Explainer: DBS: How pension harmonisation could finally end decades of unequal retirement pay

For years, two retired civil servants could have worked side by side, held the same grade level, served the same number of years and retired honourably, yet receive significantly different monthly pensions simply because one retired earlier than the other.

That long-standing anomaly is what the Pension Transitional Arrangement Directorate (PTAD) hopes to correct through the implementation of the Defined Benefit Scheme (DBS) Pension Harmonisation, a policy that could substantially improve the income of thousands of retirees under Nigeria’s old pension system.

Rather than being another routine pension increase, PTAD says the reform fundamentally changes how eligible pensions are calculated, potentially leaving many pensioners better off for the rest of their lives.

Many retirees under the DBS have become accustomed to occasional pension increments announced by government. Those increases simply add a percentage to what pensioners already receive.

Instead of applying a flat increase, PTAD will recalculate eligible pensions using the latest approved salary structures that existed before the Defined Benefit Scheme was closed. This means pensions will be aligned with the position a retiree attained, their grade level and years of service, rather than being tied to when they left service.

For thousands of pensioners, the difference could be substantial.

Imagine two directors who spent 35 years in the federal civil service and retired from the same ministry. Under the old arrangement, the officer who retired several years earlier could be receiving a significantly lower monthly pension than a colleague who retired later, despite having virtually identical careers.

Under pension harmonisation, PTAD says both pensions would be recomputed using the same approved salary structure, narrowing or eliminating those disparities.

According to Tolulope Abiodun Odunaiya, executive secretary and chief executive officer of PTAD, the harmonisation exercise represents one of the biggest reforms undertaken since the Directorate was established in 2013 to manage pensions under the old federal pension arrangement.

She described the initiative as a landmark reform designed to restore fairness, improve retirees’ welfare and strengthen confidence in the administration of the country’s legacy pension system.

“The objective is to ensure that retirees who held similar positions and rendered comparable years of service receive equitable pension benefits regardless of their retirement dates,” she said.

She said the reform was approved under President Bola Tinubu’s Renewed Hope Agenda and seeks to address one of the most persistent complaints among pensioners under the DBS.

For years, pensioners have complained that the timing of their retirement often determined how much they received, creating wide gaps between retirees with similar career histories.

These differences emerged as salary structures changed over time, while many earlier retirees continued receiving pensions calculated using older pay scales.

PTAD says the harmonisation exercise is intended to correct those historical imbalances by formally recomputing pensions using approved salary structures that were in place before the Defined Benefit Scheme ended.

In effect, pension outcomes will now reflect what retirees earned during service, rather than the particular year they retired. The Directorate believes this approach will improve social justice by correcting inequities that disadvantaged thousands of pensioners.

Eligible beneficiaries include pure Federal Government pensioners, as well as qualified retirees under the Parastatals Pension Department (PaPD), the Defunct and Transferred Agencies Pension Department (DTAPD), and the Treasury-funded Education and Health Pension Department (TEHPD), particularly those who initially served under the Federal Government before their agencies were transferred to state governments.

For many of these retirees, the reform could mean higher monthly pensions, improved financial security and the assurance that their retirement benefits more accurately reflect the careers they devoted to public service.

For pensioners who have spent years calling for equal treatment, the harmonisation exercise represents more than an administrative adjustment. It is an attempt to ensure that two people who did the same job, earned the same rank and served the same nation can finally retire on a more equal footing.