By Bunkaya Gana
Before the Pension Reform Act was passed in 2004, the pension scheme in Nigeria was fiscally unsustainable, segmented, and inefficient. The scheme was governed by several pieces of diverse legislations, like the 1990 Pension Act for pensionable public officers that was non-contributory and based on a Defined Benefit and was marked by delayed payment, arrears, and poor funding.
For the private sector, the pensions were covered under the National Provident Fund (NPF) Act of 1954 and subsequently the NSITF Act of 1993. Although employer contributions were compulsory, the scheme was plagued by weak enforcement, poor record keeping, and low levels of transparency. Overall, the system lacked uniformity, accountability, and security, and these deficiencies were largely responsible for why the 2004 Act was promulgated.
In order to eradicate the inefficiencies in the then system, President Olusegun Obasanjo, inaugurated a Pension Reform Committee which then recommended a fully funded, contributory scheme to ensure timely payment of retirement benefits, reduce the government’s pension liabilities, harmonize public and private sector pensions, provide transparency and accountability through the establishment of the National Pension Commission (PenCom), promote a culture of long-term savings, and mobilize pension funds to spur economic growth and national development. These recommendations were then approved by the federal government and then submitted to the National Assembly which then enacted the Pension Reform Act, 2004, and subsequently amended in 2024.
In this article, I shall attempt to summarise a very salient section of the amended Act that most employers and employees are either not aware of or never gave attention to. This very crucial section is the reason why relations and beneficiaries of many deceased pensioners have been unable to access the balances in the Retirement Savings Accounts (RSA) of their deceased relations. This may be due to inadequate enlightenment by the Pension Commission and many Pension Fund Administrators whose responsibility is to encourage employees to comply with this very important section of the law. My engagement with some employees regarding this section of the Act showed that they are either not aware of its existence and importance or that they do not consider it important. Therefore, when you ask an employee to write his will, the first excuse for not doing so is that he has no assets to put in a will. Simple education and or enlightenment would have alerted him/her to the fact that his/her pension contribution, by virtue of the provisions of Pension Reform Act is an asset that is required to be recognised in his//her Will.
This very important law is section 8(2) of the Pension Reform Act, 2014 (as amended). The section particularly deals with the distribution of money from a dead employee’s Retirement Savings Account (RSA). It describes the legal and administrative framework that guarantees that pension funds are fairly, openly and lawfully transferred to the estate or beneficiaries of a deceased contributor. For clarity, Section 8(2) of the Pension Reform Act, 2014 (as amended) is reproduced hereunder:
“Upon receipt of a valid Will admitted to Probate or a letter of Administration confirming the beneficiaries under the estate of the deceased employee, the Pension Fund Administrator shall, with the approval of the commission, release the amount standing in the Retirement Savings Account of the deceased to the personal representative of the deceased or to any other person as may be directed by a court of competent jurisdiction, in accordance with the terms of the Will or the personal law of the deceased employee, as the case may be.”
Section 8(2) supra can thus be summarized as follows:
The balances in the RSA of a deceased employee can be accessed by his relations/beneficiaries through:
A Will properly prepared by the deceased employee and probated, wherein all beneficiaries are clearly identified.
Letters of Administration duly procured and containing details of the contributors Retirement Savings Account and his/her assets.
Application of the Native Law and Customs applicable to the deceased at the time of his death. This will be applied by the court in the absence of (i) and (ii).
Of the three options highlighted in section 8(2) supra, the option that is recommended, is the need for employees contributing to pensions to write a will detailing the names of the beneficiaries. If the deceased employee left a Will, the PFA’s would then find it easier to submit the probated Will for approval of the Pension Commission. Once the Will is approved by Pension Commission approves release of the balances in the RSA, beneficiaries of deceased employees are therefore able to, within few months of the demise of the employee, access the balances in the estate account.
The other options of either procuring Letters of Administration or application of Native Law and Customs of the deceased employee are expensive, cumbersome, takes time and/or are fraught with controversies. We therefore encourage all employees who currently contribute to pensions to consider writing a Will today. We also call on the Pension Commission and Pension Fund Administrators to encourage all employees to consider writing their Will immediately upon engagement as employees.
Key Takeaways
Section 8(2) of the Pension Reform Act of 2014 has made clear provisions on the modalities for dealing with pensions of deceased persons to the pension funds from being left unattended after an employee passes away. This stops false claims and unauthorized access while guaranteeing that only legitimate beneficiaries receive the RSA balance. Legal evidence, such as a valid will, a letter of administration, or a court order, is needed to verify the authenticity of the people claiming the money before any distribution is made. By guaranteeing that money is disbursed legally, this requirement preserves the integrity of the pension system in addition to safeguarding the interests of the deceased’s dependents.
Bunkaya Gana is the Managing Director/CEO of Greenwich Trustees Limited and can be reached on 08033335436 or [email protected].
