Establishment of the National Pension Commission (PENCOM)
The Pension Reform Act 2004 established the National Pension Commission (PENCOM) as the body to regulate, supervise, and ensure the effective administration of pension matters in Nigeria. The functions of the Commission include:
Regulating and supervising the Scheme established under the Act.
Issuing guidelines for the investment of pension funds.
Approving, licensing, regulating, and supervising pension fund administrators,
custodians and other institutions relating to pension matters as the Commission may,
from time to time, determine.
Establishing standards, rules, and guidelines for the management of the pension funds
under the Act.
Ensuring the maintenance of a National Data Bank on all pension matters.
Transitional Provisions for the Public Sector
The Act made provision for the establishment of Pension Departments under the scheme to administer the affairs of existing pensioners. The National Pension Commission supervises these departments. The responsibilities, funds, and assets of relevant existing pension boards or offices were transferred and vested in the respective departments. It is anticipated that these departments shall cease to exist after the death of the last pensioner.
Also the Act provides for retirement benefit bond. Because the schemes were unfunded for the public service of the Federation and the Federal Capital Territory, this bond is issued to those current staff who worked for a specified number of years, but are exempted from the new scheme. In acknowledgement of their accrued rights under the defunct pension scheme, this bond addresses government indebtedness to them. However, this bond is only due and payable when they retire.
The Retirement Benefits Bond Redemption Fund was also established and is maintained by the Central Bank of Nigeria. The Federal Government pays 5% of the total monthly wage bill payable to employees in the public service of the Federation and Federal Capital Territory into this fund. Payments for retirement benefit bonds issued are made from this fund. Payment into this fund will cease when all retirement benefit bonds have been redeemed.
The Pension Reform Act (PRA), 2004, Section 30 subsection (2) (a) provides for the establishment of a Pension Transitional Arrangement Department (PTAD), which consists of the following departments:
The Civil Service Pension Department
The Military Pension Department
The Police Pension Department
The Customs, Immigration and Prison Pension Department
The Security Agencies Pension Department
PTAD is expected to evolve from three offices into a single pension administration and management organisation under the supervision of the National Pension Commission.
Pension Reform Act, 2014
In line with relevant provision of the section 173 (3) of the 1999 Constitution that the Pension Scheme should be reviewed every five years, the Pension Reform Act 2014 repeals the Pension Reform Act 2004 (as amended). The highlights of the Act are that:
The scheme will be applicable to employers with three or more employees (currently
five or more required); and
The total rate of contribution will increase from the current 15% of monthly
emolument to 20% with a minimum of 12% by the employer and a minimum of 8% by
Reference: Public Service Reforms in Nigeria (1999-2014) - A Comprehensive Review
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