Connect with us

Business

The Case for Transitioning from the Contributory Pension Scheme to a Hybrid Pension Model under the PRA 2014

info

Published

on

Pension

 

It has become evident that Nigeria’s mandatory Contributory Pension Scheme (CPS) established under the Pension Reform Act (PRA) 2014 (as amended) has not consistently delivered adequate and sustainable retirement income for over two decades of implementation. This is largely attributable to prevailing economic conditions facing the country and the absence of a substantial lump-sum benefit at retirement. These shortcomings have triggered persistent concerns and growing agitation among stakeholders for reform or exit from the CPS. Policy responses have included the introduction of the Enhanced Pension (EP) for only retirees under Programmed Withdrawal (PW), excluding Life Annuity retirees who felt aggrieved and the approval of additional benefit structures alongside the CPS.

Although the PRA 2014 does not allow a complete transition away from the CPS for most employers, it does permit the continuation of pre-existing gratuity or severance arrangements. In line with this provision, the National Pension Commission (PenCom) issued the 2017 Guidelines on Gratuity Benefits, enabling private sector employers to operate defined benefit (DB) gratuity schemes alongside the CPS, subject to annual actuarial valuation to ensure adequate funding. Furthermore, PenCom issued a framework on 13th September 2023 for the establishment of Additional Benefits Schemes (ABS) under the CPS, pursuant to Section 4(4)(a) of the PRA 2014. This framework effectively facilitates a transition toward a hybrid pension model, allowing employers to introduce supplementary benefits, either defined benefit or defined contribution, on a fully funded basis.

A hybrid pension scheme combines elements of both defined contribution (DC) and defined benefit (DB) systems. Under a DC scheme such as the CPS, investment and longevity risks are largely borne by employees. In contrast, DB schemes place these risks on employers. A hybrid arrangement shares these risks between both parties.

The recent initiatives by PenCom, including the reintroduction of gratuity for federal civil servants (equivalent to 100% of annual emolument for those with at least ten years of service, effective January 2026); the PenCare healthcare scheme for low-income retirees; and plans to implement the GMP, have signaled a practical and commendable transition toward a hybrid pension model. This development is significant, timely and commendable.

This article examines potential funding approaches for these defined benefit components and their implications for stakeholders.

2. Gratuity Scheme Design  

Gratuity is a defined benefit paid as a one-time lump sumto an employee upon retirement or exit after a minimum period of continuous service. The funding approach for the newly approved Federal Government gratuity scheme has yet to be clearly defined. Typically, such schemes are non-contributory, with funding provided solely by the employer based on actuarial valuation of liabilities.

In practice, two primary funding models exist: Pay-As-You-Go (PAYG) and fully funded system. A clear understanding of these approaches along with Nigeria’s historical experience of pension schemes administration prior to the 2004 is essential in determining the most suitable modelfor reintroducing gratuity to Federal civil servants.Historically, Nigeria operated a PAYG system. While this model allows flexibility and immediate payment of benefits, it is highly vulnerable to demographic pressures, economic instability, and political interference. Factors such as an aging population, increasing life expectancy, and fluctuating workforce contributions often result in funding imbalances, leading to deficits and delayed payments. In contrast, fully funded systems accumulate and invest contributions during employees’ working years to finance future benefits. These systems offer greater long-term sustainability but depend heavily on investment performance, robust governance, and transparency. They are also exposed risks including market volatility, fund mismanagement, and manipulation of actuarial assumptions to present a more favorable financial picture.

Nigeria’s past reliance on largely unfunded (PAYG) defined benefit schemes resulted in substantial pension liabilities and arrears, prompting the introduction of the CPS. However, challenges persist under the CPS, including inadequate funding of accrued pension rights for pre-2004 employees, irregular remittance of contributions, and failure by some State Governments to implement pension laws in compliance with the PRA 2014.

Selecting a sustainable funding model for gratuity requires careful consideration of the issues discussed above. The reintroduction of gratuity within the CPS must be supported by legislative amendments to the PRA 2014 to prevent duplication of lump-sum benefits.

3. Pension Industry Healthcare Initiative (PenCare)

In March 2026, PenCom launched the Pension Industry Healthcare Initiative (PHI), known as PenCare. This initiative aims to provide affordable and quality healthcare coverage for low-income retirees under the CPS, many of whom lose employer-sponsored health insurance upon retirement. PenCom is expected to develop a comprehensive framework for accrediting healthcare providers, supervising Health Management Organizations (HMOs), and providing free or subsidized health insurance for the low-income retirees.  

