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          Pension and gratuity are worker’s entitlement after disengagement from service. There are the old and the new pension scheme systems. Based on the challenges experienced from the old pension scheme, the new pension scheme was given birth to in year 2004. Therefore, problems associated to the old pension scheme includes:
-   Inadequate financial support from Government.

-      Age limit for retirement was not specified

-      Haphazard approach to pension entitlement

-      Inadequate maintenance of staff record of service.

-      Large number of retirees.

Hence, the current new pension scheme tries to develop strategies to avoid the above stated problems by developing a standard table of reference for pension entitlements of staff either based on years of service or by age limit. Therefore, the appropriate age for pension benefits and withdrawal is 50 years of Age. 

The contribution of workers pension fund based on the July 2004 new pension scheme is 15%. As the employees contribute 7.5%, the employers contribute 7.5% which makes a total of 15% of the monthly salary.

On these bases, therefore, documents necessary for effective calculation of employee’s contributory pension are:

  1. Salary table as at June 2004.
  2. Accrued contribution as at retirement.
  3. Last promotion level and step
  4. Service years and % accrued
  5. Adoption of gratuity benefits.

This of course implies that each employee on retirement from service, his/her entitlement would depend on how much they contributed during their service years and as managed by the chosen PFA’s (Pension Fund Administrators).

The PFA’s execute their activities in line with the consent of PENCOM or (National pension Commission) as regulatory body. While the PFC’s (Pension Fund Custodians) saves the total contribution of both the employer and the employees. Therefore, the PFC’s includes financial institution e.g. First Bank, UBA, Zenith Bank and Diamond Banks.

There are also the closed PFC’s which refers to big organization like NNPC, PHCN, CBN, Shell etc that manages their own pension funds, because of their financial strength.

Pension Calculation

Ex. 1

Calculate the gratuity and monthly pension for Mr. XY whose 1st date of appointment with NCRI as a Researcher was 1/2/1972 and date of birth was 7/3/1950 if he retires in 1/2/2010 on grade level (conraiss) 12(9).


Years of Service with ref. to 2004 = 32Yrs

Total Annual Emolument=1,200,000.00{HATISS}

Gratuity Accrued = 276% T/E (3,312,00O.00)

Pension Accrued P.a = 74% T/E (888,000.00)

=>Accrued Right = 3,312,000.00

Contributory Pension b/w July 2004 to Jan.2010


AR + CP=4,312,000.00

Lump sum =50% of ARCP=2,156,000.00

Balance 50% of ARCP=Pension

Life expectancy=70yrs

Monthly Pension =N17, 966.66

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