Pension Schemes in Nigeria: Albatross of Retirees
Prof MK Othman
Workers’ retirement is one of the conditions of service in both private-public sectors. Like death, the retirement date must come to pass whether a worker prepares for it or not. Ordinarily, one should be looking forward to it but in Nigeria, the thought of retirement gives workers a horrible sleepless night. This was not the case, some years back. I can remember in the 1980s, as an undergraduate student of engineering in ABU Zaria, I did my internship (Student Industrial Works Experience Scheme, SIWES) at UTC Motors Kano. One of the most memorable events was the preparedness of each worker for his/her retirement. Every personnel of the UTC was enthusiastically looking forward to his/her retirement date. Their retirements not only usher them into freedom but wealth and a prosperous future to begin a new promising life. During their paydays, some weekly and others monthly, their payslips carried the quantum of their retirement benefits, which could easily be invested to guarantee a new prosperous life after owning a personal house and mobility. Some were counting days and hours to their retirement date. Their retirement benefits were coming earlier than actual retirement dates.
I also witnessed another memorable case of workers’ retirement when I did another internship in CEMAGREF, as a postgraduate student of ENGREF, Montpelier France during the academic session of 2001/2002. I passed through many old hands in CEMAGREF but within a week of my stay, I observed that these old hands were heartily looking forward to their retirements. One of them told me, “When you come here next to two/three years, you will not see me, I will be in so, so place enjoying my retirement holiday”. To them, retirement means having a joyful rest, physically and psychologically after 30 years of diligent and meritorious service to their motherland. It means enjoying the fruits of their labour akin to admission into Heaven to be compensated for the services rendered. These two memorable scenarios indicate that ordinarily, after 30 or so years of service, the majority of workers would like to have a joyful exit from active service for a well-deserved rest as a senior citizen.
While in France, workers are still looking forward to their retirements but in Nigeria, retirement is like a prison sentence, which every person detests. As a worker, your take-home pay does not take you home but as a retiree, your pension is so meagre that it can hardly meet 10% of your basic needs as a senior citizen. Workers who die on active service are kind of treated with disdain, as the difficulty and time taken to pay their death benefits to their families are unbearable. Ditto to accessing their bank accounts. The bank confidentiality policy, long protocol combined with lack of awareness makes the next-of-kin of a deceased worker almost impossible to access funds from the bank accounts of their deceased breadwinners. Millions of dormant accounts in our banks containing trillions of Naira deceased customers. So, the families of deceased workers are subjected to unimaginable hardship. So, why is the system mercilessly treating workers shabbily after their retirements?
Before the recent introduction of a contributory pension scheme, Nigeria was operating a defined pension scheme in which workers retired with about 80% of their terminal salary as pension and 300% of their salary as gratuity. The public workers continued to enjoy their pension till their death.
Government/employers were solely responsible for the payment of both the gratuity and pension. The pension payment was being funded through budgetary allocations for each fiscal year. This means that the funding of pension became normal government budgetary expenditures. Heavy corruption due to lack of transparency made the scheme unbearable to the government and thus, pensioners were always being owed their pensions running to several months or even years. Some lost their lives due to misery, lack of care combined with old age, and health challenges. This was why workers were afraid of retiring; some falsified their age to gain more years before retirement.
Workers’ unions were able to arm-twist the government to push the retirement age from 60 years to 65 years and some to 70 years. Corrupt practices and aggrandizement of public funds among civil servants became the order of the day as they were trying to acquire as much wealth as possible to avoid living in agony after retirement. A few years ago, I met a 2-year retired director from one of the Federal Ministries walking from one establishment to the other looking for a petty contract to survive. His physical appearance showed me that life was mercilessly dealing with that retired director. It was a national shame that workers who have put in their best to serve the nation assiduously were cruelly treated and considered as national liabilities.
Over the years, the defined pension scheme in Nigeria failed to serve the basic objective of making retiring enjoy the fruit of their labour. The failure was attributed to poor pension fund administration, outright corruption; embezzlement of the pension fund; inadequate build-up of funds, and poor supervision. The system was so fraught with tenacious challenges that made the government champion the legislation of contributory pension scheme, which successfully became law in 2004. Has the contributory pension scheme addressed the challenges of the old defined pension scheme? Is the contributory pension scheme not akin to pushing retirees to jump from frying pan to fire? What is the way forward? (To be concluded next week)