Service Delivery and Myth/Reality of the Present Pension Scheme

Being a Lead Paper Presented by Nweke Emmanuel Onyekachi (Ph.D/ACIA/ACIPM/MNIM/FCAI) at the 10th Annual Delegate Conference of Senior Civil Servants of Nigeria (ASCSN), Ministry of Defense, Lagos and Outstations held at No. 1 Forces Avenue, Old GRA, (behind SPAR), Port Harcourt Shopping Mall, on 9th December, 2021.

Protocols

Preamble

It is deemed necessary to thank the organizers for honour of inviting me to an epoch event such as this. Pension and matters around it has become a national out cry especially the approaches adopted by government operators in the implementation of pension scheme in Nigeria. The paper has made concerted efforts to demystify major concepts of the subject matter and hope that it will indeed provide a veritable lead paper for fruitful deliberations and outcome in this national conference of special crème de crème of the Nigerian workforce.

Introduction

• Pension represents a payment to a worker during the retirement phase of his life to ensure his sustenance and that of his beneficiaries after the active phase of working life.

• Pension schemes exist to achieve several objectives, the most paramount of which are:

• Social Security: In this regard, pension schemes exist to ensure that people receive some income in their old age to take care of themselves and any dependants. Under this objective, proponents of pension schemes realize that individuals are on their own predisposed to improvidence, and are unable to make arrangements by themselves for their old age, except their employers or Government provide same or establish the necessary structures. For example, the Nigerian Pension Reform Act 2004 has assurance of retirement benefits and assisting improvident individuals save for their retirement as part of its cardinal objectives. 

• Encouraging Work, Ethical behavior and Work Productivity: The existence of pension schemes ensure that people are encouraged to work because their lifestyle in retirement is taken care of. Also, in developed economies struggling with massive corruption and for certain categories of employees, a Defined Benefit system may give reasonable assurance and encourage ethical behavour. Worker productivity may also be enhanced by Defined Contribution Schemes that encourage worker productivity as contributions are enhanced by promotions, wage increases and additional income, which may be tied to productivity, e.g. incentive bonuses.

• Encouraging Savings: Individual and collective savings are key to individual and family wealth creation as well as national development. Contributory Schemes ensure that a savings culture is instilled, as leads to capital accumulation that is required for societal development. The incentives provided by Contributory Schemes like tax incentives for both employers and employees, as well as for voluntary contributions further encourage savings among workers

Definition of Key Terms

• The following terms have been defined to guide the paper:

• Service Delivery: any contact with the public administration during which citizens, residents or enterprises – seek or provide data, handle their affairs or fulfill their duties. These services should be delivered in an effective, predictable, reliable and staff-friendly manner

• Myth: traditional story, especially one concerning the history of a people or explaining a natural or social phenomenon, and typically involving supernatural beings or events. It is just like saying our problem in Nigeria is spiritual (supernatural).

• Reality: the state of things as they actually exist, as opposed to an idealistic or notional idea of them. I.e. the present state of Pension Scheme in Nigeria.

• Pension Scheme: it's a type of long-term savings plan. And it's a tax-efficient way to save money during working life. You save some of your income regularly during your working life or your employer may do so for you. This gives you an income in later life, when you want to work less or retire.

• Gratuity: a sum of money paid to an employee at the end of a period of employment. "an end-of-contract gratuity of 20% of the total pay received. 

Pension Scheme in Nigeria

• Pension schemes can generally be categorized as Defined Benefit (“DB”) Schemes and Defined Contribution (“DC”) Schemes.

• DB Schemes are schemes that promise a specific level of benefit at retirement based on final emoluments and number of working years. In a DB Schemes, the schemes sponsors, usually the Government or employers set aside funds to provide for these defined benefits. DB Schemes require actuarial valuations to ascertain the “funding gap”, i.e the difference between the scheme’s assets (funds) and its liabilities (promised benefits).

