10,000 3,000

Topic Description




It is in the nature of man to pass through a life cycle (childhood, youth and adulthood/old age), except in an occasion when this cycle is cut short by premature death. In like manner, the working lives of employees move continuously towards a certain direction that is from employment, to growth, to retirement (or can be terminated either by death or disability). Since man is naturally born to grow and become old – the stage when it is usually too difficult to work and earn a living – planning for retirement/old age becomes expedient. The extent an individual is committed to this cause during his active productive years makes a difference in the quality of life he enjoys at his old age and longevity.

As people grow old they work, produce, and earn less and therefore need a secure source of income to see them through their lifetime. To this extent societies and governments have developed mechanisms to provide income security for their older citizens as part of the social safety net for reducing poverty. No doubt, these arrangements should be a source of concern for everyone – rich as well as poor, young as well as old – because the arrangements adopted can either help or hinder economic growth (World Bank, 1994).

Pension has been a common global discourse in the contemporary literature. The past decade has brought recognition of the centrality of pension systems to the economic stability of nations and the quality of life and longevity of their workers after retiring from active service (Holzmann and Hinz, 2005). This notwithstanding, there has been an emergence of what Barr (2006) called ‘a pension crisis’ caused by high and rising pension costs which has created worries. In fact, the global trend is a total paradigm shift towards definite and fully funded contributory schemes. In most countries pension plans are defined benefit plans financed on a Pay-As-You-Go (PAYG) basis, through pay roll taxes that can be adjusted periodically to ensure that revenues are sufficient to meet current pension obligation (Dalang, 2006).

The World Bank, in 1994 published a path-breaking seminal book on pension reform entitled, “Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth” (Orszag and Stiglitz, 1999). The Bank delivered its new ideas on pension systems in this landmark report which became the reference point for the Bank’s approach to pension reforms. It advocated a move away from pay-as-you-go financing which has dominated pension provision in both rich and poor countries. The report backed compulsory funded pensions, and paid for by workers saving part of their earnings in retirement accounts. Since1994 the Bank has been involved in pension reform in more than 80 countries, and provided financial support for countries to grow. According to the Bank, the main objectives of pension systems are: poverty alleviation, consumption smoothing from one’s work life into retirement and the broad goal of social protection. Consequently, reforms along these lines have been carried out mainly in Latin America and the post-Soviet “transition countries”. Chile was the first to embark on the reform as early as 1981. In all, twelve countries in Latin America have passed laws introducing mandatory savings; ten have implemented them. In Europe and Central Asia, fourteen countries have decided to introduce individual accounts whilst ten actually made the change (Dalang, 2006; Holzmann and Hinz, 2005).

After a critical assessment of the various pension schemes of the various countries, the World Bank on 21st February, 2005, released a new report titled “Old Age Income Support in the 21st Century”: An International Perspective on Pension Systems and Reform”. The report emphasized the need for change as most pension schemes in the world do not deliver on their social objectives. Pension schemes create distortions, impose marginalization, old age poverty, post retirement sufferings and ultimately lead to untimely death. Above all, they distort market economies and are financially unsustainable because they are expensive to run and the process fraudulent even by those mandated to administer the pensions (Asuquo, Akpan and Tapang, 2012).

In an attempt to reposition pensions, the report stated that any pension reform should consider:

  1. The informal sector which incidentally makes up for more than half of the labour force
  2. Catering for people who will be poor throughout their lives, and
  • Those that will be physically challenged

In 1996, the International Development Targets (IDTs) were set to improve economic well-being, social and human development and ensure environmental sustainability and regeneration in readiness for the fight against poverty in the emerging Millennium. In September, 2000, 149 world leaders adopted the United Nations Millennium Development Declarations which its fundamental values bind countries to do more in the realm of human development. Part of the mandate was to ‘halve the proportion of people whose income is less than one dollar a day and who suffer from hunger’. Emerging from the Millennium Development Declarations are Millennium Development Goals (MDGs), which are a set of specific, qualified and time-bound targets on the various dimensions of human development – income, poverty, hunger, health, education, gender, equality, and environmental sustainability. Their importance for the global community is exemplified by their increasingly becoming the driving force for development policy internationally, the means for productive life for the billions plus people living in extreme poverty as a way to secure a peaceful world for all (UN, 2013; NEEDS, 2004).

