Before the enactment of the Pension Reform Act 2004 which established a Contributory Pension Scheme for all employees in Nigeria, there existed a Defined Benefit (DB) Scheme which was largely unfunded, non-contributory, and was also referred to as Pay-As-You-Go (PAYG) Scheme.
Employers paid retirees gratuity and pension but the Scheme was largely characterized by deficit in funding, there was no Regulator and it was managed differently by various employers.
Approved Existing Schemes
Under the DB Pension Scheme, the amount an employee is
paid as pension is mainly based on the number of years of service and
the employee’s grade level at the point of retirement.
Some employers have handed over the administration of their Defined Benefit Schemes to Pension Fund Administrators that have been appointed to manage them, while others have received necessary approvals to continue to manage the Scheme in accordance with the National Pension Commission’s Regulations on Approved Existing Schemes (AES).