THE EFFECT OF 2004 PENSION REFORM ON PUBLIC SERVANT...

THE EFFECT OF 2004 PENSION REFORM ON PUBLIC SERVANT...
 
CHAPTER ONE
INTRODUCTION
Background of the study
Pensions as a form of social security against old-age poverty and other uncertainties have attracted great interest virtually everywhere in the world, both in developed and developing countries, in recent times. Pension programmes, especially those that are publicly financed and administered, have become an issue of concern to economists, policymakers and the general public. This is not only because such programmes are central to the well-being of pensioners and the elderly, but also because the majority of pension programmes are not actuarially balanced (that is they are not financially stable), and as such they are run at deficits, thus making the present values of their future liabilities to be enormous.1 To this end, an overview of what a pension programme/scheme entails is needed for a general under-standing of this form of social security service.
A pension scheme is a transfer programme that serves as a channel for redistributing income to the elderly or retirees, after a stipulated number of service years. A pension is usually a regular payment made by the government or by private companies or organizations to their retirees as a form of social security against old-age risks and uncertainties. In some countries, especially those that are economically advanced , pensions are usually extended to other categories of people apart from retirees, such as widows, orphans, disabled people (in the form of disability pensions), and the elderly or the aged. Pension programmes are usually put in place to serve as protection for the elderly and retirees against old-age risks, poverty and other uncertainties. In addition, they are also used to promote a ‘saving culture’ among current employees, and this stimulates savings.2, 3
As pointed out earlier, pension programmes have attracted the attention of the general public because of their inherent problems. Nigerian pensioners are suffering badly from the stings of the problems of the public pension scheme, which was largely governed by Pension Decree No. 102 of 1979 and was a non-contributory scheme that was largely unfunded. It has featured persistent problems in recent times, especially in the civilian regime. Various problems can be identified that serve as costs to the pension scheme. These include the dependency of the pension scheme and the erratic budgetary allocation to the Federal Government; the untimely release of pension schemes; the untimely release of pension funds, which affects the payment of pension benefits and other retirement benefits; and a huge accumulation of pension liabilities, among several others. As a result of these problems, the majority of retirees and pensioners do not feel the impact of this social security service put in place by the government. The public pension scheme has failed in achieving its aims, and every day pensioners voice their grievances to the government and to anyone else who cares to listen.
The Nigerian post-reform public pension scheme, which itself was reformed under Pension Decree No. 102 of 1979, has been unfavourable to most current pensioners. In spite of the benefits that were supposed to accrue to pensioners, it has also succeeded in breeding numerous costs, which are being dealt with by both the government and the pensioners themselves. Despite the wealth of Nigeria, especially through the bulk of her oil revenue, there still exist very large pension deficits and actuarial imbalance between the pension contributions and benefits, which have led to huge pension liabilities over the years. This clearly shows that the Federal Government is not showing the readiness or eagerness to meet the obligation of financing the pension scheme as deemed necessary. The inadequacy and inefficiency of the government's public pension system have resulted into deteriorating well-being for pensioners in Nigeria. Yet, for many years the government did not seem perturbed enough by this development to find a lasting solution to the falling standard of living of pensioners, until last year, when it reformed the existing pension scheme with the aim of providing a solution to the pension problems.
For many pensioners, the benefits that accrue to them from the public pension scheme are bittersweet in nature, as there are also several costs associated with the scheme. To start with, pensioners’ benefits are to be paid as and when due; some of them have not even been able to lay their hands on their entitlements after many years of retirement either owing to inadequate pension funds for payment for to the total omission of their names from the pension beneficiary list. Even when they are to be paid their benefits, many die in the queue owing to fatigue and failing health while waiting for the payment of their pension. Thus, the state of pension in Nigeria over the years has continued to baffle many Nigerians, both young and old. With all these developments, younger workers are becoming more and more sceptical about their prospects as future pensioners, as the failure of the Nigeria's public scheme has undermined Nigerians’ popular trust in the system, and the pension policies in the future will continue to give Nigerians problems if not properly addressed.