Management Science Seminar - From Defined Benefit to Defined Contribution Pension Scheme: Nigerian Experience
Friday 21 November 2008, 14:00
National Pension Commission, Nigeria
Abstract: The reform of the pension industry in Nigeria was necessitated by many problems confronting pension schemes in both the public and private sectors. The public sector operated largely the Defined Benefit scheme, which depended on budgetary provisions from various tiers of government for funding. The scheme became unsustainable due to lack of adequate and timely budgetary provisions and increases in salaries and pensions. There were demographic shifts due to rising life expectancies. Pension Administration had been largely weak, inefficient, less transparent and cumbersome. The private sector schemes had been characterized by very low compliance ratio due to lack of effective regulation and supervision of the system. Most of the private sector schemes were akin to Provident Fund Schemes, which did not provide for periodic benefits. Even at this, many private sector employees were not covered by any form of pension scheme.
In June 2004, a system was established that is sustainable and has the capacity to achieve the ultimate goal of providing a stable, predictable and adequate source of retirement income for each worker in the country. Thus, the Pension Reform Act 2004 was signed into law, which brought a Defined Contribution scheme that is fully funded, privately managed and based on individual accounts for both the public and private sector employees.