ordinance, pension was not automatic right of Nigerians but discretionary.
To ensure consistency and equality of rights, the federal government
promulgated the Pension Act No 102 of Federation of Nigeria 1979 (Now
Cap. 346 laws of the Federation of Nigeria 1990) with a commencement
data of 1st April 1974. The Decree No. 102 of 1979 consolidated all
enactments on pension and incorporated pensions and gravity, and sought
devices for public officers by adopting the Udorji public service Review
Commission in 1974.
The administration of the public service pension scheme is a joint
responsibilities between the federal and state governments, i.e. for
those officers who served within the period March 31, 1976. In other
words, all those whose appointments fall from 1st April, 1976 are paid
wholly by the tier of government he/she served in the federation. The
federal government however provides the guidelines for managing the
scheme both for the states and the local governments. Other pension
acts and circulars are contained in chapter two of this project work.
1.2 STATEMENT OF THE PROBLEM:
As to whether this beautiful scheme is being implemented accordingly,
there lies the problem. There has been public outcry on the
maltreatment to our senior citizens, who as a result has been forced to
resort to military to press for their rights. The widows’ children,
next of kin or dependant relatives of deceased officers undergo series
of financial destitution and distress, in order to reclaim their
benefits. The statement of the problem are therefore identified as
(a) Lack of knowledge on the part of operation on why the pension scheme was originated.
(b) Lack of literature materials and reinforcement of the mission statement aims and objectives of the pension schemes.
(c) Lack of legislation to back the scheme and reviews.
(d) Inconsistencies with the implementation of the scheme at
various tiers of government, e.g. the implementation of 30%
harmonization, 150% and 142% increases are yet to be implemented in
Enugu State Pension Scheme.
(e) Incapacitated trade union leadership.
(f) Non-existence of a State Pension Board.
(g) Non-participation in the contributory fund scheme.
(h) Inadequate funding of the scheme by the government.
(i) Shortage of manpower.
(j) Delays in settlement of pension benefits.
(k) Delays in settlement of pension benefits.
(l) Delays in promotion leading to re-computations and denial of rights.
(m) Misappropriation of the inadequate pension fund.
(n) Ghost pension syndrome and receipt of benefits below expectations.
(o) Increase in death rate.
(p) Lack of funds for the procurement of a mobile payment system to cater for the needs of the bedridden senior citizens.
Problems of the scheme are inexhaustible. All the above constraint
combined in the high mortality rate of our senior citizens and problems
to their dependent relatives, who form an integral part of the society.
The chain in social delinquencies and other vices in the society.
Hence, the civil service is fast increasing.
1.3 RESEARCH HYPOTHESIS:
In this study, the researcher worked with the following hypothesis:
1. Ho: Lack of funds does not militate against government policies on Nigeria Pension Scheme.
H1: Lack of funds militates against government policies on Nigeria Pension Scheme.
2. Ho: Pension Scheme does not encourage the employees after retirement.
H1: Pension Scheme encourages the employees after retirement.
3 Ho: Pension Scheme is not used in accounting principles.
H1: Pension Scheme is used in accounting principles.
1.4 OBJECTIVES OF THE STUDY:
The objectives of the study are manifold. The researcher would like to mention the following:
- To inform those policy makers and the workers that they should
either improve the conditions of the pension scheme or reap the same
bitter pill when they retire.
- To sensitize the stakeholders, governments, public servants, and the
general public on the inherent danger and the imminent collapse of the
result of maltreatment of the pensioners.
- To identify the problems of the scheme and their sources appropriately.
- To educate the shareholders on the objectives and origin of pension schemes.
The primary objectives of this research work is to identify a better
ways by which the government of Enugu State will be used to restructure
the payment of pension and gratuity for enhancement of society harmony
in the State.
1.5 SCOPE OF THE STUDY:
The scope of study covered the period 1999 to 2004. It concentrates on
Enugu State Public Service, which comprises the ministries, parastatals
and teachers at primary and post primary institution in the State. It
also looked through the pension scheme in Nigeria which dwelt on Decree
102 of 1970, Company and Allied Matters Decree (CAMD), which is for
public service in Nigeria.