• DC Schemes on the other hand are schemes where employers and employees make contributions, usually a fraction of emoluments or a specified amount on a periodic basis, usually as incomes are received (daily, weekly or monthly). The contributions are invested in financial instruments and the level of contribution, which may be variable, especially where voluntary contributions are allowed, and on the investment income determines retirement benefits

Funded vs. Unfunded Schemes

• Unfunded Schemes typically exist in DBPAYG Schemes where either the Government funds pension annually based on budgetary estimates and appropriations, e.g in Nigeria, pre Pension Reform Act or where current workers contributions are used to offset current pensioners, leaving the schemes perpetually unfunded or sometimes in a deficit, e.g US Social; Security.

• Company DB Schemes are usually funded with funds set aside from the Company’s revenues, and managed separately. In some corporate DB Schemes however, pension obligations are only shown as liabilities, with no corresponding funding. Also, even where there is funding. There may be no clear separation of pension funds from the assets, leading to frequent “virement” of pension funds to meet operational requirements of the Company.

• DC Schemes are by their nature funded at all times, and do not necessarily suffer the sponsor risk associated with DB Schemes and unfunded Schemes at the point of retirement and payment.

Contributory vs. Non-Contributory Schemes

• In this regard, Schemes are viewed from the perspective of the employee, and are deemed to be contributory where employees make contributions.

• Where only the employer or sponsor makes the contribution, it is non-contributory. Contributory Schemes might come in different variants. You may have variable contribution rates, minimum rates of contribution, voluntary contributions, ad in some cases, different access to employer and employee contribution at retirement based on pre-specified rules, e.g. where you have worked for less than a particular number of years, you do not qualify for employer’s contributions.

Individual Accounts vs Group Pension

• DB Schemes are typically Group Schemes. As a group, the time horizon is much longer, and DB Schemes can take on more risk and make more returns. DC Schemes are tied to one person’s time horizon, and cannot therefore take the same type of risks as a DB can. Individual accounts however transfer power to individuals to manage their funds, and decide to some extent their investment strategies. Individual accounts are usually more expensive to manage, but provide holders with all the gains and losses of their assets. Again in less developed countries, group accounts have failed especially due to biased and prejudiced investment decisions taken by Trustees and Fund Managers. While individual accounts are desirable for DC Schemes in reforming third world countries, the low level of literacy, financial and otherwise, means that employees cannot really make the appropriate investment decisions, but have to rely on their Fund Managers. Under the Nigerian DC Schemes, Pension Fun Administrators (“PFAs”) operate a single fund where employees are pooled together irrespective of preferences and risk appetite in a single fund unitized investment schemes. This obviously is a reflection of the reality of financial illiteracy, yet the urgent need to migrate from a DB Schemes managed by Government.

HISTORICAL DEVELOPMENT OF PENSION IN NIGERIA

• The development of pension schemes in Nigeria can be traced to the beginning of organized workforces in the private and public sectors in the colonial era of the mid 20th century. The first pension law in Nigeria was known as the Pension Ordinance of 1951, and provided for the full pension rights of colonial administrations and partial rights, granted at the discretion of the colonial Governor General for Nigerian workers in the colonial civil service at the time. The ordinance transformed into the pension Act of 1958. In the immediate post-independent era, pension schemes in Nigeria were also guided by four other law/rules for certain categories of workers as follows:

• Non-Government Certified Teachers Superannuation Schemes Rules of 1968;

• Standard Directions for the Grant of Retirement Benefits to Native Authority Staff for Local Government Servants in Northern Nigeria;

• Uncertified Teachers Superannuation Schemes Rules of 1973; and

• Federal Ministry of Establishments Circular No 5 of 1973 on Non-Pensionable Public Servants

• Government employees in statutory corporations and state owned enterprise, such as Central Bank of Nigeria (‘CBN”), National Electric Power Authority (“NEPA”), were covered by the Pensions Act of 1958 and Circular No 5 OF 1973, while other commercialized enterprise like NICON Insurance and Nigerian Airways operated provident schemes that were noncontributory, similar to what exited in certain private sector institutions. Federal Universities at the time had a separate pension system under the Nigerian Universities joint Superannuation Schemes which was a provident plan with a minimum 15% contribution by the Universities. The public sector funded schemes were generally more attractive than what obtained in the private sector to higher levels of funding.

