Under Section 80 of the National Pension Act, 2008, (Act 766), the Social Security and National Insurance Trust (SSNIT), in consultation with the National Pension Regulatory Authority (NPRA), shall review pensions in payment in January 2025.
This was announced in a press statement signed by Executive Director of Africa Center for Retirement Research (ACRR), Abdallah Mashud.
Section 80 of the National Pension Act, 2008 (Act 766) provides that “the Trust shall annually review the pension payment which shall be indexed to wage inflation rates of active members or another rate determined by the Trust in consultation with the Board of the Authority”.
In practice, however, SSNIT and the NPRA, agree on what is termed as the ‘Overall Rate’ by which pensions will increase for the coming year. Given the overall indexation rate, a ‘Fixed Rate’ of increase for each pensioner and an equally distributed ‘Flat Amount’ are determined. The Fixed Rate is equivalent to the previous year’s Annual Average Price Inflation Rate.
Basis of the protection
Emphasis is normally placed on the Fixed Rate because of its enormous impact on each pensioner’s absolute increment. The Fixed Rate is equivalent to the previous year’s Annual Average Price Inflation Rate.
As of November 2024, the increment in prices of goods and services (inflation) averaged approximately 23%. In essence, this represents the purchasing power lost by pensioners in 2024, which must be restored in January 2025.
Due to the SSNIT Scheme’s financial sustainability issues as highlighted in recent Actuarial Valuation Reports, the Social Security Administration has not indexed benefits fully to price increases (inflation) in the last four (4) years.
Pension increments have failed to keep pace with price increases and ultimately have imposed serious hardship on particularly low-earners. When inflation averaged 47% in 2022, pensions were increased by a fixed rate of 19%.
In 2023, inflation averaged a higher 40.28% but pensions were increased by a lower fixed rate of 10% in 2024. This has highlighted the inconsistencies in the implementation of the pension indexation provision.
In 2025, we expect a continuation of this trend, that is, the awarded Fixed Rate increment in pensions will be lower than the actual average price increases (inflation) of the previous year (due to scheme sustainability adjustment factors). We, however, do not expect the Fixed Rate of increment to be lower than 85% of the average inflation for 2024.
