Correspondence: Ade Ibiwoye, Department of Actuarial Science and Insurance, University of Lagos, Lagos, Nigeria. Tel: +234 80 3307 8121; E-mail: adeibiwoye@yahoo.com

¹studied Mathematics at the University of Lagos and Actuarial Science at the University of Manitoba, Canada. He has a PhD in Operations Research from the University of Ilorin and about ten years' cognate experience in the insurance industry as a consultant in pensions and employee benefits. Presently, he lectures actuarial mathematics at the University of Lagos, Nigeria. His research interest includes life and health insurance, actuarial modelling, and optimization modelling.

Received 9 July 2008; Revised 9 July 2008.

Abstract

The old pension system in Nigeria was bedevilled by many infrastructural defects and administrative inefficiency. It could no longer be sustained and had to be replaced. With the aid of a dynamic recursive model and data from a parastatal, this study determines how much an individual can expect to get at the time of retirement and compares this with what it would have been under the old system. It concludes that the new contributory scheme, although appearing sound in its design, still has some weaknesses that may make the realisation of the objectives of the pension reform elusive. It appears that the individual employee, in an inflationary economy like that witnessed in Nigeria, may have to make substantial additional contribution if he wants to realise the objective of maintaining a standard of living commensurate to what it was just before retirement. It advises that the regulator should enforce that contributions are remitted promptly in order to reap maximum benefit from the scheme.