• The National Provident Fund (“NPF”) was established under an Act of parliament in 1961 to provide for income loss protection for employees as required by the International Labour Organization (“ILO”), Social Security Minimum Standards of 1952, covering employees in the private sector only. The NPF was a contributory scheme with a minimum contribution of 6% of basic salary subject to a total maximum of N8.00 by employee and employee. The NPF metamorphosed into the Nigeria Social Insurance Trust Fund (“NSITF”) in 1993. NSITF was a define benefits contributory limited social insurance scheme. It started with an initial total minimum contribution of 7.5% of basic salaries, and was later revised in 2002 to 10% of total emoluments (basic, housing and transportation) shared by employer and employee.

• Some private sector institutions also ran separate pension schemes apart from NSITF to augment the retirement benefits of their employees

The 1979 Pension Act

• In 1972, the Military Government of General Yakubu Gowon inaugurated the Public Service Review Commission, popularly known as the Udoji Commission. The Udoji Commission’s recommendations led to the promulgation of the Pension Act No 102 of 1979, and radically changed the remuneration of public servants and their retirement benefits. The Udoji Commission’s recommendations regarding the retirement benefits of public servants were hinged on the following cardinal philosophies:

• Payments of retirement benefits should be seen as a deferred payment;

• Retirement benefits of a qualifying public servant are right, and cannot be withheld, reduced or tampered with;

• Payment of retirement benefits will be non-contributory, Pay As You Go basic from budgetary allocations’

• Public sector Schemes should be modified and harmonized to promote mobility within the public service;

• Retirement Benefits for existing pensioners should be adjusted as salary scales are changed for existing workers;

• Private sector institutions may continue to run their existing schemes; and

• The National Provident Fund should be strengthened to carry out its functions as a social security provider.

• The Pensions Act encompassed the Udoji Commission recommendations, consolidated all enactments and circulars on pension in force prior to the Act, and repealed all existing pension laws that were in existence

Features of Udoji Pension Reform

• The main features of the 1979 Act were as follows:

• It was a defined benefits schemes paid out of the Consolidates Revenue Fund of the Federation;

• It covered all public officers who held permanent and Pensionable appointments, and retie in Pensionable circumstances;

• Pension and gratuity are granted under the following circumstances:

• On voluntary retirement after qualifying service of 10 years up 31 March 1977 and 15 years since 01 April 1977 to 30 May 1992, and then 10 years since June 1992.

• On compulsory retirement based on the officer’s length of service and his last total emolument, as captured in the table below:

• Other Regulations and Reforms

• Besides the 1979 Act, there also existed laws for specialized groups within the public service that were similar to the 1979 Act, as follows:

• Armed Forces Pension Act 1979;

• The Pension Rights of Judges Act of 1985 (amended in 1988 and 1991);

• Academic Staff of Federal Universities Act of 1993;

• Police and other Agencies Pension Act of 1993; and

• Police Pension Right of Inspector-General of Police Act of 1993

Present Pension Structure

• Contributions

• Employers and employees are required to make monthly funded contributions throughout the employee’s working life towards the employee’s retirement benefits. The Act requires a total minimum contribution of 15% of the employee’s Total Emoluments, consisting basic salary, housing and transport allowances. For employees in the private sector, and the federal public service including the Police and paramilitary institutions, the minimum rates of contribution are 7.5% each by employer and employee, while for the Arms Forces, the minimum rates of contribution are 12.5% (employer), 2.5% (employee). Employers are allowed to bear the full burden of the total contributions, and individual employees may make additional voluntary contributions to augment their retirement saving.

• Voluntary contributions unlike the mandatory contributions can be withdrawn from the RSAs by the employees at time before the retirement. The tax benefits enjoyed by mandatory contributions also apply to voluntary contributions, so long as the contributions are not withdrawn for at least 5 years. PFAs are expected to account for the voluntary Contributions separately and apply the tax rules on it at the point of withdrawal.

