CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The administration of pension scheme is not a contemporary phenomenal or practice. Memorably, it can be traced back to 13BC. The earliest record of payment of public sector pension dates back to the Roman Empire times when in 13BC, Emperor Augustus Caesar paid pension to the Military and loyal civil servants to boost their welfare. This was to secure the active loyalty of troops who were then the sole determinant of power in the realm and further conquest. Thus, it was a kind of reciprocal or compact arrangement. The pension was first paid from Augustus‟ personal funds and later taxes of 5% were levied on inheritances and 1% sales tax to meet the pension liabilities of the emperor. Three thousand denary was paid to Legionnaires after 20 years of active duty and 5 years in reserves. This had the effect of making beneficiaries‟ instant millionaires by the standards of the time.

According to Stephen (2012), the history of public pension in modern Europe started with disability compensation to soldiers. A good example was the scheme established by the British parliament in 1592. By the 18th Century all major European nations maintained some form of pension for their officer corps. However, these pension schemes were not very popular because of the perceived bias of the schemes for the military. The primary aim was to keep the military in total subjugation and commitment to the leaders of the time as military might guaranteed state power and sovereignty at the particular time in history.

Stephen (2012) maintained that in modern times, the United States public pension system, otherwise known as U.S. Social Security (Old Age, Survivors and Disability Insurance)

(OASDI) is a social security insurance created by the Republican Government of Franklin Delano Roosevelt in 1937 during the great depression, following the stock market crashes of the late 1920‟s and early 1930‟s. Retirement benefits payment is the largest component of OASDI.

The scheme was unfunded though as payment of retirees were financed by payroll taxes of current workers to enhanced their wellbeing or welfare depending on workers earning records at an age of retirement.

In Nigeria, Pension schemes were introduced into the public service in the early years of the 19th Century as evidenced in Pension Proclamation No. 14 of 1901 of the Northern Nigeria Protectorate and the Pension Ordinance No. 4 of 1902 of the Colony of Lagos and pension Ordinance 1951. Until 2004, there were a myriad of enactments that regulated the administration of pension schemes in Nigeria (Balogun, 2006). They include the Constitution of the Federal Republic of Nigeria, 1999 in Sections 173 and 210, the Pension Act Cap 346 Laws of the

Federation 1990, the National Provident Fund Cap 273 Laws of the Federation 1990 and the Nigeria Social Insurance Trust Fund Act, 1993 amongst others.

In order to have an in-depth knowledge and understanding of the direction of changes in pension reform, it would be useful to first of all understand the antecedents of pension system in Nigeria. In the public sector, (both civil and public services, statutory bodies), pensions were governed by the Pensions Act of 1979, later the Pensions Act of 1990 as amended by the Pensions Regulations of 1991. The Act provided for benefits in terms of gratuity and pension payments. Gratuity is a single, lump sum payment while pension is a periodic payment, normally on monthly basis for life (Olanrewaju, 2011). The scheme was a compulsory and noncontributory one, which created a right to monetary collection by public servants and an obligation on the part of government to make payment. Thus, the pension Act of 1990 as amended by Pension Regulation of 1991 has set a base for pension right to the retirees and contractual term between the retirees and the government of Nigeria including all levels of governments. Before April 1974, gratuity and pension for public servants were not treated as rights but as privileges. The applicable law provided that no officer shall have an absolute right to …pension or gratuity, Section 6(1). Nevertheless, with effect from 1974, they became rights to which a qualifying public servant was entitled to claim from the government. The general pension scheme for civil servants was financed from government general revenue on a pay-asyou-go basis (Olanrewaju, 2011). This implies that the payment of pension and gratuity become a compact between the state and the retired civil servants in Nigerian governments.

However, this scheme later suffered numerous problems between January 1976 and June 2004. Within this period, there were numerous maladministration in the payment of gratuities and pensions such as falsification of age, delays in payment, stoppage of payment, under payment, omission of names from the pay-roll, loss of files, long distant travels to receive payments, ghost pensioners, embezzlement of funds, mismanagement and diversion of funds (The Post Express June, 2000),in Olanrewaju (2011). These exploitative evils were purely bureaucratic or administrative. The pensioners had to cry out aloud in streets and mass-media for a positive change (Obi, 2002: 91-100). Thereafter, the Pension Reform Act 2004 was enacted on 25th June, 2004 and became effective on 1st July, 2004 to redress these problems in the scheme.