The study clearly enumerated the problems of the pension, some
restructure that has been taken place and briefly stated the necessary
benefits to them, and how to qualify for it. It took into a particular
look on Enugu State Pensioners as a case study.
1.6 LIMITATIONS OF THE STUDY:
This analysis by its demand relied mainly on secondary data. Most of
the raw data are supposed to be published by the government agencies.
Because of these constraints were experienced and they are limitation
of the study namely:
Most government documents and publications have not been published,
especially during the military era. This limited the study, otherwise,
it would have been extended from 1990-2004.
Unpublished data were rarely made available to the researcher by
government officials who avoid violating the official secrecy act.
Access to the premises of some agencies in search of data was
restricted. Little time was allowed to researcher to read materials and
collect data, photocopy facilities were either not available or not
A lot traveling and photocopying were involved. Substantial amount
of money was spent on transport fares. In some organizations where
photocopying was allowed, it was done at exorbitant rates.
Secondary data on the projects was not easily available. The issues
raised boarder on government’s dereliction of its responsibility, which
may indict it. No interest was therefore taken to deal inappropriately.
1.7 ORGANISATION OF THE WORK:
The report of this study needs to be arranged well and properly.
This is to ensure a smooth flow of information. The report is therefore
arranged in five chapters as follows:
Chapter one covered the introductory part of the study. It
encompassed background of the study, statement of the problem, research
hypothesis, objective of the study and scope of the study. Others
include limitations of the study, organization of the work and
definition of terms.
Chapter two is concerned with the existing literature with focus on the relevant matters.
Chapter three dealt with the research methodology. In that,
attention was drawn to sources and method of data collection, data
presentation, tool of data analysis and procedures of research analysis.
Chapter four concentrated on the finding and analysis of the study.
The results were used to draw inference as to whether our hypothesis
should be accepted or rejected.
Chapter five deals with the summary of the findings, conclusions,
recommendations and suggestions of solving the problems identified in
the course of the analysis.
It will be worthy of note also that included were bibliography and
appendix at the end of the report. These are the source documents where
the researcher collected most of her research inferences.
1.8 DEFINITION OF TERMS:
Some of the terms used in this work and the perspective in which they were used were defined and/or explained below:
Experts who calculate insurance risk and payment by studying how frequently the pension benefits mature and are paid.
A periodic payment or allowance to an individual or to his family
given, because of some meritorious work or when certain conditions such
as age, length of service etc, have been fulfilled.
This is an established post in the service or any approved service,
which may be taken into account in computing an officer’s under the 1999
Decree (now Act) No. 102.
This is the age at which pension and gratuity can be calculated for
an officer and this has now been reduced from 15 qualifying years to 10
years by the 1992 pension reform. Services outside the above stated age
will not be taken into account for purposes of computation of officer’s
retiring benefits as at the case of “leave without pay”.
These are those employed by other or organizations and are paid monthly salaries.
This means an employee in a steady employment that is eligible to payment of pension benefits as it becomes due.
Any approved service which may be an officer is eligible by length of service for a pension or gratuity.
ELIGIBLE OR ELIGIBILITY:
This describes who is qualified for pension benefits.
NEXT OF KIN:
Those whose names are furnished by the deceased officer on his record of service kept in the records office of the ministry.
This means cessation of service after an officer has served for a
period of not less than 5 years and 10 years respectively, being period
appointed as qualifying an officer a gratuity and pension.
This is a lump sum of money paid once to a retired officer according to the number of years of his entitlement.
This refers to a retired officer from the public service.
SURVIVOR OR DESIGNATED SURVIVORS:
These persons whose names are furnished by the officer on his record
of service kept in a records office of the deceased officers ministry.
This can be retirement or withdrawal. Withdrawal means ceasation of
service after an officer has served a minimum period of 5 years, but
less than 10 years, which qualifies the officer for the gratuity.
This is the wife of the deceased officer.
This is a sort of termination of an appointment by an officer, which
may or not be approved. Any service rendered prior to resignation will
not count on re-engagement unless the break has been condoned.