A Study Of Impact And Implication Of Restructuring The Nigeria Pension Scheme (A Case Study Of Enugu State)

Project and Seminar Material for Accountancy / Accounting

A Study Of Impact And Implication Of Restructuring The Nigeria Pension Scheme (A Case Study Of Enugu State)

Chapter One


1.1 Background Of The Study:

A pension scheme is a planned program, which enable corporate organization to acquire and set aside fund to cater for the well being of their staff after retirement from active service. The scheme enables pension to benefits to be paid to the beneficiaries. It could be paid to retired employee, a widow or a disabled person. There are legal and administrative procedures and processes made to facilitate the realization of this objective in both to public and private sectors of our economy. Pension benefits are given for meritorious services to the organization.

The scheme is classified into two parts:

  1. A non-funded plan where the fund is under the control of employer. This is where payment to retired employees are made directly from operations by the organization as they become due without accumulation of funds. This is obtainable in the public services system and
  2. Contributory plan – where the employees bears parts of the cost (i.e. employees pay some portion for example, 10% of their gross monthly income, while the employer pays 15% of the gross monthly income. Organizations specific in their pension plan, the number of years an employee has to service before he/she qualifies for pensions. In Nigeria, most organization currently allows a minimum of five and ten years for gratuity and pension respectively.

The organizations that run a pension fund scheme usually have a pension board, such as the local government staff pensions board. There is also the Nigeria Social Insurance Trust Fund (NSITF), which now replaces the former national provident fund. This caters mainly for the needs of the private sector. When establishment pension plans through “retirement plans”, that qualify under the international Revenue Code, approval would be sought from the Joint Tax Board, so that the deductions would be tax-free.

Those expected to run the contributory pension schemes are:

  1. Every worker who is employed by a company incorporated or deemed to be incorporated under the Company and Allied Matters Decree (CAMA) 1990.
  2. Every workers employed by a partnership irrespective of the number of workers employed is not less than five including owners.

The two types of pension scheme used in Nigeria are:

  1. The self-administered pension scheme, which is managed and administered by the trustee of the scheme. It is their responsibility to pay retirees their pension regularly and invest the balance surplus fund.
  2. The insured pension fund scheme is managed and administered by an underwriter on behalf of owners of the scheme i.e. the Board of Trustees.

The underwriters (actuaries) invest the contributory funds into some government bonds or gilt-edge securities, commercial stocks, and today, they are in real estate and transport services. They by this contribute to the economic development of the country; collect the principle contributions, while the fund continue to generate more money through multiplier concept.

Government scheme, which is a non-funded scheme, is the core public service plan. It is planned to totally dependent on funding from the treasury to the extent law permits this arrangement. It is charged to the consolidated expenditure. It will be worthy to note that pension is a liability already incurred and as such, the fund to meet this obligation should be secured and made available always.

The objective of pension scheme is to ensure a health, stable, economic and social atmosphere that will promote harmony and given a sense of belonging to the retirees. This is achieved through:

  1. Maintaining unbroken service, by retaining experienced staff, high rate of productivity and operational safety is achieved through good quality of labour force and efficiency.
  2. Confidence in serving officers that their status would still be maintained even after their service, by providing them a regular periodic payment to prevent them from slipping into destitution.
  3. To ensure loyalty and orderliness in the public trust would work conscientiously of the expected pension benefits.
  4. The pension fund is also used to make investments-cost saving to generate more money and employment in the economy.

As to the extent to which those objectives have been achieved or successful, this project addressed the results and identified the problems.

The history of pension in Nigeria was dated back to 1946 with the first pension legislation enacted in 1951, referred them to as pension law was primarily designed for the United Kingdom Officers who will move from post to post in vast British Empire. Its objective was to maintain continuity of service wherever they are sent to serve. When the law became applicable to the indigenous staff, it had limited application to the extent that it was granted at the pleasure of the governor-general.

Under ordinance, pension was not automatic right of Nigerians but discretionary.

