Pension management has become a critical issue globally, especially as significant portions of the workforce age, raising concern about their financial security during retirement.
In Nigeria, pension payment is not only a motivating factor for public service employees, it also influences their work behaviour significantly.
According to the World Health Organisation (WHO), a pension is a regular payment made to retired individuals to provide them with guaranteed income or support during retirement.
The perception of Pension Fund Administration (PFA) in Nigeria has evolved significantly since the implementation of the Pension Reform Act (PRA) in 2004 and its subsequent amendments.
While many believe that the PRA has established a foundation for improved pension fund management, public sentiment still reflects ongoing concerns about its efficiency and accessibility.
This historical context highlights a transition from a problematic old system to a more structured approach. However, achieving widespread satisfaction and trust remains a challenge.
As Nigeria marks two decades since the enactment of the PRA, stakeholders in the pension industry are reflecting on significant achievements while addressing ongoing challenges.
The Pension Fund Operators Association of Nigeria (PenOp) asserts that the PRA has transformed the pension landscape, significantly improving retirees’ lives and enhancing the overall economy.
According to the chief executive officer of PenOP, Mr Oguche Agudah, PRA has effectively tackled the mounting pension liabilities that previously plagued the country.
Agudah said that before the PRA, pensioners were often left waiting for their benefits, leading to dire situations where many queued for payments, some even dying before receiving their dues.
He said that the introduction of the Contributory Pension Scheme (CPS) has fundamentally changed this narrative.
“With private sector fund managers now overseeing pension contributions, there has been a marked improvement in efficiency and reliability.
“Today, we have a system that is not only funded but also transparent and sustainable,” Agudah said.
He said that the growth of pension fund assets under the CPS was a testament to its success.
According to him, as of October 2024, pension assets exceeded N21 trillion, reflecting a Compound Annual Growth Rate (CAGR) of over 20 per cent since 2007.
He attributed the growth to consistent contributions from both public and private sectors, and strict compliance enforced by PenCom.
He also identified Micro Pension Scheme, launched in 2019 as one of the notable innovations introduced under the PRA.
Agudah said that the initiative, which targets individuals in the informal sector, allows them to contribute flexibly based on their earnings.
“The Micro Pension Scheme is designed to foster financial inclusion among those who traditionally lack access to formal pension systems,” he said.
He encouraged informal sector workers to take advantage of this opportunity for their future security.
He, however, said that in spite the success stories misinformation remained one of the challenges facing the pension sector.
“Misinformation and misrepresentation have been an issue in the scheme because people have not taken their time to understand the scheme, they are used to the old model and change is difficult.
“A large number of people still do not understand the workings of the scheme and that is why we are working with the media to change the narrative,” he said.
He also addressed proposals to transition police personnel from the CPS back to a Defined Benefit Scheme (DBS), warning that such a move would lead to fiscal unsustainability and delayed payments for police pensions.
He said that reverting to the DBS model would not resolve police concerns but, instead, create deeper financial and operational challenges for the country.
“Moving the police out of the CPS will require a staggering N3.5 trillion annually to fund pensions for approximately 400,000 personnel, in a budget already burdened by deficits, this is simply unsustainable.
“It will also divert resources from other critical needs, including minimum wage adjustments and public services,” he said.
The CPS currently holds over N21 trillion in assets and is considered a critical component of Nigeria’s economic infrastructure.
Agudah said that the target was to ensure that all pensioners were paid on time.
The Director-General of PenCom, Ms. Omolola Oloworaran, highlighted significant achievements over the past 20 years, including over 10.5 million contributors and pension assets exceeding N21.9 trillion as of October 2024.
However, she acknowledged ongoing challenges such as inflation eroding retirees’ purchasing power, and delay in paying accrued rights.
“Moving forward, we are working with the Federal Government to put in place a sustainable solution that ensures that retirees receive their benefits promptly and without undue stress,” Oloworaran said.
She expressed excitement over the micro-pension scheme initiative, noting that it is the commission’s way of fostering financial inclusion.
She said that the commission intended to use technology to scale the micro-pension plan.
“Technology plays a vital role in driving this inclusion from mobile enrollment to real-time account management,” she said.
Oloworaran said that PenCom planned to rebrand the micro-pension scheme and also target onboarding not less than 20 million Nigerians in the informal sector.
She also said that the commission issued over 38,000 Pension Clearance Certificates (PCC) to organisations in 2024.
While PFA had recorded some successes in the country, stakeholders have continue to seek for more measures to make it more effective and ensure that retirees had seamless access to their benefits when due.
The National Chairman of Nigeria Union of Pensioners, Contributory Pension Scheme Sector (NUPCPS), Mr Sylva Nwaiwu, there is a need for further amendment od the CPS in line with current realities in the country
”CPS is good for the nation looking at where we are coming from and where we are headed.”
“Pension increments should always be encouraged, pensioners should receive their money at retirement,” he said.
Mr Michael Fagboun, an Ibadan-based lawyer, said that the PRA and the CPS should be periodically reviewed to reflect the ever-changing financial landscape, especially from the angle of the plight of pensioners
“The Pension Reform Act and, by implication, the CPS, should be reviewed every 10 years, taking into account what contributors and pensioners experience and go through to access their funds,” he said.
Mr Shehu Muhammed, National President, the Association of Senior Civil Servants of Nigeria (ASCSN), called on the National Assembly to amend the pension law to allow for improved packages for retired civil servants.
Muhammed said that issues surrounding pension had lingered for years, while many attempts to tackle them had not been successful.
According to him, one of the challenges is the failure of some employers to remit their own contributions to PenCom, making it difficult for the affected employees to access their terminal benefits.
“From this, you can see that there is no difference from the old system. We are all coming back to square one, where you spend years without having access to your terminal benefit.
“Some retirees have died without having access to their retirement benefits. However, we still have a window: which is the National Assembly,’’ Muhammed said.
He called on the legislature to amend the PFA to pave the way for retirees to have access to their money immediately after exiting the service.
While substantial progress has been recorded in the pension reform, concerned stakeholders believe that in creating a more reliable pension system, ongoing challenges must be addressed.
With continued dialogue among stakeholders—there is hope for further advancements in Nigeria’s pension landscape that will benefit generations to come. NAN
