COMPLETE SCHOOL PROJECT TOPICS & MATERIALS :
CHAPTERS: Chapter 1-5
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CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Prior to the enactment of the Pension Reform Act 2004, pension scheme inNigeria had been bedeviled by many problems. This scenario necessitated the introduction of a new regime in Nigeria by the administration of President Olusegun Obasanjo. The pension system, unless specially adopted to meet the hardship of time, results in hardship to the family of a white or blue collar worker who dies prematurely in service, or on the verge of retirement or before enjoying the pension benefits for any appreciable period, [Abah, 1999].
However, pension can be classified as contributory and non-contributory pensions. A pension scheme is said to be contributory when both the
government and the employee contribute [not necessarily equally] towards its payment. It is non-contributory if the whole amount for its payment is funded by the government or the employer only, (Chukwuemeka, 2008). Factually, the emergency of pension scheme allowed workers to retire and the changing attitudes made it socially acceptable to do so.
The country operated Defined Benefit Scheme (gratuity and pension) between January 1, 1946 and June 2004. Nigeria in 1951, introduced pension benefits into the public sector with effect from 1946, the idea brought about a major attraction for employment in the public service. Nevertheless, the pension Act 102 of 1979 was the main legislation guiding the entire public service. To qualify for pension then, the officer involved must have served for a minimum of 15 years and gratuity period was a minimum of 10 years of service. By 1992, it was reformed to minimum of 10 years for pension and 5 years for gratuity. One notable fact during the period was the pension scheme success recorded by the private sector. Most schemes in the public sector were insured schemes defined by contributions of employees and employers. It provided
large sum of retirement benefits or earlier withdrawal. Pension fund managers, portfolio managers, bankers were relevant in pension fund administration in the public sector. Again, decree 77 of 1993 established the Nigeria Social Insurance Trust Fund (NSITF) to replace the old National Pension Fund (NPF) managed by the Federal Government for private sector. Nonetheless, under this scheme, there were poor administration, inadequate delivery system, and lack of adequate records of movement from one employment to the other. Again, the Pension Reform Act was enacted on the 25th June, 2004 and came into effect on 1st July 2004. The Reform established a Defined
Contributory (DC) scheme against the former Defined Benefit (DB). Dike, (2006) stated that, ‘the enactment of the new pension Act 2004 signed into law by President Olusegun Obasanjo on 30th June, 2004 has opened a new vista in the management of pension fund. The present pension scheme regulated by the Pension Commission is public and private sectors driven with government only playing its part by contributing its quota to the relevant pension managers for private and public servants.’
In line with the background information is the issue of pension crisis before Define Contribution (DC), such crisis were:
= Pensioners not being paid entitlements regularly.
= Existence of ghost pensioners in the public service.
= Pensioners dying on verification queues.
= Unstructured and unfounded private sector scheme.
= Diversion and mismanagement of existing pension fund by Board of Trustee (BOT) and fund managers.
Against this background, the under listed formed the main objectives and features of the Pension Reform Act 2004;
I. To ensure that every person who worked in either the public service of the Federation, Federal Capital Territory or private sector receives his
retirement benefits as and when due.
II. To assist individuals by ensuring that they save for their livelihood during old age and thereby reducing old age poverty.
III. To ensure that pensioners are not subjected to untold suffering due to inefficient and cumbersome process of pension payment.
IV. To establish a uniform set of rules, regulations and standards for the administration and payment of retirement benefits for the public service
of the federation, federal capital territory and the private sector.
V. To stem the growth of outstanding pension liabilities.
In fact, the pension reform programme is governed by the key principles of sustainability, safety, and security of benefits, transparency, accountability equity, flexibility, uniformity, and practicability.
As the major function of the commission, the pension reform Act 2004 established the National Pension Commission (NPC) as the body to regulate, supervise, and ensure the effective administration of pension matters in Nigeria, (http://www.pencom.gov.ng./index.php).
Other functions of the commission include;
a. Regulation and supervision of the scheme established under the Act.
b. Issuance of guidelines for the investment of pension funds.
c. Approving, licensing, regulating, and supervising pension administration, custodians, and other institutions relating to pension matters as the
commission may, from time to time, determine.
d. Establishing standards, rules, and guidelines for the management of the
pension funds under the Act.
e. Ensuring the maintenance of a National Data Bank on all pension matters.
f. Carrying out public awareness and education on the establishment and management of the scheme.
g. Promoting capacity building and institutional strengthening of pension fund administrators and custodians.
h. Receiving and investigating complains of impropriety leveled against any pension fund administrator, custodian or employer or any of their staff or agents.
i. Performing such other duties which, in the opinion of the commission, necessary or expedient for the discharge of
ii. Its functions under the Act.(National Pension Commission).
