ABSTRACT

This research work is on the problem and challenges of Nigeria contributing pension scheme to Nigeria civil servants specifically as it effect regular payment of pension, arrear/debt of pension, issue of ghost pensionnaire, effect of change of jobs and pension administrator and the level of implementation and supervision of rules, regulation and standards in the industry.

The researcher employed questionnaire, chi-square for the research work. This method was applied because information could be source from Nigeria Civil Servants PenCom workers and pensionnaire retirees.

The result indicate that payment of pensionnaires are not regular, arrears/debt of pensionnaires has not been cleared, issued of ghost worker are still not cleared, and low level implementation and supervision of rules and regulation of PenCom; all these constitute problems and challenges for PenCom and pensionnaires.

Finally, Having found the above problem and challenges of Nigeria pension scheme to Nigeria Civil Servant the researcher recommended that an institution should be build to train staff to handle pension matter and serious measure should be taken to fish out ghost workers and pay arrears of pensionnaires.

TABLE OF CONTENT

TITLE PAGE - - - - - - - - - i

CERTIFICATION - - - - - - - - ii

DEDICATION - - - - - - - - - iii

ACKNOWLEDGEMENT - - - - - - - iv

ABSTRACT - - - - - - - - - v

TABLE OF CONTENT - - - - - - - vi

CHAPTER ONE: Introduction

1.1 Background of Study - - - - - - 1

1.2 Statement of problem - - - - - - 4

1.3 Objective of Study - - - - - - - 5

1.4 Research Questions - - - - - - - 6

1.5 Statement of Hypothesis - - - - - - 6

1.6 Scope and Limitation of Study - - - - - 7

1.7 Significant of Study - - - - - - - 8

1.8 Definition of Terms - - - - - - - 9

REFERENCES - - - - - - - - 11

CHAPTER TWO: Review of Related Literature

2.0 Introduction - - - - - - - - 12

2.1 Meaning of Contributory Pension Scheme - - - 13

2.2 Types of Pension Scheme Reform - - - - 15

2.3 Review of the Nigeria Pension System Pension

Policies and Development in Nigeria - - - - 17

2.4 Feasible Options for Effective Pension System - - 20

2.5 Statement of Key Principles - - - - - 22

2.6 Goals and Objective of the Pension Reform Act 2004 - 23

2.7 Institutional and Legal Framework - - - - 30

2.8 Implication of the Contributory Pension Scheme - 32

2.9 Overview of the Act Investment and

Risk Management - - - - - - - 35

2.10 Benefits of the Pension Scheme - - - - - 39

2.11 Role of Financial Institution in

Pension Administration - - - - - - 42

2.12 Opportunities and Challenges for Financial

Institutions in Pension Industry - - - - 45

2.13 Problems and Challenges before Pension

Industry in 2010 - - - - - - - 49

REFERENCES - - - - - - - - 59

CHAPTER THREE: Research Design and Methodology

3.1 Introduction - - - - - - - - 62

3.2 Research Design - - - - - - - 62

3.3 Population of the Study - - - - - - 63

3.4 Sampling procedure - - - - - - - 64

3.5 Data Collection - - - - - - - - 65

3.6 Test of Validity and Reliability of

Research Instrument - - - - - - 65

3.7 Procedure for Data Collection - - - - - 66

3.8 Questionnaire Design - - - - - - 66

3.9 Data Analysis - - - - - - - - 67

REFERENCES - - - - - - - - 68

CHAPTER FOUR: Presentation and Analysis of Data

4.1 Introduction - - - - - - - - 69

4.2 Data Presentation - - - - - - - 69

4.3 Test of Hypothesis - - - - - - - 83

4.4 Analysis of Data - - - - - - - 88

CHAPTER FIVE:

5.0 Summary of Findings, Conclusion and

Recommendation - - - - - - - 90

5.1 Summary of Findings - - - - - - 90

5.2 Conclusion - - - - - - - - 91

5.3 Recommendation for Policy - - - - - 92

5.4 Area of Further Study - - - - - - 93

BIBLIOGRAPHY

APPENDIX

CHAPTER ONE

1.0 BACKGROUND OF THE STUDY

1.1 Introduction

The Nigerian pension system exists to provide post-retirement income security for employees. It was first introduced by the colonial administration to guarantee income and welfare for British citizens who worked in the country and retired within its territory.

According to Adesina (2006), Nigeria's first legislative instrument on pension matters was the Pension Ordinance of 1951, which had retrospective effect from 1 January 1946. This was followed by the National Provident Fund (NPF) Scheme of 1961, the first legislation enacted to address the pension needs of private-sector employees. The Pension Act No. 102 of 1979, alongside the Armed Forces Pension Act No. 103 of the same year, followed eighteen years later. In 1987, the Police and other Government Agencies' Pension Scheme was enacted under Pension Act No. 75, accompanied by the Local Government Pension Edict, which established the Local Government Staff Pension Board.