PenCare is structured as a corporate social responsibility (CSR) initiative funded by PenCom and Pension Fund Administrators (PFAs), rather than directly from pension assets or Retirement Savings Accounts (RSAs). However, since PFAs and PenCom derive revenue from fees on assets under management (AUM), the initiative could indirectly result in higher fees or new charges, potentially reducing contributors’ retirement savings. This means current contributors could effectively subsidize retiree healthcare costs. Additionally, not all contributors may benefit from PenCare, raising equity concerns.

There is also a risk of overlap with the National Health Insurance Authority (NHIA), which already has a mandate to provide healthcare access, including for CPS retirees. Without effective coordination, PenCare could duplicate existing functions, leading to inefficiencies and increased healthcare system-wide costs.

4. Guaranteed Minimum Pension (GMP)

The GMP, provided for under Section 84(1) of the PRA 2014, is a key mechanism for ensuring income adequacy in retirement. It serves as a safety net by guaranteeing a minimum benefit level within the CPS, thereby protecting retirees against poor investment returns and economic volatility.

The GMP functions as an “underpin” within the defined contribution framework (CPS), ensuring that benefits do not fall below a specified threshold (GMP), typically linked to a percentage of final salary at retirement date. Its implementation requires careful actuarial assessment to ensure cost-effectiveness and sustainability.

The Pension Protection Fund (PPF), established under Section 82 of the PRA 2014, is intended to finance the GMP and compensate for investment-related losses. It is funded through contributions from the Federal Government, PenCom, and pension operators, as well as investment income.

However, implementation of the GMP has been delayed, likely due to ongoing efforts by the Federal Government to settle accrued pension liabilities under the CPS. While initial funding of ₦107 billion for the PPF commenced in February 2025, additional resources are required for full implementation. Encouraging voluntary contributions and strengthening complementary welfare initiatives could reduce reliance on the GMP and ease pressure on the PPF over time.

5. Conclusion

Nigeria is already undergoing a gradual transition from a purely contributory pension system to a hybrid model, both in policy and practice. The introduction of gratuity schemes, healthcare support, and minimum pension guarantees reflects recognition that the CPS alone cannot fully meet retirees’ needs.

For this transition to be effective, State and Local Governments must also adopt similar reforms. In particular, the reintroduction of gratuity schemes across all tiers of government is essential to achieving a uniform and equitable pension system, as envisaged under Section 1(a) of the PRA 2014. Thus, a well-designed hybrid model would offer the best prospect for delivering sustainable and adequate retirement income for Nigerian workers.

Dr Pius Apere is an (Actuarial Scientist and Chartered Insurer), Chairman/CEO, Achor Actuarial Services Limited

The post The Case for Transitioning from the Contributory Pension Scheme to a Hybrid Pension Model under the PRA 2014 appeared first on Business Today NG.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

CBD COP17: UNDP, UNICEF launch campaign to promote green careers among young people

info

Published

on

WhatsApp Image 2025 09 24 at 09.47.03.jpeg

The United Nations Development Programme (UNDP) and the United Nations Children’s Fund (UNICEF) have launched a global campaign to help young people discover skills and career opportunities that can contribute to a sustainable future.

The initiative, christened “See It, Be It,” was announced on Thursday on the sidelines of the ongoing 17th session of the United Nations Convention on Biological Diversity (CBD COP17) in Yerevan, Armenia.

The campaign seeks to showcase the people, skills and career opportunities shaping a nature-positive, low-carbon future, the United Nations said in a statement.

It will feature young professionals making a difference across science, technology, business, agriculture, communications, finance, the creative industries and community leadership.

From scientists restoring ecosystems and entrepreneurs building sustainable businesses to innovators developing new technologies and community leaders protecting local environments, their stories will demonstrate how young people can build careers that benefit both people and the planet.

“Young people need more than new opportunities to build a sustainable future: they need to know these opportunities exist, understand how to pursue them and see people with whom they can identify already making a living through them,” UNICEF said.

PT WHATSAPP CHANNEL
Dangote Refinery AD

The agency noted that research, including the Organisation for Economic Co-operation and Development’s (OECD) Cultivating the Future report, highlights how young people’s career expectations remain concentrated in a relatively narrow range of traditional professions.

