Pension reform raises some fundamental questions: What is a pension system? What is its essence? Why do governments intervene in this area in the industrialized world and increasingly in developing countries? (Modigliani and Murahlidhar, 2004).2.1.1 The concept of pensionPensions are a form of social security for retirees. It is supposed to serve as an additional source of income for retired workers when their current earning capacity ceases (Modigliani and Murahlidhar, 2004). It has been defined as “a sum of money paid regularly to a person who no longer works due to age, disability, etc., or to his widow or dependent children, by the State, by her former employers or from funds to which she and her employers both contributed” (Onifade, 2001). According to the third edition of the Longman Dictionary of Contemporary English (2000), the word Pension is a sum of money paid regularly by a government or business to a person officially considered too old or ill to earn money by working. Alternatively, pension can also be defined as a periodic payment to a person who has retired from work due to old age or disability (Chinwuba 2004).2.1.2 The concept of pension schemeA scheme or system of Retirement however is the set of plans, procedures and legal procedures for obtaining and setting aside funds to meet the social obligation of care that employers owe to their employees upon retirement or in the event of death or disability (NICON, Abuja). It is a structured method of providing economic security to an individual when they can no longer support themselves. As a pre-arranged and well-thought-out plan, it gives assurance to beneficiaries that the promised benefits are properly organized and will be delivered when appropriate (Onifade, 2001). It can also be considered as a financial plan by which a worker's benefits are paid whenever they become due in accordance with the rules of the plan (Chinwuba 2004).2.1.3 The essence and characteristics of pension schemesThe The main objective of a pension system is to help households achieve an allocation of vital resources by smoothing consumption over the life course, as postulated by the life cycle hypothesis (LCH). This is achieved by transferring resources from working life to retirement when incomes dry up (Modigliani and Muralidhar, 2004). There are essentially three reasons for the existence of pension plans. These are: social insurance, redistribution and savings (Modigliani and Muralidhar, 2004).