• Because the retirement benefits under a DC Scheme is enhanced by the level of contributions and investment returns, RSA holders may enhance their retirement benefits by making additional voluntary contributions during their working life. The tax benefits of Voluntary Contributions also make them a better savings tool than ordinary bank saving account or other investments.

• Investments

• The Act prescribes permissible assets for pension investments, and the Investment Guidelines issued by PenCom provide asset allocation guidelines, maximum exposures to the various asset categories and benchmark returns for each category. Generally, the Act and the Guidelines permit investments in Nigerian Securities only, with a provision for investment in foreign securities subject to the approval of the President of the Federal Republic. The Act and Guidelines permit investments in Quoted Equities, Money Market and Bank Placements, Corporate and Government Bonds, Mutual Funds and Unit Trusts, Real Estate Securities and Asset Backed Securities. Compliance with the investment guidelines in monitored by PenCom, based on daily reports provided by PFAs.

• The investment guidelines are designed to ensure that Pension funds achieve reasonable risk mitigation through a broad asset allocation and diversification strategy that will ensure that they yield competitive long-term returns and liquidity of pension funds. The Guidelines are subject to periodic review by PenCom in consultation with PFAs and PFCs.

• PFCs are also required to ensure that the investment instructions they carry out on behalf of the PFAs comply with the Investment Guidelines and the Act. We will discuss the Investment Guidelines in subsequent chapters.

• Withdrawals

• Under the Act, withdrawals can be made under three scenarios as follows:

• Voluntary Contributions: Voluntary Contributions can be withdrawn at any time by the RSA holder as a lump sum. However, where such contributions are withdrawn within a period of less than five years which they were made, the tax benefits enjoyed at the time of contribution would be suffered at the point of withdrawal. Therefore contributions withdrawn after 5 years will enjoy the tax benefits under the Act.

• Mandatory Contributions at Early Retirement: Employees may take an early retirement under the terms and conditions of their employment. For example, workers may stop active paid employment on health grounds or may choose to also pursue personal interests aside from full-time paid employment before they reach the age of 50 years. When an employee takes an early retirement in this manner, he may apply to PFA 6 months post retirement, and receive 25% of the RSA balance as a lump sum. The balance on the RSA thereafter would be accessible to the RSA holder as an annuity or programmed withdrawal when he age of 50 years.

• Mandatory Contributions at 50years or above: RSA holders may access their RSA balances at retirement or having attained the age 50 years in the following ways. 

• Lump Sum Withdrawal: An RSA holder may take lump sum amount so long as the balance after taking the lump sum is sufficient to procure the RSA holder a programmed withdrawal over his expected life span, or an annuity for life that would provide at least 50% of his last salary over the expected life span or over his lifespan respectively. This means that not all RA Holders may have sufficient funds to procure a lump sum withdrawal. Retirement Planning Calculators are available to help RSA holders estimate their potential Lump Sum withdrawals under this rule. Retirement Planning calculators are available at the website of some of the licensed PFAs

• Programmed Withdrawal: The RSA holder will be required to advise his PFA of an expected lifespan based on his RSA balance, and his financial needs in retirement, and the PFA will set up a series of monthly or quarterly programmed payments for the retiree over this expected lifespan. A longer expected lifespan will provide smaller periodic payouts, but will ensure that an income is available to the retiree for a long period. On the other hand, a shorter expected lifespan will result in higher periodic payments, but may portend the possibility of the retiree out-living the expected lifespan and having his RSA paid out already.

• More conservation retirees would choose a longer expected lifespan. Should a retiree die before this period, the RSA balance would be paid out to his beneficiaries as prescribed under the Act. This is perhaps a better position to be in compared to out-living your programmed withdrawal.