Enugu State as a component unit of Nigeria federation, is not immuned from these problems mentioned above, and is yet to start the process of adopting the new (Act 2004) contributory scheme which is perceived as a solution to the problems of the Pay As You Go Pension Scheme as shown above.  (Daily Independent May 13th,2014) As such, pensioners in the State are still suffering from the inherent problems in the administration of Budgetary Scheme discussed above since the State is still yet to adopt the new contributory pension scheme. 

1.2        Statement of the Research Problem

 The non-payment of gratuity and pension to retirees in Enugu State has become a problem since the creation of Enugu State on the 27thAugust 1991 from the former Gongola State. The budgetary system or defined benefit pension scheme were in operation in the defunct Gongola State which was inherited by the Enugu State till date. It was first controlled and managed by the Office of Establishment of the State before the establishment of the Enugu State Pension Board. 

 Prior the year 2000, the administration of pension and gratuity of workers in Enugu State had been an issue of serious concern. There are many records of unpaid pension and gratuity among retirees, stoppage of their monthly pension as well as delay in the payment of retirees their retirement benefits, among others. The non-payment of workers entitlement at the end of meritorious services in Enugu State has led so many retirees into abject poverty and subject of ridicule in some localities, which in turn mutilates their welfare in the State and thwarts their social ways of lives.  

In 2000, the Enugu State government deemed it fit to establish the Enugu State pension board and to provide for matters incidental thereto. The pension board following the law is mandated to ensure effective pension administration in the state via the budgetary or Pay As You Go Pension Scheme, to minimize the incidence of ghost syndicated pensioners, ensure efficient and prompt payment of gratuity to retired civil servants in the state, to further ensure regular payment of benefits to pensioners etc. (Enugu State Pension Law, 2000).

 In spite of the efforts by the government through the establishment of the Enugu State pension board in order to redress the aforementioned problems, there still seems to be an increasing cases of delay in the payment of pensioners‟ retirement benefits, under payment of pension and gratuity and the stoppage of the payment of pensioners‟ monthly pension to the extent that it forced or compelled so many retirees to involved themselves into  the act of some societal vices such as theft, loss of trust by their debtors, house to house begging and even fraudulent attitudes to earn living. The frequencies of these abnormalities recorded for example include 34 cases of under payment of pension and gratuity, 33 cases of delay payment of retirees, 20 cases of nonpayment of death benefits, 39 cases of omission of names from the pay-roll, 40 cases of loss of files of pensioners, and 37 cases of unpaid pension and gratuity within the period of the study (2004-2014) among others. In addition, some administrative or bureaucratic irregularities including the channeling of numerous grievances or complaints to the Public Complaints Commission (PCC) in Yola, are rumpus, (PCC Register of cases, 2014). As a result, many pensioners were owed months of pension benefits which hypothetically undermined their welfare.

 The study therefore attempts to investigate why retirees are suffering from cases of unpaid gratuity, pension and other related allowances in spite strides made by the Enugu State government by establishing the Enugu State pension board and charged with viable functions to mitigate the problems of pension and other related matters therein.

1.3        Research Questions

i.             To what extent has delay in the payment of pensioners‟ retirement benefits has affected the welfare of pensioners in Enugu State? 

ii.           How under payment of gratuity and pension entitlement affected the welfare of pensioners in Enugu State?

iii.          To what extent has stoppage of the payment of pension benefit affected the welfare of pensioners in Enugu State? 

1.4        Objective of the Study

The main objective of the study is to determine the procedures and way of payment of pension and gratuity to pensioners  in Enugu State . Specifically, the study seeks to:

i.                    Examine the extent to which delay in the payment of pensioners‟ benefits affected pensioners‟ welfare in Enugu State.

ii.                    Determine how under payment of gratuity and pension entitlements has affected the welfare of pensioners in Enugu State.

iii.                Determine how stoppage of the payment of pension benefit affected the welfare of pensioners in Enugu State.

1.5        Hypotheses 

Ho1:  Delay in the payment of pensioners‟ retirement benefit has no effects on pensioners‟ welfare in Enugu State.  

Ho2:Under payment of pensioners‟ gratuity and pension entitlements does not affect the pensioners‟ welfare in Enugu State.

Ho3:   Stoppage of the payment of pensioners‟ pension has no effect on pensioners‟ welfare in Enugu State.

