by Ivor Takor


There comes a time in a person’s life cycle, when they can no longer be fit for active economic activities, earning regular income through work. It is a period of rest, for those who have planned for it and a period of poverty and destitution for those who have failed to plan for it or made what turn out to be unreliable plans. Organisations therefore, plan for their employees’ old age by putting in place pension schemes for them. Pension is a regular income received by a person on retirement, as a result of having reached the statutory retirement age, length of service or on health grounds.

Evolution of Pensions in Nigeria

The first pension legislation in Nigeria was enacted in 1951 by the Colonial Masters retrospective effect from 1st January,1949. It was termed the pension ordinance and was designed primarily for colonial officers that were deployed from one post to another in the vast British Empire. The first private sector pension scheme in Nigeria was set up in 1954 for employees of the Nigerian Breweries. This  was followed by United African Company (UAC) in 1957. 

National Provident Fund (NPF) was the first formal pension scheme in Nigeria, established in 1961 for the non-pensionable private sector employees. The Nigerian Social Insurance Trust Fund Act of 1993 with an emphasis directed towards enhancing social protection of private sector workers replaced the NPF.

The Pension Decree 102 was enacted in 1979 with retrospective effect from 1st April, 1974. This Decree repealed all pension laws from 1st January 1946 to 31st March 1974. Pension Decree 103 was also enacted for the military.

Types of Pensions

The traditional pensions provided by the Colonial Masters were Defined Benefit Schemes. These schemes defined pensions as a per centage of the final salary of the pensioner. These generally did not involve contributions from the employee and the pensions were paid from the general funds of government rather than from a specific pension fund.

In recent years as part of the Neoliberal reforms there has been a move away from Defined Benefit Schemes and the introduction of Defined Contribution Schemes. In the later case, fixed contributions are paid by the employer and the worker into a pension fund. The pension fund is then invested and the actual pensions paid depend on the success of the penion managers.

Defined Contribution Schemes have many disadvantages for workers. The workers have to make contributions from their salaries each month and there is no guarantee that they will receive a certain level of pension. The level of the pensions paid depends on the size of the fund. If the investments from the fund do not do well or if the monies are stolen then the pensioners do not receive the expected value of pensions during retirement. So many of the risks are transferred from the employer to the worker. The benefit is supposed to be that the money will be available to pay pensions when they fall due.

But even in Britain, some pension funds have not done well or the funds have been ‘borrowed’ by the employers. For exampe, the newspaper tycoon Robert Maxwell committed suicide in 1991 after it was discovered that he had taken hundreds of millions of pounds from the pension funds of his newspapers. The government paid some compensation, but the workers lost half the value of their pensions.

The Pension Reform of 2004

The Government of former President Olusegun Obasanjo, as part of its Economic and Governance Reform Programmes, enacted the Pension Reform Act (PRA) 2004, which brought about a paradigm shift from Defined Benefits Scheme to Defined Contribution Scheme. PRA 2004 was repealed and replaced with PRA 2014 with effect from 1st July, 2014.

Section 1 established a Contributory Pension Scheme and provided that the scheme shall apply to all employees in the Public Service of the Federation, Federal Capital Territory and in the case of the Private Sector who are employed by a company with five (now three) or more employees

Challenges of the Pension Administration

The implementation of pension reform in Nigeria has had its own share of challenges. Some of the issues are outlined below.


Compliance with the provisions of the PRA 2014 is more in the public sector as participation is compulsory for all public employees.

In the private sector, organizations with at least three employees are required to implement the Contributory Pension Scheme. However, compliance by employers in the private sector has remained a challenge due to lack of comprehensive database of employers of labour in the country, which limits the extent of enforcement by the regulator. The National Pension Commission (PenCom) has engaged services of Recovery Agents to ensure compliance with the provisions of the law.

Timely Transfer of Contributions into Retirement Savings Accounts of Contributors

Contributions of the Federal Government employees are being duly deducted and remitted into a dedicated account with the Central Bank of Nigeria since July 2004.  However, PenCom needs to work towards ensuring the timely transfer of these monies so as to make them available for investment.  For the private sector, monitoring the collections is a huge task for PenCom. 