• Annuities: The third withdrawal mode under this category allows retirees to transfer their RSA balance to a licensed life insurance company and procure an annuity over their life. The annuity is a life insurance contract that undertakes to pay the annuity holder (retiree) a series of monthly or quarterly payments over the annuity holder’s life span, based on the single sum premium (RSA Balance) transferred by the retiree. Usually with annuities, they are tied to your life, and so there may be nothing left for your beneficiaries. The fixed payout made by the insurance company is based on life expectancy tables, an evaluation of your health, and history of longevity in your family, as well as its expenses and the potential returns it can make on your investments. If you live longer than the insurance company expects, the insurer loses money on you. However, where you die earlier, than you get the short end of the stick, because your beneficiaries may get nothing depending on the terms of the annuity contract.

• It should be noted that specific guidelines for withdrawals from RSA had not been released by PenCom at the time of this publication. One issued they may further clarify on the modes of withdrawal stated above.

COMPLYING WITH THE ACT

• The Act is applicable to all employees in the Federal Public Service, Federal Capital Territory Administration and the private sector with up five employees. Compliance requires that employees in the applicable sector choose a licensed PFC designated by the PFA. The Act also allows the continuance of existing pension schemes subject to PenCom’s approval, and the establishment of Closed PFAs for approved institutions, under certain conditions.

• The Act exempts four categories of pensions from compulsory participation under the Acts as follows:

• State Government employees, except where the State Government adopts the Federal Pension Law;

• Pensions who are already existing pensioners;

• Pensions mentioned in Section 291 of the Constitution (Judicial Officers); and

• Pensions with three years to compulsory retirement as at 01July 2004 in the public sector and 01 January 2005 in the private sector.

• However, these categories of workers may choose to participate in the scheme. For example State Government employees have started participating because their respective Governments have passed enabling legislation to establish CPSs, modeled after the Act

Difference between Gratuity and Pension

• Every employee seeks and deserves to be looked after they complete a long term of service towards the industry and country’s economy. This is why, they receive retirement benefits in the form of a few schemes, so that they may be self sufficient and economically independent to live dignified lives. While a few schemes may require the employee to contribute in part along with the company, others are given completely by the organisation upon retirement. Pension and gratuity are two such retirement benefits. • Definitions and meanings

• Definition of Pension:

• The term pension refers to a monthly installment paid to an employee upon retirement. It is a benefit provided by the employer that can be a government establishment or any other organisation to the ex-employee or his dependent relatives on a perpetual basis. Pension payments become effective for employees who have served the same organisation for at least 10 years. The amount of pension is decided taking into consideration the average emoluments of an employee, which could be either the last drawn salary or the average salary of 10 months preceding retirement, etc. Pension becomes payable upon the retirement, superannuation (a pension paid to a retired employee who has contributed to a fund), death or disablement of an employee.

• Gratuity is the sum of money that an ex employee receives as a form of gratitude for his contribution towards the organisation. It is a form of social security benefit provided by the employer of an establishment to the retiring employee as a token of recognition when they retire or leave the organisation. To be eligible for gratuity, a person must complete at least 5 years in USA and 10 years in Nigeria, of service at the same organisation. The 10 years of service condition is not applicable in the case of death or disablement of the employee as a result of an accident or disease. This is payable upon the retirement, superannuation, death or resignation of an employee. The amount of gratuity payable is given to the employee upon leaving the establishment but in case of death, is handed over to the nominee of the employee. If there is no nominee, the same is given to the legal heir in accordance of the law.

How Pension is Administered in United Kingdom

• Pensions in the United Kingdom, whereby United Kingdom tax payers have some of their wages deducted to save for retirement, can be categorised into three major divisions - state, occupational and personal pensions.

• The state pension is based on years worked, with a 35-year work history yielding a pension of £179.60 per week. It is linked to wage and price increases. Most employees and the self-employed are also enrolled in employer-subsidised and tax-efficient occupational and personal pensions which supplement this basic state-provided pension.