By 1993, the Nigeria Social Insurance Trust Fund (NSITF) Scheme was established under Decree No. 73 of 1993 to replace the defunct NPF. From 1994, private-sector employees were also covered against loss of employment income arising from old age, invalidity, or death.

Most public-sector pension schemes were poorly funded or entirely unfunded because of inadequate budgetary allocation. This produced outstanding pension deficits estimated at about two trillion naira before the commencement of the Pension Reform Act 2004 (PRA). Scheme administration was generally weak, inefficient, and lacked transparency. There was no authenticated database of pensioners, while as many as fourteen documents were required to process a single pension claim. Restrictive and questionable practices in fund investment and management compounded pension liabilities to such an extent that pensioners reportedly died while queuing for verification, and over three hundred parastatal schemes were insolvent before the new scheme commenced (Ariyo et al., 2024; Nwankwo & Eze, 2023).

In the private sector, most employees lacked any form of structured retirement benefit arrangement; what existed often resembled a resignation benefit rather than a genuine retirement pension. At that time, Nigeria's pension arrangements were largely unregulated, lacked common standards, and were administered under fragmented and inconsistent rules prior to the PRA 2004. Before the Act, three separate regulators oversaw aspects of pension administration: the Securities and Exchange Commission (SEC), the National Insurance Commission (NAICOM), and the Joint Tax Board (JTB) (Ahmad, 2006).

The Pension Reform Act 2004, later consolidated and re-enacted as the Pension Reform Act 2014, established a mandatory Contributory Pension Scheme (CPS) covering employees of the Federal Public Service, the Federal Capital Territory, and the private sector (Atedo, 2006). The Act ended the unfunded pay-as-you-go arrangement and replaced it with a fully funded scheme that is compulsory for all qualifying employees. Existing schemes could apply to the National Pension Commission (PenCom) for approval to continue, subject to compliance with the Act. Under the CPS, the employer and employee make defined monthly contributions into a Retirement Savings Account (RSA) opened in the name of the employee, for the benefit of the employee or designated beneficiaries. PenCom is the sole regulator of all pension matters in Nigeria; pension funds are managed by privately owned and PenCom-licensed Pension Fund Administrators (PFAs) chosen by each employee, while a Pension Fund Custodian (PFC), appointed by the PFA, holds the pension assets in trust as an independent third party. PenCom also issues binding guidelines on the investment of pension funds. Each contributor is entitled to receive pension benefits for life, derived from the savings accumulated in his or her RSA (Aliu et al., 2023; Ezenwa & Okonkwo, 2024).

More recent scholarship continues to evaluate the performance of the CPS nearly two decades after its introduction. Studies on the transparency and compliance dimensions of the scheme found that transparency among pension operators significantly improves the long-term sustainability of the CPS, while weak regulatory compliance among employers continues to undermine remittance discipline and fund growth (Aliu, Abdul-Hamid, Suleiman, & Olanrewaju, 2023). Other recent work documents persistent administrative bottlenecks, including delays in retirement benefit disbursement, low investment returns on pension assets, and difficulty accessing accumulated savings following job loss, particularly in the aftermath of the COVID-19 pandemic (Ezugwu, Ariyo, Okparaka, & Agbo, 2023). Similarly, studies focused on public universities and other public-service institutions have identified non-remittance by some state governments, weak enforcement of compliance obligations, and low contributor awareness as continuing threats to the scheme's objectives (Adebayo & Olaniyan, 2022; Ogunleye, 2023).

Based on the foregoing, this study examines the challenges and problems associated with the implementation of the Nigerian Contributory Pension Scheme as it affects Nigerian civil servants.

1.2 Statement of the Problem

The Nigerian Contributory Pension Scheme is designed to enable contributors, including civil servants, other public servants, private-sector employees, and voluntary contributors, to enjoy adequate retirement benefits in old age. Notwithstanding this objective, the scheme continues to face significant challenges.

Under the earlier pay-as-you-go (PAYG) arrangement, the system became unsustainable owing to inadequate and untimely budgetary provisions amid rising salaries and pension obligations. Regulation and supervision were weak, contributions were not remitted promptly because salaries were frequently delayed or owed in arrears, and most schemes were poorly funded or entirely unfunded as a result of inadequate budget allocation.

Administration under the old system was generally weak, inefficient, and non-transparent; improper investment and mismanagement of pension funds produced mounting liabilities; and the absence of common standards or supervision left the system highly fragmented across institutions.