To ensure consistency and equality of rights, the federal government promulgated the Pension Act No 102 of Federation of Nigeria 1979 (Now Cap. 346 laws of the Federation of Nigeria 1990) with a commencement data of 1st April 1974. The Decree No. 102 of 1979 consolidated all enactments on pension and incorporated pensions and gravity, and sought devices for public officers by adopting the Udorji public service Review Commission in 1974.

The administration of the public service pension scheme is a joint responsibilities between the federal and state governments, i.e. for those officers who served within the period March 31, 1976. In other words, all those whose appointments fall from 1st April, 1976 are paid wholly by the tier of government he/she served in the federation. The federal government however provides the guidelines for managing the scheme both for the states and the local governments. Other pension acts and circulars are contained in chapter two of this project work.

1.2 Statement Of The Problem:

As to whether this beautiful scheme is being implemented accordingly, there lies the problem. There has been public outcry on the maltreatment to our senior citizens, who as a result has been forced to resort to military to press for their rights. The widows’ children, next of kin or dependant relatives of deceased officers undergo series of financial destitution and distress, in order to reclaim their benefits. The statement of the problem are therefore identified as follows:

  1. Lack of knowledge on the part of operation on why the pension scheme was originated.
  2. Lack of literature materials and reinforcement of the mission statement aims and objectives of the pension schemes.
  3. Lack of legislation to back the scheme and reviews.
  4. Inconsistencies with the implementation of the scheme at various tiers of government, e.g. the implementation of 30% harmonization, 150% and 142% increases are yet to be implemented in Enugu State Pension Scheme.
  5. Incapacitated trade union leadership.
  6. Non-existence of a State Pension Board.
  7. Non-participation in the contributory fund scheme.
  8. Inadequate funding of the scheme by the government.
  9. Shortage of manpower.
  10. Delays in settlement of pension benefits.
  11. Delays in settlement of pension benefits.
  12. Delays in promotion leading to re-computations and denial of rights.
  13. Misappropriation of the inadequate pension fund.
  14. Ghost pension syndrome and receipt of benefits below expectations.
  15. Increase in death rate.
  16. Lack of funds for the procurement of a mobile payment system to cater for the needs of the bedridden senior citizens.

Problems of the scheme are inexhaustible. All the above constraint combined in the high mortality rate of our senior citizens and problems to their dependent relatives, who form an integral part of the society. The chain in social delinquencies and other vices in the society. Hence, the civil service is fast increasing.

1.3 Research Hypothesis:

In this study, the researcher worked with the following hypothesis:

  1. Ho: Lack of funds does not militate against government policies on Nigeria Pension Scheme.
    H1: Lack of funds militates against government policies on Nigeria Pension Scheme.
  2. Ho: Pension Scheme does not encourage the employees after retirement.
    H1: Pension Scheme encourages the employees after retirement.
  3. Ho: Pension Scheme is not used in accounting principles.
    H1: Pension Scheme is used in accounting principles.

1.4 Objectives Of The Study:

The objectives of the study are manifold. The researcher would like to mention the following:

  1. To inform those policy makers and the workers that they should either improve the conditions of the pension scheme or reap the same bitter pill when they retire.
  2. To sensitize the stakeholders, governments, public servants, and the general public on the inherent danger and the imminent collapse of the result of maltreatment of the pensioners.
  3. To identify the problems of the scheme and their sources appropriately.
  4. To educate the shareholders on the objectives and origin of pension schemes.

The primary objectives of this research work is to identify a better ways by which the government of Enugu State will be used to restructure the payment of pension and gratuity for enhancement of society harmony in the State.

1.5 Scope Of The Study:

The scope of study covered the period 1999 to 2004. It concentrates on Enugu State Public Service, which comprises the ministries, parastatals and teachers at primary and post primary institution in the State. It also looked through the pension scheme in Nigeria which dwelt on Decree 102 of 1970, Company and Allied Matters Decree (CAMD), which is for public service in Nigeria.