• Historically, the "Old Age Pension" was introduced in 1909 in the United Kingdom (which included all of Ireland at that time). Following the passage of the Old-Age Pensions Act 1908 a pension of 5 shillings per week (25p, equivalent, using the Consumer Price Index, to £27 in present-day terms), or 7s.6d per week (equivalent to £40/week today) for a married couple, was payable to persons with an income below £21 per annum (equivalent to £2200 today), The qualifying age was 70, and the pensions were subject to a means test. The age of eligibility was moved to 65 for men and 60 for women, but from April 2010, the age for women is gradually being harmonised to match that for men, and the retirement age for both men and women is increasing to 68, based on date of birth, and by no later than 2046

Reality of Pension Administration in

Nigeria

• Over the years, Nigeria has experimented with different pension schemes, with lofty ambitions to ameliorate the suffering of aged and retirees. Many, even with sterling objectives, have failed. Since the introduction of the Contributory Pension Scheme in the Nigerian Public Sector in 1998 and the inception of the 2004 reform, it has been evidenced that the Nigerian government has too failed in its obligation in fulfilling the ultimate aim of establishing the scheme; such as: inability of government and its agencies to ensure prompt payment of retirement benefits to its retiring employees as at when due, inability of government to implement policies that would enhance efficiency in the management of the scheme, lack of genuine commitment towards stemming the growth of Pension liabilities in the sector, inability to ensure that personnel indicted of misappropriation of Pension fund are duly prosecuted, ensuring judicious monitoring and utilization of pension funds, lack of government commitment in mandating its regulatory body to ensure the enforcement of laid down policies that would encouraged PFA’s and PAC’s to perform inefficiently, poor recruitment process and used of unqualified staff in viable framework for collection and analysis of data relating to retiring employee.

• Although the new reform is guided by the key principles of sustainability, accountability, equity, flexibility and practicability, there is also this fear that funds contributed can be mismanaged by the trustees. Some pension fund administrators do not have the necessary risk management profile while some fail to pay regard to rating signals needed to making sound investment decision. The decision of investment managers of the pension fund administrators who are responsible for this process impact greatly on the contribution value due to employees (fund owners). Sound investment and efficient management of the huge pension fund assets may have great implication on the economy

Myth of Pension Administration in

Nigeria – A sorry Satire

• The National Pension Commision (PenCom) said pension fund assets had risen to N12.66 trillion as at June 30, with contributors under the Contributory Pension Scheme (CPS) hitting the 9.38 million mark.

• The Director General, PenCom, Aisha Dahir-Umar, said this at the 2021 Journalists Workshop held on Monday in Lagos, with the theme: Positioning the Pension Industry in the Post COVID-19 Era.

• Mrs Dahir-Umar, represented by Peter Aghahowa, Head, Corporate Communication, PenCom, noted that the consistent growth trajectory justified the commission’s overriding investment philosophy of ensuring the safety of pension fund assets.

• She assured pension ‘stakeholders’ that the implementation of the CPS remained on course.

• Mrs Dahir-Umar stated that the emergence of the COVID-19 pandemic necessitated a review of business processes across various organisations, which made it imperative for the commision to deepen technology innovation.

• “COVID-19 has engendered socio-economic disruptions of the entire global order, with multifarious challenges in conducting hitherto routine activities.

• “It was, therefore, imperative for the commission to deepen technological innovation to navigate through the challenges imposed by the pandemic.

• “The most recent technological innovation introduced by the commission is the in-house designed and developed online enrolment application.

Physical Appearance of Retirees of Nigeria and The United Kingdom

Some Frequently Asked Questions about Pension

1. What is the Contributory Pension Scheme? Contributory Pension Scheme (CPS) is an arrangement where both the employer and the employee contribute a portion of an employee's monthly emolument towards the payment of the employee's pension at retirement.

2. What is the law that established the CPS in Nigeria? The CPS was established in June 2004 by the Pension Reform Act (PRA) 2004, which was repealed and reenacted in July 2014.

3. How is the CPS different from the Defined Benefits Pension Scheme? Under the CPS, both the employer and employee contribute certain percentages of the employee's monthly emoluments to build a retirement fund from which benefits are paid at retirement while under the Defined Benefits (DB) Scheme, total pension obligation is borne by the employer

4. What is the main objective of CPS? The main objective of the CPS is to ensure that every person that worked in either the public or private 1 sectors in Nigeria, including the self-employed persons, receives his/her retirement benefits as and when due.