It added that research by UNICEF and the European Training Foundation also found that career guidance failed to showcase opportunities emerging from the green transition adequately.

“These gaps underline the importance of making a wider range of career pathways visible, particularly to young people in developing countries who have fewer opportunities to access career guidance and professional networks,” the UN said.

Objectives and prospects

According to the UN, the “See It, Be It” campaign aims to broaden young people’s horizons by presenting diverse, relatable role models and showing how their interests, skills, and ambitions can help build a more sustainable world.

The campaign aims to reach 500 million young people worldwide by the end of 2027.

It brings together organisations, youth networks, educators, employers, communicators, and sustainability professionals to share stories and expand their reach.

Early supporters include the Global Youth Biodiversity Network, an international network connecting young people working to protect biodiversity; the Nature Working Group of YOUNGO, the official children and youth constituency of the United Nations Framework Convention on Climate Change; and the Youth Negotiators Academy, a youth-led organisation that trains young people to participate in multilateral negotiations.

The UN said it was inviting partners to contribute stories, amplify profiles through their networks, and help ensure young people from different countries and communities can access a broad range of role models and career opportunities.

Silvia Mestroni, UNICEF’s acting representative in Armenia, said the initiative would help young people recognise their potential and explore ways to contribute to a more resilient world.

“Every child and young person deserves the chance to imagine a future full of possibility and see how their interests and talents can make a difference sustainably,” she said.

Ms Mestroni added that connecting young people with diverse role models and stories of change could broaden their horizons, build confidence, and inspire them to explore different ways to contribute to a sustainable future.

Similarly, Midori Paxton, UNDP’s global head of biodiversity and ecosystems, stressed the need to make sustainable career opportunities more visible to young people.

“Science tells us we’ll need three earths to sustain us by 2050 if we carry on the way we are,” she said, emphasising the need to transition towards nature-positive and low-carbon lifestyles and economies.

Ms Paxton said younger generations have significant potential to shape a future where people and nature thrive. Still, she stressed that this potential requires access to opportunities and the ability to envision what’s possible.

“Through See It, Be It, we want to make the people and pathways driving change far more visible and help many more young people recognise that there is a place for their talents in building a sustainable future,” she said.

CBD COP17

PREMIUM TIMES earlier reported that representatives of governments, Indigenous peoples, local communities and other stakeholders had convened in Yerevan, Armenia, for CBD COP17.

The conference, scheduled for 19–30 October under the theme “Taking Action for Nature,” brings countries together to accelerate efforts to halt and reverse global biodiversity loss.

The 2026 UN Biodiversity Conference also includes the 12th meeting of the parties to the Cartagena Protocol on Biosafety and the sixth meeting of the parties to the Nagoya Protocol on Access and Benefit-sharing.

Discussions are focused on reviewing collective progress, strengthening implementation support, advancing scientific and policy guidance, addressing the financial and economic factors influencing biodiversity outcomes, improving biosafety and promoting the fair and equitable sharing of benefits arising from genetic resources.

At COP17, countries will undertake the first global review of collective progress under the Kunming-Montreal Global Biodiversity Framework.

The review is expected to assess how far countries have progressed towards their commitments and identify gaps requiring urgent action.

Other priorities include mobilising finance, strengthening capacity-building and international cooperation, and expanding the participation of indigenous peoples and local communities in biodiversity conservation.

Financing remains critical because implementing biodiversity commitments requires sustainable resources, especially for countries facing competing development priorities and limited institutional capacity.

The conference will also examine the policy and economic conditions that influence biodiversity outcomes, including how governments and other stakeholders can align development activities with conservation objectives.


Discover more from Premium Times Nigeria

Subscribe to get the latest posts sent to your email.

Continue Reading

Business

Seplat Energy appoints Effiong Okon as chief executive officer

info

Published

on

244381091 159504936372487 4050436558445745549 n e1765995758601.jpg

Seplat Energy Plc has appointed Effiong Okon as its chief executive officer, making him the first Akwa Ibom indigene to occupy the top executive position at the Nigerian energy company.

Mr Okon, an engineer with more than 35 years of experience in the oil and gas industry, was appointed by the company’s board of directors in June 2026 and assumed office on 1 August 2026, according to information published on Seplat Energy’s website.

