1.1 BACKGROUND TO THE STUDY
Pension generally is a way of catering for the welfare of retirees. It is a periodic income or annuity payment made at or after retirement to employees who has become eligible for benefits through age, earnings and service.According to Alo (2004), many countries of the world are currently grappling with pension reforms in the face of pressures from ageing populations. Series of pension administration schemes have emerged in Nigeria before and aer independence. In the words of Sule and Ezugwu (2009), the exact origin of pension fund administration in Nigeria is debatable; however the history of pension in Nigeria could be traced to the prolonged battle between workers and employers of labour aiming that the victory of employees over employers marked the privilege of receiving gratuity and pension in Nigeria. The 1951 Pension Ordinance was the first legislative act on pension in Nigeria followed by the establishment of the National Provident Fund (NPF) in 1961 to cater for pension issues in the private sector. In 1979, the Pension Act No.102 was instituted and the Armed Forces Pension Act No. 103. Subsequently in 1987, the police and other government agencies pension scheme was established under Pension Act No.75 of 1987.
Similarly in 1987, the Local Government Staff Pension Board was established to take care of pension matters among local government employees (Sule and Ezugwu, 2006). The shortcomings and associated impediments of the previous scheme heralded the National Social Insurance Trust Fund (NSITF) in 1993, to address pension and retirement issues in the private sector. Pension schemes in Nigeria over the years have always come from budgetary allocations, non contributory and not fully funded thereby creating bottlenecks, series of death after retirement due to delay or lack of payment after retirement. These whole issues led to the 2004 pension reform also known as the Contributory Pension Scheme. The new pension scheme requires pension funds to be privately managed by licensed Pension Fund Administrators. Pension Fund Administrators (PFAs) have been duly licensed to open Retirement Savings Accounts (RSA) for employees, invest and manage the pension funds in a manner as the National Pension Commission (PENCOM) may from time to time prescribe, maintain books of accounts on all transactions relating to the pension funds managed by it, provide regular information to the employees or beneficiaries and pay retirement benefits to employees in accordance with the provisions of the Pension Reform Act 2004.Before it is issued with an operating license, the Pension Fund Administrators must be a limited liability company whose sole object is the management of pension funds (PENCOM, 2005).
To discourage frivolous applications and to ensure credibility, such company must have a paid up share capital of N1,000,000,000 and demonstrate professional capacity to manage pension funds and administer retirement benefits (PENCOM, 2005). The current Pension reform Act 2004 could be said to be in conformity with the international standard and best practices in Pension fund administration. Some of the key indicators that indicate the convergence of pension fund administration towards international standard include to ensure that workers receive their retirement benefits as and when due; assist improvident individuals save in order to cater for their livelihood during old age; and to establish a uniform set of guidelines and standards for administration and payment of retirement benefits. However, the researcher is examining the convergence of pension fund administration in Nigeria with international standard.
1.2 STATEMENT OF THE PROBLEM
Pension fund administration in Nigeria has been poor as the schemes were characterized by delays and sometimes non-remission of benefits to beneficiaries across the public sector. Orifowomo (2006) asserts that insuicient monitoring of pension activities by the regulatory authorities coupled with clear legal and administrative sanctions for erring parties led to poor compliance by stakeholders. Furthermore, there were no provisions for individual retirement savings account nor periodic publishing of statement of accounts and returns.Likewise, employees were not at liberty to choose their pension fund administrators and were subsequently at the mercy of the fund managers. The Pension Reform Act 2004 was enacted partly as a result of the failure of previous schemes to address the pension needs of Nigerians and partly as a result of the quest by stakeholders to evolve a scheme that would provide for both the public and private sector employees and of international standard. The researcher is curious to ascertain if the pension reform system in Nigeria.