The Pension Reform Act 2004 sought to address these problems, but PenCom inherited substantial pension arrears and the unresolved problem of ghost pensioners, alongside the absence of an accurate, verified database of pensioners. Implementation has also been constrained by the cost of information technology infrastructure required to deliver timely payment of pension as and when due. Further questions arise regarding the treatment of employees who change employment or who elect to transfer from one PFA to another, as well as concerns about risk management in the investment of contributors' funds. Recent empirical studies confirm that these challenges persist: weak enforcement of remittance obligations, delays in accessing retirement benefits, and low contributor financial literacy remain recurring findings in the literature (Aliu et al., 2023; Ezugwu et al., 2023; Ogunleye, 2023). It is against this background that the researcher undertook this study on the challenges and problems of the Nigerian Contributory Pension Scheme as they affect Nigerian civil servants.

1.3 Objectives of the Study

The broad objective of this study is to examine the problems and challenges of the Nigerian Contributory Pension Scheme as they affect Nigerian civil servants. The specific objectives are to:

1. determine whether pensioners receive their retirement benefits regularly, as and when due;

2. ascertain whether the pension debts or arrears inherited by PenCom from the old scheme have been cleared;

3. determine whether the problem of ghost pensioners has been effectively eliminated;

4. assess the effect of change of employment and change of pension fund administrator on contributors under the scheme; and

5. determine whether adequate supervision and implementation of the rules, regulations, and standards governing pension administration are being maintained.

1.4 Research Questions

The study seeks to answer the following questions:

1. Do pensioners receive their retirement benefits regularly and as and when due (on a monthly basis) in Nigeria?

2. What is the current position regarding the debts and arrears of pension inherited by PenCom under the contributory pension scheme?

3. Does the problem of ghost pensioners still exist under the contributory pension scheme in Nigeria?

4. What effect do changes of employment and changes of pension fund administrator have on contributors under the scheme?

5. What is the impact of inadequate supervision and weak implementation of the rules, regulations, and standards governing pension administration?

1.5 Research Hypotheses

The study is guided by the following hypotheses:

H0: The debt or arrears of pension inherited by PenCom do not constitute a significant challenge to the Nigerian Contributory Pension Scheme as it affects Nigerian civil servants.

H1: The debt or arrears of pension inherited by PenCom constitute a significant challenge to the Nigerian Contributory Pension Scheme as it affects Nigerian civil servants.

H0: Change of employment and change of pension fund administrator do not constitute a significant challenge to the Nigerian Contributory Pension Scheme as it affects Nigerian civil servants.

H1: Change of employment and change of pension fund administrator constitute a significant challenge to the Nigerian Contributory Pension Scheme as it affects Nigerian civil servants.

H0: Ghost pensioners do not constitute a significant problem to the Nigerian Contributory Pension Scheme as it affects Nigerian civil servants.

H1: Ghost pensioners constitute a significant problem to the Nigerian Contributory Pension Scheme as it affects Nigerian civil servants.

1.6 Scope and Limitation of the Study

The scope of this study is centred on the challenges and problems of the Nigerian Contributory Pension Scheme as they affect Nigerian civil servants. The study draws on data from selected pension fund administrators, government ministries, and relevant agencies, with Enugu metropolis serving as the principal source of information for the research.

The researcher encountered several constraints in the course of this work, including a scarcity of data on certain issues, which left some questions only partially answered, owing in part to the uncooperative attitude of some staff in the institutions sampled. In several instances, information was withheld by administrators or institutions on the grounds of confidentiality. The researcher acknowledges that these constraints may have affected the comprehensiveness of the findings. Responsibility for any remaining errors or omissions rests with the researcher.

1.7 Significance of the Study

This study is intended to be both practical and educative, in that it exposes some of the challenges and problems confronting the Nigerian Contributory Pension Scheme as it affects Nigerian civil servants.

The work is a step toward informing and enlightening the general public on these challenges and problems. It is also intended to provide a reference document for further investigation and evaluation of the performance of PenCom in relation to Nigerian civil servants, thereby contributing to the body of literature in the field of finance.

Finally, the study is intended to benefit policymakers, regulators, public- and private-sector employers and employees, voluntary contributors, the general public, the Enugu State and Federal Governments, and pension administrators.

1.8 Definition of Terms

National Provident Fund (NPF): A savings scheme established in 1961 for non-pensionable private-sector employees, into which both employer and employee contributed on a monthly basis (Adesina, 2006).

Nigeria Social Insurance Trust Fund (NSITF): A scheme established under Decree No. 73 of 1993 to provide enhanced social protection, including benefits for loss of employment income, invalidity, and death, to private-sector employees (Ahmad, 2006).

Pension Reform Act (PRA): Federal legislation, first enacted in 2004 and substantially re-enacted in 2014, that established a uniform, fully funded Contributory Pension Scheme and a single regulatory authority for all pension matters in Nigeria (PenCom, 2022).

