The research work evaluates pension fund administration in Nigeria “a comparative
analysis of Premium Pension Ltd and Sigma Pension Ltd as a case study. Key problems facing
pension scheme in Nigeria was identified with an overview of the scheme. Primary data were
generated from direct observation and interviews granted. Secondary data on the other hand were
obtained from official publications, national dailies, documentations and internet materials. The
analyses confirm that regular upward reviews of pensions and gratuities in the country without
appropriate strategies for financing the scheme has become a major problem, which calls for
immediate solution in other to alleviate the suffering and hardship of retirees in the country.
The research work recommends that the Nigerian government should encourage the
option of having the banks where the salary accounts of employees are domiciled to make
pension deductions on monthly basis and have it remitted to the concerned body (PFAs),the need
for public enlightenment on the merit of the new contributory pension scheme, the 2004 Pension
Reform Act should make provision for Nigerians in Diaspora who may want to contribute to the
retirement saving scheme and the government should punish those who steal pensioners funds to
serve as deterrent to others.
The research conclude that a well organized structure that will ensure prompt payment of
retirees and pensioners is highly desirable and this must be vigorously pursued by the
TABLE OF CONTENTS
Title Page i
Approval Page ii
Table of Contents vii
Chapter One-Introduction 1-4
Chapter Two-Literature Review 5-56
Chapter Three-Research Methodology 57-58
Chapter Four-Data Presentation & Analysis 59-75
Chapter Five-Summary, Conclusion & Policy Recommendations 76-79
1.1 BACKGROUND OF THE STUDY
The purpose of occupational pension scheme is to provide employees regular and stable
income after their retirement from service. It is an arrangement an employer or a group of
employers use(s) to provide pension (and sometimes other) benefits for their employees when
they leave or retire. They also provide benefits to the employee’s dependant if the employee dies.
This scheme is usually funded by contributions from just the employer, or from both the
employer and the employee. A good pension scheme does not only serve as an incentive to
employees but helps to attract and retain experienced staff.
The first pension legislation in Nigeria was enacted in 1951 by the British colonial
administration, referred to as the Pension Ordinance, with retrospective effect from 1st January,
1946. The pension which was initially designed for colonial officers who were moved from post
to post in the vast British Empire was to ensure their continuity of service wherever and
whenever they were deployed to serve the colonial administration. When the law eventually
became applicable to Nigerians, the application was at the discretion of the Governor – General.
Pension was therefore not a right for Nigerians under the Ordinance. To redress this, a new
Pensions Act was enacted in 1979 referred to as the Pensions Act No. 102 of 1979; retroactively
effective from 1st April, 1974. The Act consolidated all enactments on pensions and incorporated
pensions and gratuity scales designed for public officers by the Udoji Public Service Review
Commission in 1974. It also became the basic pension law from which other pensions laws in
Nigeria emerged. These laws include:
• Armed Forces Pensions Act No. 103 of 1979. The Act consolidated all enactments
dealing with pension benefits and gratuity scales for the Armed Forces.
• Pension Rights of Judges Decree No. 5 of 1985.
• Amendment Acts Nos. 51 of 1988; 29 of 1991; and 62 of 1991.
• The New Pension Reform Act 2004 (Federal Republic of Nigeria Official Gazette No. 60
Lagos – 30th June 2004 Vol.91)
1.2 STATEMENT OF THE PROBLEM
The management of pension scheme in Nigeria is inundated by multiple and diverse
problems. One key problem is the lack of adequate funding. Government parastatals and
institutions have not succeeded in setting aside the recommended amount for pension scheme
from the total emolument of their employees for lack of funds. Another dimension of the
problem is that, retirees find it difficult to collect their pension gratuity as at when due after
In view of the above, this research work seek to evaluate pension fund administration in
Nigeria and make possible recommendations that will enhance efficiency in the administration of
pension fund in Nigeria.
1.3 OBJECTIVE OF THE STUDY
The objective of this study is to evaluate pension fund administration in Nigeria. Other
objectives include the following;
i. To ascertain if employers of labour (public and private employers) do fund the pension
scheme in Nigeria.
ii. To ascertain if the management staff of pension fund administrators are well trained and
qualified to manage pension fund in Nigeria.
iii. To ascertain the level of compliance with the requirement of completing clearance forms
with various units or institution so as to verify their indebtedness.
iv. To ascertain the extent to which the new pension contributory scheme meets the
expectation of the retirees.
v. To ascertain the extent of efficiency in record keeping by pension fund administrators in
1.4 RESEARCH QUESTIONS
The research questions in this work include the following:
1. To what extent do employers of labour fund pension scheme fund in Nigeria?
2. To what extent are the management staffs of pension fund administrators qualify and
competent to manage pension fund in Nigeria?
3. To what extent does retiree complete set of clearance form with the various units or
institutions and submitted to pension office for processing before retirement?
4. To what extent does the new pension contributory scheme meets the expectation of the
5. To what extent does Pension Fund administration keep records of retirees?
1.5 RESEARCH HYPOTHESES
The research hypothesis used in this research work includes the following:
1. HO: Retirement Saving Account (RSA) of employees is not funded by employers of
labour under the new pension contributory scheme.
HA: Retirement Saving Account (RSA) of employees is always funded by employers of
labour under the new pension contributory scheme.
2. HO: Management staffs of pension fund administrators are not qualified and
competent to manage pension fund in Nigeria.
HA: Management staffs of pension fund administrators are qualified and competent to
manage pension fund in Nigeria.
3. HO: Retirees don’t comply with the requirement of completing clearance forms with
various units or institution and submitted to pension office for processing before
HA: Retirees do comply with the requirement of completing clearance forms with
various units or institutions and submitted to pension office for processing before
4. HO: The new pension contributory scheme does not meet the expectation of the
retirees in Nigeria.
HA: The new pension contributory scheme meets the expectation of the retirees in
5. HO: Records of retirees are not properly kept by pension fund administrators in
HA: Records of retirees are properly kept by pension fund administrators in Nigeria.
1.6 SCOPE AND DELIMITATION OF THE STUDY
This research work is limited to the evaluation of pension fund administration and
comparative analysis of two pension fund administrators in Nigeria using Premium Pension Ltd
and Sigma Pension Ltd as a case study.
1.7 SIGNIFICANCE OF THE STUDY
This work shall be of great benefit to the National Pension Commission as it will enable
the Commission to review and update it existing guidelines on payment of retirees benefits and
gratuity after retirement from active service.
Pension fund administrators in Nigeria will also find this report dispensable as the report
will enhance efficiency in the operation of pension fund administration in Nigeria. Other
researchers will find the work useful as it is a base for future research work.
Finally it will also contribute positively to the field of knowledge, especially the field
which this research is directed.