1.6        Significance of the Study

         It prepare the mind of civil servant on the necessary and sufficient condition they must possess to be qualified for receiving pension and gratuity.

         It will help the civil servant to know the processes and ways involved in payment of pension and gratuity.

         It gives explanations on the processes and ways the civil servant must undergone before they can finally get their pension and gratuity.

         It also explains the kind of service or employment that are pensionable.

         It will help students who might wish to carry further research work or related topic.

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1.7   Scope of study

This study is meant to cover the procedures and ways of payment of pension and gratuity to retired civil servants in Enugu state.

However, data of this study were collected from Enugu state only due to financial and time factors. This research therefore concentrate on, in Enugu state .It was noted that there were some of pensioners in Enugu state.

It is assumed that from the pattern of development of pension and gratuity in Enugu state more than half of Enugu state will adequately provide information on the characteristic of the total population. It helps to provide quicker results than does the use of the whole population.

1.8 Limitation of the Study

This study is subjected to the limitation of time and finance. These also have necessitated the limitation of coverage.

Also, the researcher found it difficult to get the respondent to complete the questions.

Furthermore, it has not been easy getting information from the management staff of employers in Enugu state.

The obvious contributions to the nations economic well being in areas of job opportunities, source of finance for Government, public and private sectors of the economy makes the study of paramount importance.

1.9 Operational Definition of Concepts.

This aims at operational definition of all unusual terms whose meanings are not obvious or the meanings are not ordinarily known. Such terms are defined the way they occur or used in this study. This is to avoid confusion and misinterpretation by a reader. However, the researcher chooses to define such concepts or terms conceptually or authoritatively first, before operational definition will follow where necessary. This is to provide a reader better understanding and help to distinguish between the authoritative and working (operational) definition of each term.

1          Administration of Pension Scheme:  

According to John (1960) in Paul (2013) administration is the determined action taken in pursuit of conscious purposes. It is the systematic ordering of affairs and the calculated uses of resources, aimed at making those things happen which we want to happen, and at the same time preventing developments that fail to square with our intentions.Pension scheme according to Tijjani(2007) can be seen as government plan or program in form of policy through which retirees or somebody else pays regular amount of money to enhance the state of his welfare.

However, Administration in this study is operationally defined as the mobilization and direction of effective human and financial resources for the prompt, regular, continuous and correct payment of the retirees‟ retirement benefits (pension and gratuity) to the extent that there would be no delay in the payment, no under payment and no stoppage of the payment of pensioners‟ retirement benefits (pension and gratuity) in Enugu State Pension Board.   On the other hand, pension scheme is operationally defined as old budgetary pension scheme that is 100% sponsored by government or an employer.  

2           Delay in the payment

The Enugu state pension law section 8 (1) specified that the procession of benefits of retired civil servant of the State shall be completed and ready for payment one month to the officer‟s official retirement date to avoid financial handicap at retirement. Based on this provision, delay means if an officer is not paid his pension and gratuity as soon as he/she is retired.

However, delay in payment as used in this study or operationally defined as failure to pay the retirees their pension and gratuity within two months time (60 days) after their retirement.   

3          Under payment

Under Payment is operationally defined as the payment of the retirees their gratuity or pension less than the official amounts that were supposed to be paid to them.

4          Stoppage of Payment

This is a situation where the payment of monthly pension is suddenly cut-off or stopped and the retirees no longer get their monthly pension. 

5Pensioners’ Welfare: Williams (1976: 281) viewed welfare as a concept derived from well-fare that is “well” in its still familiar sense and “fare” primarily understood as journey or arrival but later also as supply of food, well-being, happiness, health and prosperity of a person. Also Pa‟ag (1993:31) perceived welfare as the evaluation assigned by the individual to income or, more generally, to contribution of our well-being from those goods and services we can buy with our money.

However, pensioners’ welfare in this study is operationally defined as the prompt payment of pensioners‟ pension and gratuity, no delay, non stoppage of pension and no under payment of pensioners‟ retirement benefits to the extent that the pensioners and their families can be able to: 

i.      eat three square meal of  balanced diet a day and drink clean water ii.         afford and access health facilities iii.           afford to pay children‟s school fees

iv.          Wear good and functional clothes and be able to change it over time.

v.            afford housing or shelter for themselves  vi.be looking healthier, happy and prosperous 

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