The Role of Actuarial Valuation in Determining Pension Fund Liabilities in Nigerian Public Service

This study investigates the role of actuarial valuation in accurately determining pension fund liabilities in Nigeria's public service, with particular focus on the transition from the defined benefit scheme to the contributory pension framework. The Pension Reform Act of 2014 mandated proper actuarial assessment of outstanding defined benefit liabilities for public sector workers who qualified for grandfather provisions. However, compliance with this requirement across federal and state government agencies has been uneven. This study adopts a descriptive survey design, drawing data from interviews and questionnaires administered to 75 actuaries, pension administrators, and government finance officers across Abuja, Lagos, and Enugu. Secondary data from PENCOM annual reports and actuarial valuation certificates are also analyzed. The study assesses the methodology, frequency, and adequacy of actuarial valuations conducted for public service pension schemes over the period 2018 to 2023. Findings indicate that actuarial valuations, where conducted, consistently reveal significant underfunding of legacy defined benefit liabilities, with funding ratios below 60 percent in several states. Incomplete employee data and irregular valuation cycles were identified as the primary technical weaknesses. The study concludes that inadequate actuarial valuation practices expose future pensioners to significant income insecurity. It recommends that PENCOM make triennial actuarial valuation a mandatory compliance requirement for all public service pension schemes and establish minimum actuarial standards for public sector valuations.

Keywords: actuarial valuation, pension liabilities, public service, PENCOM, defined benefit.