Income security in old age is a worldwide problem, but its manifestations differ in different parts of the world. In Africa and parts of Asia, the old make up a small part of the population – and have long been cared for by extended family arrangements, mutual aid societies, and other informal mechanisms. Formal arrangements that involve the market or the government are rudimentary. But as urbanization, mobility, wars and famine weaken extended family and communal ties, informal systems feel the strain. That stain is felt most where proportion of the population that is old is growing rapidly, in consequence of medical improvements and declining fertility (Word Bank, 1994). Agreeably, in Nigeria, old people were cared for through the extended family system. The aged had the opportunity to live with the children and younger relatives who provided him with his needs.

Today, the story is different because the society is dynamic. There has been dislocation in the societies set up brought about by rural-urban migration of youth and young people in search of white collar jobs. The demographic changes have affected the traditional parent-offspring relationship. They now live in very distant locations apart from one another. Western civilization made it possible for people to seek for paid employment in urban cities which sometimes are far away from their villages. The evolution of paid employment precipitated the concept of pension. The idea is that since workers spend the whole of their productive lives working for their employers, they (employers) in turn should, of necessity, make adequate plan for the up-keep of their workers after they retire from active service.

Pension, simply put, connotes a form of official obligation in any employment relationship. It is a legal and economic obligation in which employers of labour are mandated to fulfill in her contractual relationship with employees. It is a form of employers’ benevolence towards employees (Pitch and Wood, 1979) quoted in Inyokwe (2013). Pension plans are usually established by a legal document called a trust deed with the declaration that the funds would be administered in accordance with the rules spelt out in the document. Employers offer pension benefits to attract, retain and reward employees. Employees, on the other hand, rely on retirement benefits as a form of financial security in their less productive years (Babatunde, 2012).

Pension industry in Nigeria has witnessed reforms over the years with the prevalence of crisis. Employees and employers do not usually realize the necessity for planning adequately ahead for their retirement and retirement of their employees, respectively because the concept of pension is alien to them. This explains why most private sectors had no pension schemes for their employees and as such the workers who retired from such private sector organizations had no retirement benefits. Even where the scheme existed it was poorly organized. The same poor attitude to pension schemes was prevalent in the public sector where governments saw pension scheme as altruistic and public civil servants in pension management handled it unethically, hence, the preponderance of crisis (accumulation of huge pension liabilities, large scale misappropriation of pension funds, etc.) in the pension industry before the enactment of Pension Reform Act 2004.

The first pension law in Nigeria was the Pension Ordinance of 1951. It was later transformed into Pension Act 1958. This was the first attempt by the colonial administration to provide for the full pension rights of the colonial administrators. However, some limited right was granted to the Nigerian workers in the civil service at the discretion of the colonial Governor General. This was followed by National Provident Fund (NPF) scheme established in 1961 by an Act of Parliament 1961. The NPF was changed to Nigeria Social Insurance Trust Fund (NSITF) in 1993 via a decree No.73 of 1993. The effective date was from July, 1994. This Act was broader based than NPF. This was the first legislation enacted to take care of pension matters in the private organizations. Thereafter, the Pension Act No.102 of 1979, the Police and other Government Agencies’ Pension Act No.75 of 1987, and Local government Edict which precipitated the establishment of Local Government Staff Pension Board of 1987 (Fapofunda, 2013; Odia and Okoye, 2012; Barrow, 2008; Akhiojemi, 2004; Balogun, 2004).

However, there were several government circulars and regulations issued to alter their provisions and implementation. For example, mandatory retirement at the age of 60 years or 35 years of service, whichever comes earlier, in 1988, and in 1992, the qualifying period for gratuity was reduced from 10 years to 5 years and that of pension from 15 years to 10 years (Barrow, 2008) cited in Gunu and TSADO (2012).

The government operated a pay-as-you-go pension system. The pension administration in the public sector was largely Defined Benefit (DB) pension scheme which was neither funded nor contributory. The pay-as-you-go (PAYG) scheme was mandatory to the public sector but optional in the private sector. The scheme was characterized by massive accumulation of pension debt which made the scheme unsustainable due to lack of adequate and timely budgetary provisions as well as increases in salaries and pensions. There were also demographic shifts due to rising life expectancies, pensioners live longer which added to the pension expenditure (Ahmad, 2006; Balogun, 2004).