Again, the National Pension Commission shall have power to do the
following;
I. Formulate, direct and oversee the overall policy on pension in Nigeria.
II. Fix the terms and conditions of service including remuneration of the employees of the Commission.
III. Request or call for information from any employer or pension fund administrator or custodian or any other institution on matters relating to
retirement benefits.
IV. Charge and collect such fees, levy or penalties, as may be specified by
the Commission.
V. Establish and acquire offices and other premises for the use of the
Commission in such location as it may deem necessary for the proper
performance of its functions under the Act.
VI. Investigate any pension fund administrator, custodian or other party
involved in the management of pension funds under the Act.
VII. Establish standards, rules and regulations for the management of the pension funds under the Act.
VIII. Impose administrative sanctions or fines on erring employers or pension
administrator custodian.
IX. Order the transfer of management or custody of all pension funds or
assets being managed by a pension fund administrator or held by a
custodian whose license has been revoked under this Act or subject to
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insolvency proceeding to another pension fund administrator or
custodian, as the case may be.
X. Do such other things which in its opinion are necessary to ensure the efficient performance of the functions of the Commission under the Act. (http;// www.pencom.gov.ng/index.php?). Onyishi (UNN) opined that those who are discharged through the natural elimination process of
retirement have to be replaced. This is why government organization are usually in hierarchy, normal promotions from one grade or rank to a
higher one is a way of achieving this objective. Other methods include lateral and vertical transfers, secondment and new appointments. This is
why the Nigerian civil service is made sufficiently flexible in structure that critical manpower can be deployed and redeployed to area of dire
need.
Nwizu (2002) stated that there are several factors which tend to impede the processing of retirement benefits claims of retiring and retired personnel. These factors can be grouped under two sub-headings viz. the intrinsic factors
and the extrinsic factors.
The intrinsic factors; these are those factors which militate against the quick processing of retirement papers and the eventful payment of the benefits which occur as a result of the Organization and management of retirement benefits. These factors cause a lot of pains to prospective retirees, such factors are:
= Some beneficiaries are quite ignorant about their rights, the rules and the administration such as retirement benefits.
= Again, most of the would-be beneficiaries appear unprepared and not psychological attuned to the realities of retirement.
= In some cases the staff involved to receive notice of retirement only at
the last minute, causing uncertainty in the mind of the retiree whether such notices would be implemented.
Extrinsic factor: the prospective retirees from the federal ministries either due to ignorance or fear of the unknown over stay their welcome in the service.
This means that they stay beyond the statutory requirement for retirement. The rules have it that any prospective retiree who overstays in service will have all the excess salary and allowance payments made to him during the period of overstay deducted from his retirement benefits.
In Nigeria, the prescribed age of superannuation or retirement varies from 60 to 65 years. This varies from country according to the climatic condition and life expectancy. In the United States of America, it is 65 to70 years, in Britain 60 to 65 years, and India 55 in case of non-ministerial and 60 in case of ministerial services (expected in case of those not in service on 31st march 1938, for whom it is 55). However, in Britain there is an optional age of retirement, and compulsory one at 60 or 65 years respectively. At 60, an employee has the option to retire on the usual pension rights if he so wishes and the government has option to make him retire if it thinks it fits in the interest of efficiency but 65 he must compulsorily retire, (Emma, 2008). In fact, many centuries ago, the Greek Philosopher Socrates, told us a home truth that says, the unplanned life is not worth living. Equally, there is a time Maxim that say, whoever fails to plan surely plans to fail. These truths have
been lived out by thousands of retirees who failed to plan their retirement with carefulness and studied attention. Honestly, as a result of lack of planning, many a retiree has had his or her peace of mind dashed on the rocks of financial insecurity and embarrassment during their retirement periods, (Onuigbo, 2004).
Again, the amended pension and gratuity policy of 1997, of the federal government of Nigeria was intended to reflect the austerity measures of the government of General Olusegun Obasanjo. The policy intended to cut down certain pension and gratuity allowances to retiring officers. Its salient features
include;
– It cancelled the gratuity allowances meant for officers retiring after less than 10 years of service.
– It reduced percentage for pension and gratuity; officers retiring after less than 15 years of service would no longer be entitled to pension whether or not they had attained the age of 45.
– Officers (Civilian or Armed forces personnel) who are retired from the
service in the public interest after serving for 15 years or more are entitled to
the payment of a pension immediately on retirement, irrespective of their age
at retirement.