Delays in Releasing Funds for the Payment of Accrued Pension Rights

Federal Government liabilities on accrued pension rights, arose because employees’ right to accrued retirement benefits for the previous years they had been in employment was guaranteed by PRA 2004 and later PRA 2014. For employees of the Public Service of the Federation and Federal Capital Territory, where pension scheme was unfunded, the rights was acknowledged through the issuance of a “Federal Government Retirement Benefits Bond” to such employees, under Section 15 of PRA 2014, while Section 39 provides for the redemption of the Bonds.

The inadequate or total non funding of the Redemption Fund compared with the annual projected pension liability of the Federal Government arising from voluntary and mandatory retirements, death of employees in service and the right of pensioners to pension review in line with section 173(3) of the 1999 Constitution (as amended) has been the greatest challenge of the Contributory Pension Scheme in the Federal Public Service.

Implementation Group Life Insurance Policy

The implementation of the life insurance policy for employees has added some financial commitments on employers of labour. Employers’ in the private sector are not willing to implement this provision of the Act therefore PenCom has engaged the services of Recovery Agents to ensure compliance.

Funding Minimum Pension Guarantee

Section 84(1) makes provision for Minimum Guarantee Pension (MGP), which should be specified by PenCom from time to time. People have started retiring since 2007 based on the Act and PenCom is yet to specify the MGP. The fiscal requirement for the MPG is shouldered by the government in other jurisdictions. For example, in Chile, the provision of MPG is a permanent cost to the government. Hence, the need for governments at all levels to recognize this provision of the PRA 2014 and bear its full cost in order to ensure a dignified retirement living standard for all workers. 

States and Local Government Employees Pension

Nothing so far exposes the greed, avarice and self-centredness of our predatory ruling political class than the pension rights of States and Local Government employees.  Some Governors  failed in eight years to enact laws to take care of the pensions of employees of States and Local Governments they superintended over. However, they were able, through subversive generosities extended to members of their ever “cooperative” Houses of Assemblies to provide for themselves, bloated “pensions”. These include several huge houses, bullet proof vehicles, security and domestic servants as well as  provisions for medical tourism. These were sometimes smuggled into the statutes of their states in the name of pension rights for political office holders or whatever.

It is difficult to understand why a Governor who served a state for eight (8) years should believe that his services are more meritorious, deserving a decent pension than employees of the same State and Local Governments, who put in between twenty (20) to thirty five (35) years of services. Some of these Governors’ have turned Abuja, the seat of the Federal Government, to their safe haven. They can be seen in the hallow chamber of the Senate of the National Assembly or superintending as Ministers in Federal Ministries drawing salaries and allowances in addition to their bloated governor pensions.

Nigerian Working Class and the Struggle for Decent Pension

The topic “Nigeria Working Class and the Struggle for a Decent Pension” means that without a struggle, the Nigerian working class will not receive decent pensions. There is a phrase: working class and two words, struggle and decent  in the context of pension that are important in our discussion. Let’s look at them:

Working class: some synonyms for working class are blue-collar, common labourer, factory labour, grass root, laboring class and proletariat. These group of people are given a voice in the workplace by trade unions, to whom they pay union dues. Struggle: some synonyms for struggle are battle, contest and combat. Decent: some synonyms for decent are satisfactory, reasonable, fair, acceptable, adequate and sufficient.

I make bold to point out that from the establishment of the Nigerian Breweries pension scheme in 1954 to date, the Nigerian working people as represented by their unions, have not taken keen interest in pension matters talk less of embarking on struggles for decent pension. By virtue of the positions I have occupied in the Nigerian labour movement, I say so in good authority. Everything Nigerian workers have received as pensions, have been handouts from employers, including governments that happen to be the largest employers in Nigeria.

Decent Pensions

Decent pensions can only be achieved under the framework of social security. Pension, being a component of social security. Retirees have issues around: sickness/medical care, family, invalidity,  survivors, as well as housing. If these are accessible to a retiree in their old age, then we can say he/she has a decent pension.