Besides, the administration of the scheme was very unrealistic, inefficient, less transparent and cumbersome. This precipitated bureaucratic bottle necks and corrupt practices. Huge amount of resources were expended in yearly verification exercises. This also failed to provide the desired prompt and efficient payment of pension. One of the dailies, in collaboration observed that:

…From the revelations, it had been a conduit for a bazaar of looting and fraud masterminded by serving civil servants against their colleagues who had left service. The 18-page report by the Abdulrahsed Maina stank with details of organized crime in government offices… had revealed that since 1976, N3.3 trillion had been deducted from the pensions fund nationwide without proper accountability… Shocking also was the fact that while the serving workers lined their pocket with the loot, an average of 50,000 pensioners had not been paid their pension since retirement in the past 42 years. (Sun, Monday, Nov. 5, 2012).

In spite of huge revenue accruing from oil, successive regimes could not pay the salaries of working employees as and when due let alone pension entitlements. The looting and “scramble” for pension funds by the pension “chieftains” were so suffocating that President Olusegun Obasanjo, seemingly concerned about the near destitution of the pensioners, said:

Over the years, retirement in our societies has become synonymous with suffering as if ageing were a course rather than a blessing that it really is. Often pensioners are forgotten by their former employers who thus accentuates society’s attitude that rejects pensioners as spent shells. The culmination of this persistent neglect of pensioners has become a threat to national security and indignant pensioners are made more and more inclined to public protests and demonstrations (Adedapo, 2004).

As already stated, old pension crisis is a global problem but the Nigerian version is coloured with corruption and large scale embezzlement of pension funds. This is because abinitio the pension industry was not properly organized. There were poor supervision of pension fund administrators in the effective collection, management and disbursement of pension funds; the various governments were insincere about pension.  The aftermath of these developments and more led retirees to become more or less baggers (Toye, 2006).The administrators developed some unwholesome behaviours in the disbursement of pension funds. They organized unorthodox individual retirement scheme such as large scale fraud and collection of 10 percent kick back from pensioners as a condition for payment. These pension administrators constituted themselves into beasts/birds of prey to their former colleagues (pensioners).

It was against these myriad of problems that the Federal Government of Nigeria constituted various committees headed by Chief Ajibola Ogunsola and Mr. Fola Adebola at different times to look at the challenges of pension schemes in Nigeria and proffer solutions. Fola Adebola’s committee report was enacted into the Pension Reform Act 2004 and came into operation on 1st July, 2004 (Fapofunda, 2013; Balogun, 2004).

The reform was a part of the main policy pursued by the Obasanjo administration to address the Millennium Development Goals (MDGs) which is anchored on National Economic Empowerment and Development Strategies (NEEDS). The macroeconomic framework of NEEDS under ‘Empowering the people’ involves issues relating to health, education, environment, integrated rural development, safety nets, gender, and geopolitical balance as well as pension reforms. The achievement of the objectives of NEEDS’ programme rests on four key strategies, one of which is ‘implementing a social charter’. In order to harness the full potentials of the citizenry, NEEDS aims at alleviating poverty through ensuring functional, sound and qualitative health and educational systems, employment generation for the youth. This is the overarching ultimate goals of NEEDS. The previous pension scheme which was in crisis was then replaced with a Contributory Pension Scheme by (the Act) to give the retired citizens a better life after retirement (ArticleNG, 2013; NEEDS, 2004; Charles, Mordi, and Abwaku, nd.).

The Pension Reform Act 2004 (the Act) was therefore enacted to correct these abnormalities in the system. Based on these wrong attitudes, Obasanjo administration introduced a pension system that is, according to him, sustainable and has capability to achieve the ultimate goal of providing a stable, predictable and adequate source of retirement income for each worker in the country (Ahmad, 2012). The pension reform Act 2004 (the Act) was signed into law which gave birth to Contributory Pension Scheme (CPS) fully funded, privately managed, and based on individual account for both the public and private sector employees in Nigeria. The main objectives of the Act is to ensure that every person that worked in either the public or private sector in Nigeria receives his/her retirement benefits as and when due. The Act, among its various provisions, repealed the Pension Act 1990 and other Acts pertaining to pensions were either entirely repealed or amended (Adedapo). The Federal Government has found the global trend in paradigm shift in pension industry – Contributory Pension Scheme.  It is in realization of this fact that the researcher decided to conduct a study on the impact of the implementation of the Pension Reform Act 2004 (Contributory Pension Scheme) on the pensioners’ welfare in Nigeria with particular reference to Nnamdi Azikiwe University, Awka. The justification for the sample is that the University has operated old pension system (PAYG) and is currently operating the contributory pension scheme. The sample also possesses the same characteristics with other federal Universities.