The study clearly enumerated the problems of the pension, some restructure that has been taken place and briefly stated the necessary benefits to them, and how to qualify for it. It took into a particular look on Enugu State Pensioners as a case study.

1.6 Limitations Of The Study:

This analysis by its demand relied mainly on secondary data. Most of the raw data are supposed to be published by the government agencies. Because of these constraints were experienced and they are limitation of the study namely:

Most government documents and publications have not been published, especially during the military era. This limited the study, otherwise, it would have been extended from 1990-2004.

Unpublished data were rarely made available to the researcher by government officials who avoid violating the official secrecy act. Access to the premises of some agencies in search of data was restricted. Little time was allowed to researcher to read materials and collect data, photocopy facilities were either not available or not allowed.

A lot traveling and photocopying were involved. Substantial amount of money was spent on transport fares. In some organizations where photocopying was allowed, it was done at exorbitant rates.

Secondary data on the projects was not easily available. The issues raised boarder on government’s dereliction of its responsibility, which may indict it. No interest was therefore taken to deal inappropriately.

1.7 Organisation Of The Work:

The report of this study needs to be arranged well and properly. This is to ensure a smooth flow of information. The report is therefore arranged in five chapters as follows:

  1. Chapter one covered the introductory part of the study. It encompassed background of the study, statement of the problem, research hypothesis, objective of the study and scope of the study. Others include limitations of the study, organization of the work and definition of terms.
  2. Chapter two is concerned with the existing literature with focus on the relevant matters.
  3. Chapter three dealt with the research methodology. In that, attention was drawn to sources and method of data collection, data presentation, tool of data analysis and procedures of research analysis.
  4. Chapter four concentrated on the finding and analysis of the study. The results were used to draw inference as to whether our hypothesis should be accepted or rejected.
  5. Chapter five deals with the summary of the findings, conclusions, recommendations and suggestions of solving the problems identified in the course of the analysis.

It will be worthy of note also that included were bibliography and appendix at the end of the report. These are the source documents where the researcher collected most of her research inferences.

1.8 Definition Of Terms:

Some of the terms used in this work and the perspective in which they were used were defined and/or explained below:


Experts who calculate insurance risk and payment by studying how frequently the pension benefits mature and are paid.


A periodic payment or allowance to an individual or to his family given, because of some meritorious work or when certain conditions such as age, length of service etc, have been fulfilled.

Pensionable Service:

This is an established post in the service or any approved service, which may be taken into account in computing an officer’s under the 1999 Decree (now Act) No. 102.

Pensionable Age:

This is the age at which pension and gratuity can be calculated for an officer and this has now been reduced from 15 qualifying years to 10 years by the 1992 pension reform. Services outside the above stated age will not be taken into account for purposes of computation of officer’s retiring benefits as at the case of “leave without pay”.


These are those employed by other or organizations and are paid monthly salaries.


This means an employee in a steady employment that is eligible to payment of pension benefits as it becomes due.

Qualifying Service:

Any approved service which may be an officer is eligible by length of service for a pension or gratuity.

Eligible Or Eligibility:

This describes who is qualified for pension benefits.

Next Of Kin:

Those whose names are furnished by the deceased officer on his record of service kept in the records office of the ministry.


This means cessation of service after an officer has served for a period of not less than 5 years and 10 years respectively, being period appointed as qualifying an officer a gratuity and pension.


This is a lump sum of money paid once to a retired officer according to the number of years of his entitlement.


This refers to a retired officer from the public service.

Survivor Or Designated Survivors:

These persons whose names are furnished by the officer on his record of service kept in a records office of the deceased officers ministry.


This can be retirement or withdrawal. Withdrawal means ceasation of service after an officer has served a minimum period of 5 years, but less than 10 years, which qualifies the officer for the gratuity.


This is the wife of the deceased officer.


This is a sort of termination of an appointment by an officer, which may or not be approved. Any service rendered prior to resignation will not count on re-engagement unless the break has been condoned.

A Study Of Impact And Implication Of Restructuring The Nigeria Pension Scheme (A Case Study Of Enugu State)

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