Social Security

The International Labour Organization (ILO) conventions and recommendations define the normative framework and set standards for the establishment and development of social security systems. The ILO Social Security (Minimum Standards) Convention, 1952 (No. 102), was the first international instrument to establish minimum standards applicable to all countries, regardless of their degree of economic development, for the following social security benefits: sickness, unemployment, old age, employment injury, family, maternity, invalidity and survivors, as well as medical care.

Actions Required to be Taken by the Labour Movement, to enable Nigerian workers have a decent Pensions within the Framework of the Contributory Pension Scheme

The struggle for decent pensions has to be anchored within the framework of a law because there is no benevolent employer anywhere in the world. Employers including governments who are the highest employers are quick to point to what the law provides.

Laws that Impact Positively on Pension

There are two principal laws that trade unionists have to rely on to battle the predatory ruling class for adequate or reasonable pension for the working class. They are Constitution of Federal Republic of Nigeria 1999 as amended and the Pension Reform Act 2014.

The Constitution of the Federal Republic of Nigeria 1999 (as amended)

Section 173(3) of the 1999 Constitution (as amended), provides that pensions of Federal Public Servants shall be reviewed every five years or together with any salaries review, which ever is earlier. Section 210(3) of the Constitution, has the same provision for States Public Servants.

These provisions are being implemented for pensioners under the old Defined Benefits Scheme. Unfortunately, pensioners under the Contributory Pension Scheme are not benefiting from these Constitutional provisions. There have been only two palliative enhancements on pensions under the Contributory Pension Scheme.

The Federal Government should be compelled to comply with the provisions of the Constitution, by increasing pensions under the Contributory Pension Scheme as it is being done with pensions under the Defined Benefits Scheme. Non compliance with this provision is a breach of the Constitution and any breach of the provisions of the Constitution is an impeachable offense.

Pension Reform Act 2014

The Pension Reform Act 2014, whose objectives are to establish a uniform set of rules, regulations and standards for the Public Services of the Federation, Federal Capital Territory, States as well as Local Governments and the Private Sector; make provisions for smooth operations of the Contributory Pension Scheme; ensure that every person who worked in either the Public Services of the Federation, Federal Capital Territory, States and Local Governments or the Private Sector receives their retirement benefits as and when due; and assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age have some lofty provisions that should be implemented to ensure the working class earn a decent pension as follows:

Gratuity Vs. Lump sum

Under the old Defined Benefits Scheme, retirees were paid Gratuity. Gratuity is the monetary amount, payable to the employee by the employer on leaving the service under pensionable conditions. Gratuity is a product of collective bargaining.

Since the commencement of the CPS, employers of labour have stopped paying gratuity to their retiring employees, claiming that gratuity is not part of the CPS. The point is that PRA 2014 didn’t stop the payment of gratuity. The PRA 2014 was put in place to enhance pension and not to amputate it.

Section 4 (4)(a) if PRA 2014 provides that “Notwithstanding any of the provisions of this Act, an employer, may agree on the payment of additional benefits to the employee upon retirement”.

Section 7(1)(a) makes provision for a retiring employee to withdraw a lump sum from the total amount credited to his retirement savings account provided that the amount left after the lump sum withdrawal shall be sufficient to procure programmed fund withdrawals or an annuity for life in accordance with extant guidelines issued by PenCom, from time to time. A lump sum is distinct from a gratuity.

In the next amendment of PRA 2014, the trade unions need to struggle for explicit provisions to be made for employers to pay gratuity, while the balance in the worker’s pension fund should be used for the payment of their monthly pension.

Group Life Insurance Policy

Section 4(5) of PRA 2014 makes it mandatory for employers to maintain a Group Life Insurance Policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premiums shall be paid not later than the date of commencement of the cover.

Subsection 6 provides that “where the employer failed, or refused or omitted to make payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period.”

This provision in the PRA 2014, is in line with survivours benefits under ILO Social Security (Minimum Standards) Convention, 1952 (No. 102). Employers are doing everything not to comply with this provision of PRA 2014 as they see it as an additional cost.

Minimum Guarantee Pension

There are pensioners in Nigeria today, who are receiving as low as N15,000 as monthly pension under the Contributory Pension Scheme. This falls far below the national minimum wage. Section 84(1) of PRA 2014 makes provisions for guaranteed minimum pension as may be specified from time to time by PenCom.