5. What are the basic features of the CPS? The basic features of the CPS are:

i. It is contributory. 

ii. It is fully funded. 

iii. It is based on individualized Retirement Savings Account (RSA). 

iv. It is privately managed by Pension Fund Administrators (PFAs) under the custody of Pension Fund Custodians (PFCs). 

v. Provision of Group Life Insurance. 

6. What are the rates of contributions under the CPS? The minimum rate of contribution is 18% of the employee's monthly emoluments where 10% is contributed by the employer and 8% is contributed by the employee. However, the employer may decide to bear the full responsibility of the contribution provided it is not less than 18% of the monthly emolument of the employee.

7. Can an employee make additional contributions? An employee may decide to make additional contributions above the minimum 8% provided the employee's total contribution and other deductions 2 do not exceed one-third of his/her total monthly emoluments. 

8. What constitute monthly emoluments? The constituent of monthly emoluments is as may be defined in the employee's contract of employment, but should not be less than the total sum of basic salary, housing and transport allowances. 

9. What does fully funded mean? A fully funded scheme is a pension scheme that has sufficient assets to fully pay the retirement benefits of its members at all times. 

10. What is a Retirement Savings Account (RSA)? An RSA is an account opened by an employee with a PFA of his/her choice, into which all pension contributions are remitted and thereafter invested for the purpose of paying retirement/terminal benefits. 

11. Does the RSA operate like a Bank Account? Unlike a bank account, the RSA can only be accessed at retirement, loss of job, medical incapacitation or in the event of death. 

12. Who is a Pension Fund Administrator (PFA)? A PFA is a company licensed by the National Pension Commission (PenCom) for the sole purpose of managing and administering pension and other

• Retirement benefit schemes' assets. Some of the PFAs are licensed to manage and administer retirement benefit schemes for staff of organizations that had existing pension schemes prior to the commencement of the CPS in 2004. These companies are called Closed Pension Fund Administrators (CPFAs). 

13. Who is a Pension Fund Custodian (PFC)? A PFC is a company licensed by PenCom for the sole purpose of holding all pension funds and assets on trust for employees as well as beneficiaries of the RSA and other retirement benefit schemes. 

14. Who receives the monthly pension contributions? The employer deducts and remits both the employee and employer portions of pension contributions to the PFC. The PFC notifies the PFA immediately upon receipt of the contributions. 

15. What is the role of the National Pension Commission (PenCom)? PenCom is the regulator and supervisor of all pension matters in Nigeria. It licenses all pension operators; issues regulations and guidelines; and ensures effective administration of all pension schemes in Nigeria.

Conclusion

• Pension administration in Nigeria should have been a veritable policy to better the lots of senior or retired citizens. However, from the array of disclosures of the paper, it is clear that Nigeria leadership has failed in his role to its citizens. Employers of labour, public and private would harvest joy and merit if their retired staff are paid within two weeks of retirement and the gratuity calculated and paid within a month.

Suggestions

• The following suggestions have been made:

• Retirees in their various categories should form consultancy forums where their former employees or other organizations may consult them and the fund paid into an amortized account for sharing by members of the union.

• Government and other employers should endeavour to pay retired workers their pensions and gratuity, one month after retirement.

• Government should always pay their own counterpart fund of the Contributory Pension Scheme.

• Employers of should may set aside a percentage of the pension or gratuity sum to set up business of choice of the prospective employees, five years to period of retirement. This could be monitored by banks and other financial or business organizations to fully hand over the business outfit to the employee upon retirement.

Selected References (APA 7)

• Gbitse, B. (2008). Pension fund administration in Nigeria, pen and pages ltd.

• Barrow, G. (2007). Nigerian capital market institute seminar for financial editors. Fundamentals of pension funds.

• Ibrahim, M. (2005). Licensing operators. PENCOM stakeholders consultation Nigeria

• Harvey, E. (2012). Euromoney-DC gardner workbooks • National Pension Commission, (March, 2006).

Regulation on investment of pension fund assets. • Sampson G. (2005). Custody experiences in Africa and product overview, PenCom PFC conference, Lagos.