Seventeen years after the Nigerian Senate enacted the Pension Reform Act 2004 (amended in 2014), pension issues have still not been completely solved. People work with the hope of retiring to a fulfilling work-free life in good health where they don’t lack anything. Nobody wants to work forever.

Sometimes, things don’t work out as planned. Things go wrong along the way either because of terrible pension policies or because people don’t understand how pensions work. It’s heartbreaking to work all your life and still live in poverty. Nothing to show the rewards of hard work.

Coping with pension issues is very daunting, so it’s important to prepare in advance. Let’s then go ahead to discuss these issues and how to deal with them.

What are pension issues?

Wikipedia defines pension issues as the predicted difficulty in paying for corporate or government employee retirement pensions due to a difference between pension obligations and the resources set aside to fund them. In simple English, a pension issue is when a retired working class individual, called a pensioner, finds it difficult to access funds that he or she is entitled to after retirement for some reason. Often, the reason is the fault of institutions responsible for dispensing these funds.

Pension issues in Nigeria

To understand how pensions work in Nigeria, you must know the meaning of pension. A pension is a regular payment made after a person has retired from being an active member of the labour force. The payment is made through an investment fund or account set up by the person and the employer during their time in the labour force.

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In Nigeria, the Pension Reform Act (PRA) 2004, amended in 2014 by the senate, governs the country’s pension procedures. The PRA established a Contributory Pension Scheme where employers and employees contribute some percentage of the employees’ salary to the scheme every month. In fact, the Federal Government is obliged to pay 18% to the Contributory Pension Scheme. The minimum contribution for the employer is 10%, while the employee contributes a minimum of 8%. The money contributed goes into what is called Retirement Savings Account.

In 2014, the PRA established the National Pensions Commission (NPC). This commission is responsible for implementing the pensions regulations laid out in the Act. NPC regulates two types of companies – Pension Fund Administrators (PFA) and Pension Fund Custodians (PFC).

There are many PFAs that an employee can choose to manage his or her pension. Once the person chooses a PFA, he or she must inform the employer. Then the contributions are paid to the PFC, who then informs the PFA of the receipt of payment. Subsequently, the PFA credits the Retirement Savings Account of the employee.

If the employee changes jobs, he or she is not required to change PFA, but if that’s the case, the change must not be more than once a year. Meanwhile, the PFA takes the money the employee has contributed to invest in approved businesses such as government bonds, public-private companies, real estate developments, etc. The Pension Fund Commission strictly monitors the investments, which reserves the right to punish offending PFAs with substantial fines and other penalties.

However, many Nigerian pensioners have battled with getting their pensions for years. Even the establishment of the Pension schemes has not solved some of the pension issues in the country. The government, particularly the state governments, are largely to blame for these challenges as many have failed to comply with the laws governing pensions in Nigeria.

Causes of pension issues

pension issues for old men and women

Lack of compliance

Since the establishment of the pensions scheme in Nigeria, the federal and state government have failed to key into the scheme to transfer workers’ funds to the PFAs and manage workers’ contributions, which have constituted delays to immediate payment of workers’ lump sum benefits after retirement. According to TheGuardian, a new report in the public domain indicates that the Federal Government has remitted only 15% instead of the 18% stipulated by the law to the NPC in the last six years.

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Many pensioners have died without accessing their pensions due to these delays. Although a reported 25 states have complied with the 2014 amended Act, only nine of them are obeying their laws by remitting the statutory contributions to the NPC. Most are still operating the “pay as you go” system, which is a further hitch to the newer and smoother system.

Poor outreach of PFAs to Nigerian workers

Some Nigerians, especially those in the state and private sectors, don’t have access to PFAs. As previously stated, most state governments still operate the “pay as you go” policy. So, many of their workers don’t use the PFAs. As a result, they find it difficult to process and access their pensions because there is no institution serving their interests. They are hung out to dry or figure things out on their own, which is an arduous task. Pensioners stay in long queues that last for hours during their verification exercise. Some of them end up collapsing or incurring health complications due to stress.

Lack of awareness

A lot of workers and pensioners usually don’t know about the amended Pension Act until it’s too late. As a result, many don’t how about the PFAs and how they work. This leads to pension issues for them which can be very frustrating.

Investment challenges

We all know the Nigerian economy is wack right now. Investment opportunities are limited. If you’ve been following this piece, you know employers’ and employees’ monthly contributions don’t just sit in their accounts. They are invested in approved businesses to accrue some beneficial interests. However, investment opportunities in Nigeria are low, thanks to the poor economy. The poor naira to dollar exchange rate also doesn’t help.


The NPC is more like a bank for the government than a safety nest for pensioners. The federal government has reportedly borrowed 70% of its requirements from the fund to fund its bonds and other instruments. Don’t forget the administrators, some of whom have enriched themselves with pensioners’ funds that are now counted among the country’s billionaires. They do this with impunity because there is deep corruption in the country, and they are not held accountable for their actions.

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Effects of pension issues

Effects of pension issues

  • Pensioners face frustration, depression, and financial anxiety after retirement.
  • Many pensioners are in poverty and penury due to the shabby treatment they get from their former employers.
  • Workers now falsify their ages to make themselves younger just to avoid retirement. This has contributed to the high unemployment rates in the country because almost all positions are still occupied by people who should have retired a long time ago.
  • Corruption in workplaces. Workers know their efforts will not be appreciated when they retire. So they don’t have a problem engaging in corrupt practices to cash out big when they can.
  • Some pensioners face untimely death due to a lack of funds to care for their failing health. Some die out of heartbreak.

How to manage pension issues in Nigeria

suffering pensioners protesting

  • The government should treat the 2014 amended Act the way it should be to enable pensioners to enjoy the fruits of their labour
  • More PFA’s should be established to reach as many pensioners as possible.
  • Awareness should be raised on the importance of PFAs to access funds for pensioners.
  • NPC administrators and others in charge of workers’ pensions should be held accountable for their work. Heavy punishment should be meted on corrupt ones among them.
  • A conducive business environment should be prioritized so investors can invest in the country. That way, pension funds can be invested more effectively to yield better dividends.
  • Pensioners, as well as other organizations, should keep raising their voices against the discrimination they face.

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