Mr Effiong Okon, CEO of, Seplat Energy Plc
Mr Effiong Okon, CEO of, Seplat Energy Plc

Onofiok Luke, a former member of the House of Representatives and former speaker of the Akwa Ibom State House of Assembly, commended the appointment, describing it as a significant milestone for the state.

In a Facebook post, Mr Luke congratulated Mr Okon, saying his emergence reflected years of professional dedication, competence and service.

He said the appointment should inspire young people from Akwa Ibom to pursue leadership positions in the oil and gas industry and other globally competitive sectors.

“For years, we have consistently clamoured, advocated and hoped to see our sons and daughters rise to the apex of International Oil Companies, particularly those operating within our communities and drawing substantially from our natural endowments,” Mr Luke wrote.

PT WHATSAPP CHANNEL
Dangote Refinery AD

He also called for greater opportunities for local professionals and host communities, arguing that communities where oil and gas are extracted should participate not only in resource production but also in industry leadership, value creation and prosperity.

Mr Luke cited Udom Inoyo, a former vice chairman of ExxonMobil’s Nigerian affiliates, as one of the Akwa Ibom professionals who had previously attained senior leadership positions in the industry.

He wished Mr Okon a successful tenure and described the appointment as a source of inspiration to aspiring professionals from the state.

Career and industry experience

Mr Okon joined Seplat Energy in 2018 and has held several senior positions, including executive director of operations, director of new energy, and director of projects. He also served as managing director of ANOH Gas Processing Company Limited, a joint venture between Seplat Energy and Nigerian National Petroleum Company Limited (NNPC).

According to his biography, he oversaw the development of the 300-million-standard-cubic-feet-per-day ANOH Gas Processing Plant, which achieved its first gas in January 2026.

ANOH is an acronym for Assa North-Ohaji South, a major natural gas development project located in Imo State, Nigeria

Before joining Seplat, Mr Okon spent 26 years at Shell, where he held senior positions in Nigeria, Europe, the Middle East and the Americas. His assignments included vice president of cost leadership and continuous improvement in the Netherlands, general manager of deepwater and offshore assets in Nigeria, and deputy vice president technical and manager of the North Field at Qatar Shell.

He also participated in the commissioning and early production phases of Qatar’s Pearl gas-to-liquids project and QatarGas LNG Trains 7 and 8, according to his biography.

Mr Okon studied at the University of Benin and attended IMD Business School in Lausanne, Switzerland, and Harvard Business School in Boston, United States. He is a fellow of the Nigerian Society of Engineers and the UK Energy Institute, and a registered engineer in Nigeria.

He is married to Bertha Okon, and they have four children.

Seplat’s growth and acquisition of Mobil’s Nigeria business

Seplat Energy was established in 2009 through a partnership between Shebah Petroleum Development Company and Platform Petroleum Joint Ventures. The company has since expanded its operations in Nigeria’s oil and gas industry, with interests spanning hydrocarbon production, gas processing, and energy transition initiatives.

A major turning point came in December 2024, when Seplat completed its acquisition of Mobil Producing Nigeria Unlimited (MPNU), the Nigerian shallow-water oil and gas business formerly owned by ExxonMobil. The transaction followed an agreement announced in February 2022 and regulatory approvals for the deal.

Following the acquisition, Seplat renamed the business Seplat Energy Producing Nigeria Unlimited (SEPNU). The acquired assets include interests in four oil mining leases — OMLs 67, 68, 70 and 104 — operated under a joint venture with NNPC, as well as associated infrastructure, including the Qua Iboe Terminal and interests in the Bonny River Terminal and gas processing facilities.

READ ALSO: AFC appoints Cardoso as board chairman

Seplat said the acquisition more than doubled its production and expanded its portfolio across onshore and shallow-water operations. The enlarged business has interests in oil and gas fields, gas processing facilities and export terminals, strengthening its position among Nigeria’s indigenous energy producers.

The company is listed on both the Nigerian Exchange and the London Stock Exchange. Its operations contribute to Nigeria’s oil production and domestic gas supply, with gas serving as an important fuel for electricity generation and industrial activity. The company has also identified gas-led growth and the development of cleaner energy solutions as priorities in its strategy.

Mr Okon takes over the leadership of the enlarged company following this expansion, with responsibility for overseeing its operations, project delivery, production growth, and gas development strategy.


Discover more from Premium Times Nigeria

Subscribe to get the latest posts sent to your email.

Continue Reading

Trending