The issue of receiving retirement benefits is becoming increasingly a nightmare to the Nigerian ‘senior citizens’ (retirees). Life after retirement is one of the dreaded periods of most workers in Nigeria. The fear of uncertainty after retirement is also responsible for age falsification among civil servants in Nigeria. Retirement in Nigeria is now synonymous with deprivation and suffering. Most often gratuities and pensions are not paid as and when due, consequently,  retirees cannot afford three square meals a day, let alone paying school fees for their children, pay house rents or take care of other necessities of life (Global Action on Ageing, 2006). It is observable that most often a number of these pensioners die without accessing their entitlements. In a bid to make ends meet, retirees even at very old age look for employment or jobs. Although the pension industry has witnessed series of reforms since independence, the implementation has not actually made any significant impact in the welfare of the beneficiaries – pensioners. This is because pension administration in Nigeria is poorly handled. The problem with Nigeria is that most of its laws are only good on the paper. Nigerians are recently projected globally in very bad image because of scandalous and startling revelations of massive looting and fraud masterminded by serving civil servants against their former colleagues who had left service. A staggering amount running into inestimable trillions was looted from pension funds by the stakeholders in the administration and management of pensions (Gbenga, 2012; Emewu, 2012). This was just one out of many of the massive looting and “scramble” to empty public treasury. The fraud is not only in pension funds, it is also obtainable in the entire public service. It is only in this era of societal decay and deadly quest for materialism that “a rat can conveniently eat the fish hung round its neck”. It is only in today’s Nigeria that public servants embezzle funds in their custody without adequate punishment. The institutionalized procedures for sanctions against fraud are treated casually as mere rituals. These precipitated neglect in the administrative accountability and transparency in daily activities of public servants.

The humiliating aspects of the pension administrators are many. They loot the pension funds. Starved and deprived pensioners are forced to queue as well as mill around the verification centres at regular intervals for verification and biometric capture across the country. These tactics create confusion, delay payment or prepare grounds for outright fraud in pension fund management. It was Balogun (2006), who affirmed that restrictive and sharp practices in the investment and management of pension funds exacerbated the problem of pension liabilities. The implication is simple to observe, huge budgetary allocations made in the past for the payment of both pensions and gratuities did not trickle down to the pensioners in general and those of Nnamdi Azikiwe University Awka, in particular.  Nigeria is fast losing its retirees due to greed and insensitivity of the government and those charged with both pension and gratuity funds. It is in the spirit of improving the economic well-being of pensioners in their post-retirement lifestyle that the Federal Government of Nigeria carried out a general overhaul of the Defined Benefit Scheme hinged on Pay-as-You-Go (PAYG) via the Pension Reform Act 2004; and how far the implementation of this Act has gone in improving the welfare of these pensioners is the worry of this study.

Section 23, Chapter 11 of the 1999 Constitution says: “The National Ethics Shall Be:

(i) Discipline (ii) Integrity (iii) Dignity of Labour (iv) Social Justice   (v) Religions Tolerance    (vi) Self-Reliance and (vii) Patriotism”. The civil servants’ attitude to work and their response to globally accepted norms control the quality of service that they render to the public. But rather sloths, delinquent, disrespectful, and negligent, were the negative traits of their performance which the citizens perceive the public service portrays. The public servants must be truly committed to hard work, sacrifice, discipline and patriotism for positive change. These are the fundamental objectives and directive principles the State Policy needs to steer and stir the ship of the New Pension Reform Act 2004 (the Act) by all the stakeholders. It is in the light of the above that the researcher poses the following research questions.


  1. Did the problems of the Old Pension Scheme negatively affect the pensioners’             welfare in Nnamdi Azikiwe University, Awka?
  2. Has the implementation of the Pension Reform Act 2004 significantly enhanced the   pensioners’ welfare in Nnamdi Azikiwe University, Awka?
  3. Is the institutional framework for the implementation of the Pension Reform Act 2004 significantly effective and efficient in delivering pensioners’ welfare in Nnamdi Azikiwe University, Awka?
  4. What are the possible measures for effective and efficient implementation of the New Pension Reform Act?




The general objective of this study is to systematically study the Pension Reform Act 2004 and to find out its effectiveness and efficiency in enhancing pensioners’ welfare.

The specific objectives are to:

  • determine whether the problems of the old pension scheme affected the welfare of pensioners in Nnamdi Azikiwe University, Awka.
  • ascertain whether the implementation of the Pension Reform Act 2004 has enhanced the pensioners’ welfare.
  • find out if the institutional framework for the implementation of the Pension  Reform Act 2004 is effective and efficient in delivering pensioners’ welfare in Nnamdi Azikiwe University, Awka.