Securities and Exchange Commission (SEC): One of three bodies that regulated aspects of pension fund management before 2004, with particular responsibility for licensing and supervising fund/portfolio managers operating in the capital market (Ahmad, 2006).

Joint Tax Board (JTB): The body that approved and monitored private pension schemes for tax-exemption purposes before 2004, deriving its powers from the Third Schedule of the Personal Income Tax Decree No. 104 of 1993 (Ahmad, 2006).

National Insurance Commission (NAICOM): The federal agency responsible for licensing and regulating insurance companies in Nigeria, including insurer-administered annuity products linked to retirement benefits.

Contributory Pension Scheme (CPS): A funded, defined-contribution arrangement that replaced the unfunded, pay-as-you-go Defined Benefit Scheme, requiring both employer and employee to make mandatory monthly contributions into an individual Retirement Savings Account (Atedo, 2006; Aliu et al., 2023).

Pension Fund Administrator (PFA): A limited liability company licensed by PenCom as a special-purpose vehicle solely to manage pension contributions, invest pension assets, and administer retirement benefits on behalf of contributors (PenCom, 2022).

Pension Fund Custodian (PFC): A licensed financial institution responsible for the safekeeping of pension fund assets on behalf of a PFA, holding such assets separately from the PFA's own assets as an independent third party (Harlem Solicitors, 2023).

Retirement Savings Account (RSA): An individual account opened by a contributor with a chosen PFA, into which monthly pension contributions from the employer and employee are paid and accumulated until retirement (PenCom, 2022).

National Pension Commission (PenCom): The statutory body established under the Pension Reform Act to regulate, supervise, and ensure the effective administration of pension matters in Nigeria, including the licensing of PFAs and PFCs (PenCom, 2022).

Ghost Pensioners: Names fraudulently retained on a pension payroll, representing deceased, non-existent, or otherwise ineligible persons, for the purpose of diverting pension funds (Nweke, 2024).

Defined Benefit Scheme: A non-contributory, employer-funded pension arrangement under which retirement benefits are predetermined by formula (typically based on final salary and years of service) rather than by the value of contributions and investment returns (Ezugwu et al., 2023).

Pension Portability: A statutory feature of the CPS that permits a contributor changing employment to retain the same RSA and PFA, or to transfer the RSA to another PFA, without loss of accumulated benefits (Ogundipe & Adeniyi, 2024).

REFERENCES

Adebayo, T. O., & Olaniyan, K. A. (2022). Implementing the contributory pension scheme in Nigerian public universities: Challenges and policy implications. International Journal of Educational Administration, Planning, and Studies, 4(2), 45–58.

Adesina, B. (2006). Pension reform in Nigeria: An overview of the Pension Reform Act 2004. Lagos: National Pension Commission.

Ahmad, M. K. (2006). The contributory pension scheme: Institutional and legal framework. Abuja: National Pension Commission.

Aliu, O. A., Abdul-Hamid, M. A., Suleiman, S., & Olanrewaju, S. M. (2023). Transparency, compliance and sustainability of contributory pension scheme in Nigeria. Gusau Journal of Accounting and Finance, 4(1), 1–18. https://doi.org/10.57233/gujaf.v4i1.204

Atedo, N. A. (2006). The new pension reform: Issues, challenges and prospects. Lagos: Pension Fund Operators Association of Nigeria.

Ezenwa, C. A., & Okonkwo, I. V. (2024). Contributory pension scheme and employees' job performance in the Nigerian public service. Studies in Economics, Politics and Social Research, 7(2), 88–104.

Ezugwu, C. I., Ariyo, C. O., Okparaka, V. C., & Agbo, I. U. (2023). Contributory pension scheme and transitory job loss in Nigeria. International Journal of Accounting, Finance and Management (IIARD), 9(8), 1–14.

Harlem Solicitors. (2023). An overview of the Pension Reform Act 2014 and contributory retirement savings. Lagos: Harlem Solicitors.

Nweke, J. O. (2024). Assessment of the administrative challenges associated with non-contributory pension administration in Ebonyi State, Nigeria. Africa Journal of Social Development and Management Research, 9(1), 201–220.

Ogundipe, A. A., & Adeniyi, J. O. (2024). Pension management in Nigeria: Challenges and solutions. International Journal of Management, Social Sciences, Peace and Conflict Studies, 7(2), 1–15.

Ogunleye, F. O. (2023). Analyses of the contributory pension scheme in Nigeria. International Policy Brief Series: Social Science and Humanities, 12(1), 1–13.

National Pension Commission (PenCom). (2022). Revised regulation on the administration of retirement and terminal benefits. Abuja: National Pension Commission.

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