CHAPTER ONE BACKGROUND OF STUDY Pension is a form of income that workers or their dependants receive after worke rs retire,

become disabled or die. Pension plans benefit people who have had car eer in private industry; in a nations armed forces or in national, state and loc al governments. Many individuals who benefit are self employed or whose employer s do not provide a pension plan establish their own pension plans (world book en cyclopaedia, 1999). Put differently, pension schemes exist to provide post-retirement benefits to employees. Pension scheme was introduced into Nigeria during the colonial era to provide old age income and security to British citizens working in the count ry upon retirement. Nigerias first ever legislative instrument on pension matter s was the pension ordinance of 1951, which had retrospective effect from 1st Jan uary, 1946. The national provident fund (NPF) scheme established in 1961 was the first legislation enacted to address pension matters of private organisations. It was followed 18 years later by the pension act no.102 of 1979, as well as the armed forces pension act no 103 of the same year. The police an d other governm ent agencies pension scheme were enacted under pension act no.75 of 1987, followe d by the local government pension edict which culminated into the establishment of the local government staff pension board of 1987. In 1993 the national social insurance trust fund (NSITF) scheme was established by degree no.73 of 1993 to replace the defunct NPF scheme with effect from 1st july,1994 to cater for emplo yees in the private sector of the economy against loss of the employment income. As identified earlier by Orewa and Adewumi (1983) Local government sys tem also established pension schemes for their staff, with a separate board known as the Local Govern ment Pension Board. It was established to take care of the local government staf f that would have retired from 1st April, 1979.The new Pension Reform Act 2004 u p to year 2004 when the Pension Act was passed by the National Assembly the gove rnment operated an unfunded defined Benefits Scheme and the payment of retiremen t benefits was budgeted annually under the Pay-As-You-Go Benefit Scheme against the backdrop of an estimated N2 trillion deficit, arbitrary increase in salaries and pensions as well as poor administration. The Obasanjo administration initia ted a pension reform in oder to address and eliminate problems associated with t he Pension Scheme (Federal Ministry of Information and Communication, (2004) Hence, it is the objective of this study to highlight the benefits and necessity of the Pension Reform Act,2004 as a retirement package independent of governmen t budget, and its effect on insurance business. STATEMENT OF THE PROBLEM . In spite of the various provisions of the 2004 pension reform, it would be pe rtinent to mention some of the fundamental ambiguities of the reform and its neg ative consequences on the retirees and also insurance business. a. The reform is discriminatory in nature. The Act discriminates in favour of certain state employees including the militar y and the judiciary. Section 9 of the Act requires most public and private secto r employees to pay seven and half per cent of their salary as pension contributi ons. In contrast, for military staff, the rate is reduced to only two and half p er cent. b. It abolishes the right to gratuity The Pension Reform Act, 2004 abolishes the right to a gratuity. c. Ambiguity in the definition of minimum retirement age In the public sector, the statutory retirement age is either 60 years or 35 year s of service, whichever comes first. In the private sector, retirement age varie s between 55 and 60 years. The factor of 35 years of service does not apply to t he private sector. d. Delay in Payment of Retirement Benefits

One of the key problems and hardships which the Pension Reform Act 2004 sought t o remove was the non-payment of retirement benefit as and when due [S.2(a)]. In contrast, in Section 4(2) the Act legalizes delays in the payment of retirement benefits. Other fundamental challenges for the provision of the2004 reforms act include; 1. Management structure of the pension fund, 2. Transitional bureaucratic structures; 3. Corruption 4. Denial of access to courts OBJECTIVES OF THE STUDY Due to the problem Nigeria has experienced as to result of PRE-PENSION REFORM AC T, 2004 STATUS. This study will try to focus on the following objectives. Highlight and analyze the fact that every employee has a stake in the pension pr ocess. Determine the effect that the transitional arrangement from old to the new schem e will have on pensioners in the sense that it encourages savings, which guarant ees a source of livelihood during old age. Highlight the fact that there can really be a retirement package independent of government budget. RESEARCH QUESTIONS To achieve the objective stated above the study will attempt to provide answers to the following research questions. According to the world wide phenomenon caused by demographic changes , global increase in life expectancy in the face of declinin g fertility rate, wealth creation and so on, what steps has the insurance indust ry in Nigeria taken to ensure the successful implementation of the Pension Refor m Act,2004. Despite the fact that the system for providing for the aged are experiencing ser ious strain especially in developing countries (Nigeria inclusive), to what exte nt has the expansion in the economy affected the need for a Pension Reform free of government bureaucracy How can the insurance industry ensure the provision of group life assurance be made mandatory for all employees covered under the act and policy arranged and p aid for by the employer STATEMENT OF HYPOTESIS HYPOTESIS I HO: THE IMPLEMENTATION OF THE Pension Reform Act 2004 will not ensure regular pa yment of retirement benefits free of governments bureaucracy H1: the implementation of the Pension Reform Act 2004,will not ensure regular pa yment of retirement benefits free of government bureaucracy Hypothesis II Ho: The implementation of the Pension Act 2004 will not increase pension satisfa ction. H1: the implementation of the Pension Reform Act 2004 will increase pension sati sfaction. Hypothesis III Ho: the implementation of the reform Act 2004would not implement life assurance business patronage. H1: the implementation of the Pension Reform Act 2004 would implement life assur ance business patronage. SIGNIFICANCE OF THE STUDY The study is relevant in view of the phenomenon world wide concerning the new f or pension reform. These are mostly caused by results of demographic statistics of the worlds population which reveals that the population agency fast. The study

will provide answers to questions on the need for Pension Reform in the sense t hat the systems for providing for the aged are under increasing serious strain i n Nigeria. Even though most countries are looking at success strikes of privatizedpensionsc hemes such as chile and Singapore, a study of this kind is expected to create co ntribution on the improvements upon the Pension Reform Act 2004 over government schemes. SCOPE OF THE STUDY The extent of coverage of the Pension Reform Act 2004 is wide. However, for the purpose of this study, the establishment of standards and rules for pension mana gement and its impact onthe insurance industry will be covered LIMITATIONS OF THE STUDY There were a number of constraints met with in carrying out this study some of t hem are: Given that the researcher had other academic pursuits which tended to cash with his interests in the study, as such he had to share his time between all his inv olvements leaving him with reduced time for the research. The distance between owerri and port-Harcourt (where the respondents are based) also constrained the researcher from regular visit to the respondent ; and The problem of financial constraintwhich made it difficult for the researcher to visit the respondent share the questioners and collect them back on the spot. DEFINITION OF TERMS ACT- a law that has been passed by a parliament. Assets- (a) a useful thing or personwith high values (b) property owned by a per son or a company Benefits- a payment provided by the government to people who need financial help because they are unemployed Budget- an estimate of income and expenditure for a stipulated period. Bureaucracy- a system of government in which most decision are taken by governme ntin which most decisions are taken by government officials Courage- to protect somebody or something against loss or injury : insurance cov erage Demographic the statistical study of human populationwhich includes births, deat hs, diseases and so on ina community over a period of time. Income- money received as wages, interest from investing in a business. Longevity- the fact of living for a long time. Pension- a regular payment made to retired people either by the government of fr om an investment fund. Pensioner- a person who is receiving a pension especially from the government. Phenomenon a fact or situation observed to exist or happen, especially one that is not fully understood. Privatized the sale of a business or an industry, so that it is no longer owned by one government. Retirement a situation where one has stopped working because he has attained a p articular age. Stocks a share that somebody has brought in a company or business.