4)  suggest possible measures  for effective implementation of the Pension Reform Act 2004.


The study has both theoretical and practical significance. From the theoretical view point, the study has theoretical significance for productivity theory of pension as propounded by Dorsey; Cornwell and Macpherson (1998), and The Theory of Prismatic Society, by Fred W. Riggs, 1964 in (Onah, 2008; Ezeani, 2005; Okoli, 2004; Kasfir, 1969).

The productivity theory of pension has two sides: demand and supply sides. The demand side of the theory posits that employers make payments to employees’ pension funds because workers are keen or prefer pension savings to cash payments to their emoluments because of the benefits attached such as reduction in income tax, retirement benefits, annuity etc. The supply side of the theory posits that employees’ gain from pension tends to raise the level of workforce productivity and reduce labour costs. This is because employers tend to invest adequately in the training of workforce, improved condition of service, provision of adequate resources, etc., that are greatly offset by the workforce’s improved output or productivity, workers retention, which are inherent in defined benefit pension scheme.

The knowledge of this theory will help the employers and implementers of the pension Act to acknowledge the fact that the enactment of the Act is as important as its implementation and that for this well-designed pension plan to deliver on its policy outcome this theory must serve as a reference point by all the stakeholders and must rise up to the inherent challenges. It is also expected that the knowledge of this theory will help contributors and pensioners to develop confidence in the pension scheme.

The prismatic theory deals with a range of social phenomena and behaviour which influence the political and administrative aspects of life in developing countries.  The knowledge of this theory will expose the extent to which negative work ethics in the Nigerian public service has affected the pension industry and the need for the political will to curb the corrupt practices in public life.

The study is also very important and useful, particularly as the Federal Government’s Vision 20:2020 is on course – (NV20:2020 portrays Nigeria’s intent to improve the living standard of her citizens as well as place Nigeria among the top 20 economies in the world).

The study may be of practical significance because the findings would enlighten both the government and public servants on the need for international best practices needed for the success of the implementation of the Act. It would guarantee improvements in the management of pensions in Nigeria. The findings would educate the pension fund operators (PFAs, PFCs, etc) on how to operate with competitive spirits. The findings will go a long way in benefiting the pensioners, their dependants and survivors, government and public at large because a well implemented pension scheme makes for healthy living of the pensioners and the society in general. A healthy society is a powerful economic resource to any government.

The knowledge of the prismatic theory of administrative weakness in developing countries will help the government and policy makers to appreciate the impact of environmental factors on the Nigeria pubic administration which calls for urgent change in attitude and will also sharpen their competence and expertise in policy designs, possible reforms targeted at institutionalizing corporate best practices particularly in the pension industry. The result of this study may elicit the urgent need for regular training for higher, middle and low cadre manpower that constitute the institutional framework for the implementation of Pension Reform Act 2004. The findings would serve as guide for possible amendments in the Act.

Finally, the findings will contribute to the existing knowledge for students of Public Administration and Local Government. It would also elicit further research.


This work is geographically restricted to Nnamdi Azikiwe University, Awka, Anambra State for the purpose of effective research work. The content scope covers the implementation of the Pension Reform Act 2004 as it affects the pensioners’ welfare in Nnamdi Azikiwe University, Awka, from 2004 to 2012.

The researcher encountered some difficulties in the course of this study. It was difficult to get the retirees to complete the questionnaire. This was because the retirement benefits are being paid in their individual banks as against the old method of converging in the school or at a designated bank on a pay day to collect their pension entitlements; as such the pensioners had to complete the questionnaire at their convenient time with the help of two trained Research Assistants.  This prolonged the time for completion and collection of the questionnaire.

Also there was the problem of the respondents supplying valid data. Some people tended to report idealized situation rather than what is done in practice while some just treated the exercise with levity. To bridge these lapses the researcher administered the questionnaire twice to some key respondents (head of departments, senior lecturers and senior administrative officers). Also the existing knowledge about the issue under investigation and findings through documentary review helped to analyze the data supplied.

However, the researcher enjoyed the full cooperation of a good number of the serving workers by their being prompt and earnest in completing the questionnaire because pensions administration is topical.

There was also the challenge of using computer for sourcing internet materials, processing and analyzing data in the course of the study since the researcher is just a first timer in the exercise.