Section 82(2)(a) provides that the minimum guaranteed pension is to be paid from the Pension Protection Fund, established and maintain by PenCom. The sources of funding the Pension Protection Funds shall be from: An annual subvention of 1% of total monthly wage bill payable to employees in the Public Service of the Federation. Annual pension protection levy paid by PenCom and all licensed pension operators at a rate to be determined by PenCom from time to time. Income from investment of the Pension Protection Fund.

Since 2004 when the Contributory Pension Scheme commenced, PenCom has not defined a minimum pension. It is high time time the Nigerian working people (trade unions) struggled for the implementation of minimum guaranteed pension provided for in the Pension Act.

Residential Mortgage/National Housing Fund

Economic instability and housing instability are closely related. Access to stable, affordable housing is particularly important for working people. They are faced with Notices to Quit from lawyers daily and struggle to find new places to live. If this is hard for a working person, then it is worse for a retiree.

Section 89(2) permits the application of a percentage of a worker’s pension assets towards the payment of a residential mortgage for the worker. PenCom has approved and published a list of Mortgage Institutions for the purpose of residential mortgage. Workers have to take full advantage of this including the provisions of the National Housing Fund to build houses while still in service.

The partnership the Federal Mortgage Bank of Nigeria has with private housing developers can not bring affordable housing to workers. The cost of their houses are far beyond the reach of workers and this is being done with the contribution of workers. What it means is that workers are contributing and non contributors are benefitting.

Micro Pension Plan

The Contributory Pension Scheme, is mandatory for employees of the public service and employees of private sector organisations with three (3) or more employees. This leaves a vast majority of workers in organisations with less than three (3) employees and the self employed, with no financial protection in their old age.

In order to expand the coverage of the Contributory Pension Scheme to these segment of citizens, and relying on section 4(7) of PRA 2014, which deals with voluntary contributions, the National Pension Commission, introduced the Micro Pension Plan, within the framework of the Contributory Pension Scheme.

Why Micro Pension?

Micro Pension Plan allows citizens who fall within the bracket earlier mentioned, to make financial contribution towards the provision of pension at their retirement or incapacitation on health grounds. Micro pensions guarantee secure a future through steady income at retirement. It therefore reduces old age poverty/destitution and the process is easy, simple and flexible to accommodate the peculiar working conditions of the individual.

Integration of Pensioners into the National Health Insurance Scheme (NHIS)

Aging is a natural process, which presents a unique challenge. An aging population tends to have a higher prevalence of chronic diseases, physical disabilities, mental illness and and other co-morbidities.

During the working life of employees, especially Federal Public Servants, they are mandatorily made part of National Health Insurance Scheme (NHIS). Unfortunately, when they retire, a time they need health care most, they are no longer part of the NHIS.

The Labour Centers, who are represented on the Board of PenCom should advocate and champion admission of PenCom with NHIS to ensure that on retirement, pensioners remain part of NHIS. They should also champion the advocacy for free health care for retirees and other elderly people. Federal and States governments can afford it. If they can afford to sponsor people for annual pilgrimages to Mecca and Jerusalem, they can afford to put in place health care for the elderly in the society especially those who have worked for the development and progress of the country.

Bridging of Knowledge Gap

Knowledge gap hypothesis states that as the rate of information flow into the social system increases, groups with higher socioeconomic status acquire the information at a faster rate than do lower status groups, widening the knowledge gap between them.

There currently exist a knowledge gap on the administration of the Contributory Pension Scheme and the provisions of the Pension Reform Act 2014 on the side of the working class and trade unionists. The gap needs to be bridged.


The greatest obstacle between the Nigeria working class and a decent pension is that trade unionists have moved away from being class struggle unionists, who promote class struggle to become business unionists. Business unionists seek to avoid struggles. They value their relationship with management/governments and consider themselves more pragmatic than workers. If they don’t change their tactics, the Nigerian working class will continue to suffer from neglect, poverty and destitution in their old age as a result of lack of decent pensions.

Trade unions need to take a more active role in pensions. They need to ensure that their members are enrolled in decent pension schemes and that all pensioners receive their entitlements as and when due.


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