Actuarial Modelling of Retirement Benefit Payout Using Makeham Mortality Law: A Case Study of Nigerian Federal University Lecturers

  • Olaronke Olufemi Oyelade
  • Ashim Babatunde Sogunro
  • Dallah Hamadu
  • ( paper pages. 221 - 250 )
The Nigerian Journal of Economic and Social Studies
Vol. 68, No. 2, July 2026
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Abstract

This study presents an actuarial analysis of pension sustainability for Nigerian university lecturers under the Contributory Pension Scheme (CPS). Salary progression was modelled using three approaches: a 3-year promotion trajectory, a multiple rates model, and an exponential function. The multiple rates model provides the best fit to the observed stepwise pattern of academic salary growth. Mortality was incorporated using Makeham’s law fitted to 2024 UN World Population Prospects data. The resulting sex-specific survival functions confirm a consistent female survival advantage across all ages. Fund accumulation over a 45-year career is projected under Pension Fund Administrator return scenarios ranging from 4% to 20%. Estimated retirement savings ranged from ₦101.71 million to ₦772.79 million, underscoring the dominant influence of investment returns over salary growth on final fund value. At an 8% rate, programmed withdrawals yielded gender-neutral monthly pensions that declined from ₦1.03 million for a 5-year payout period to ₦0.49 million for a 15-year period. In contrast, annuity payments were gender-differentiated and exceeded withdrawal amounts by 57% -152%, consistently favouring males due to their lower survival probability. These findings demonstrate that annuities outperform programmed withdrawals through pooled mortality credits, while benefit adequacy depends jointly on investment performance, payout period, and sex-specific mortality assumptions, thereby offering actionable guidance for pension administrators and policymakers.

Citation

Olaronke Olufemi Oyelade, Ashim Babatunde Sogunro, Dallah Hamadu. 2026. "Actuarial Modelling of Retirement Benefit Payout Using Makeham Mortality Law: A Case Study of Nigerian Federal University Lecturers" The Nigerian Journal of Economic and Social Studies, 68 (2): 221 - 250.

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