Actuarial Assessment of the Sustainability of the Contributory Pension Scheme in Rivers State

This study conducts an actuarial assessment of the long-term financial sustainability of the Contributory Pension Scheme as implemented in Rivers State, South South Nigeria. The CPS was introduced to address the failures of the unsustainable pay-as-you-go pension model and requires both employers and employees to contribute a percentage of monthly salary to individual retirement savings accounts. Despite the structural soundness of the framework, concerns persist about contribution compliance rates, fund investment performance, and the adequacy of accumulated savings at retirement. This study uses administrative data from the Rivers State Pension Bureau and three licensed pension fund administrators operating in Port Harcourt for the period 2019 to 2023. Actuarial projection models are used to estimate replacement rates for representative contributor cohorts under alternative investment return, contribution compliance, and salary growth scenarios. Findings reveal that full contribution compliance combined with investment returns of at least 8 percent per annum produces adequate replacement rates above 50 percent for contributors with 30-year service histories. However, intermittent contribution gaps and lower-than-expected real investment returns reduce projected replacement rates to below 35 percent for many contributors. The study concludes that the CPS in Rivers State is financially sustainable under favorable conditions but vulnerable to compliance and return risk. It recommends a mandatory top-up contribution mechanism for workers with interrupted contribution histories.

Keywords: contributory pension scheme, financial sustainability, Rivers State, replacement rate, retirement savings.