An Appraisal Of Contributory Pension Scheme And Retirees’ Welfare In Nigeria

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An Appraisal Of Contributory Pension Scheme And Retirees’ Welfare In Nigeria


Abstract


This study was undertaken to appraise the contributory pension scheme and retirees. The study opened with chapter one where the statement of the problem was clearly defined. The study objectives and research hypotheses were defined and formulated respectively. This study was carried out among selected retirees of the Lagos state Government. The data were analysed through Statistical Package for Social Sciences Software (SPSS) version 21.Based on the study conducted, this research gave the researcher room to conclude that contributory pension scheme is one of the essential ingredients needed in both public, private enterprise and corporate organizations because it has impact on efficient utilization of employees in achieving the present and future goals of an establishment.


Chapter One


Introduction

1.1 Background to the Study

Pension systems have become major elements of social development in the twentieth century, with particularly important effects on the well-being of older persons in our society. The past few years in Nigeria have witnessed concerted efforts by the various successive governments in the country at improving the living standards among the older category through Pension system, particularly with shifts in pension reforms, its payments and the maturing of pension plans.

It is well acknowledged in the literature that the responsibility of any government is to provide and sustain the welfare of its workers while in the service and after retirement. This is so because productivity and rate of growth are largely and positively related to incentives given to workers. This also has been recognized by successive governments in Nigeria as seen from various salary and pension reviews in the country. However, the essence of pension scheme is to provide workers with regular and stable income after retirement in order to cope with challenges of postretirement livelihood (Dogon-daji and Mukhtar, 2010). Hence, a worker who has worked in a given establishment for some years deserve some benefit which could take the form of pension or gratuity payable to the worker by the employer at the time of retirement.

Edogbanya (2013) viewed pension as a sum of money paid regularly to a person who no longer work because of old age, disability, retirement or to his widowed or dependent children by the state, former employers or from provident fund to which he and his employer both contributed.

The pre 2004 pension reforms had a number of problems that were adjudged to be against workers welfare, Olanrewaju (2011) and Dostal (2010) pointed out the major weaknesses of the pre 2004 pension reforms to include: Massive accumulation of debt estimated at over two trillion naira; large-scale arrears of unfunded entitlement of retirees; inadequate budgetary provisions coupled with rising life expectancy; increasing number of employers, wages and pensions; and inadequate supervision and regulation of pension system. These shortcomings adversely affected payments of retirement benefits to retirees in Nigeria.

Contributory Pension Scheme is a full funded pension scheme that tries to generate adequate funds (contribution) through savings. The scheme assists improvident individuals to save, and these savings are meant to satisfy the interest of the employee at retirement, shareholders, and also contribute effectively to economic development. Contributory Pension Scheme has been identified as an institutional investor that generates long-term contractual savings and stimulates the development of securities market (Mesike and Ibiwoye, 2012). Hence, this study presents a critical appraisal of contributory pension scheme and retirees’ welfare.


1.2 Statement of the Research Problem

The problems that have bedeviled the Pension Scheme that existed in Nigeria prior to 2004 have made it increasingly unsustainable. It was for these problems of increasing public expenditure/huge deficit, arbitrary increases in salaries and pensions as well as poor administrative structures, that the need for pension reform became inevitable. The problems were further aggravated with the constant political manipulation, besides non-payment of pensions for several years, which greatly lowered the welfare of retirees. Even the promised benefits were often inadequate due to rampant inflation against which pensioners had no protection, coupled with inaccurate record keeping that gave opportunities for corruption.

Although the new pension reform is guided by the key principles of sustainability, accountability, equity, flexibility and practicability, there is also this fear that funds or Retirees Savings Account (RSA) contributory can be mismanaged by the existing trustees. Also, risk of a given portfolio determines the return thereof. Some pension fund administrators do not have the necessary risk management profile while some fail to pay regard to rating signals needed to making sound investment decision.

In the face of all these, managing and administering contributory pension funds have continued to pose major challenge to Nigerian government. Yet, contributory pension scheme which guarantees employees certain level of comfort in their years of retirement has become a source of worry and concern to employees and retirees in the recent times. As it has become a common knowledge to see retirees forming unending queues in a bid to collect pension payment with occasional reports of untimely deaths due to the exercise.

The retirees under the old Pension Scheme are groaning because they are finding it increasingly difficult to access their retirement benefits several months and years after they have been discharged by their erstwhile employers and all these in turn, psychologically affect the welfare and performance of many Nigerian employees in the organization. It is against this backdrop that this study seeks to present a critical appraisal of contributory pension scheme and retirees’ welfare in order to confirm the adequacy and wellbeing of the retirees in Lagos State.


1.3 Objectives of the Study

The main objective of the study is to examine contributory pension scheme and workers welfare in Nigeria.

Other specific objectives include:

  1. To examine if there is any significant relationship between contributory pension scheme and retirees’ welfare in Nigeria.
  2. To investigate the effect of the contributory pension scheme on retirees’ life expectancy.
  3. To find out if the New Pension scheme is better than the Old Scheme in meeting worker’s welfare in Nigeria.

1.4 Research Hypotheses

These are statements that would be tested to determine the significance of the relationships between the variables being studied. The Null Hypotheses (Ho) represents the negative statement while the Alternative Hypotheses (Hi) represents the positive statement. Hence, the researcher intends to test the following hypotheses:

  1. H0; There is no significant relationship between contributory pension scheme and retirees’ perceived welfare in Nigeria.
    H1; There is significant relationship between contributory pension scheme and retirees’ perceived welfare in Nigeria.
  2. H0; There is no significant relationship between the contributory pension scheme and retirees’ life expectancy
    H1; There is a significant relationship between the contributory pension scheme and retirees’ life expectancy.

1.5 Significance of the Study

This study is of immerse importance.

  1. It would be of importance to the Government and policy makers to modify and improve on retirement laws in the country for better service delivery.
  2. It would serve as a source of literature and motivation for further research.

1.6 Scope and Limitations of the Study

This work is on the appraisal of the contributory pension scheme and retirees and Lagos state is our case study.
However, the following are the constraints encountered in the process of the research work.

Time:

Being a student with so much to do such as reading for the forthcoming examinations. Etc., time therefore, constitutes a constraint in the writing of this project.

Fund:

As a student with no steady sources of income, rather than the little form home. The present economic situation in the country today, has an adverse effect on the financial aspect of this research work.

Respondent:

Non-challant attitude of some retirees is also another limitation


1.7 Definition of Terms

It is very eminent to define some professional terms and language used in this work to make it easily understandable to interested readers of other disciplines.

Pension:

A regular payment made by the state to people of or above the official retirement age and to some widows and disabled people. It is a fund into which a sum of money is added during an employee’s employment years and from which payments are drawn to support the person’s retirement from work in the form of periodic payments

Retiree:

A retiree is a person who has permanently stopped working. Most retirees are 65 or older, they’ve worked their whole lives, and when they retire, or cease working, they’re taking a well-deserved break.


Chapter Five


Summary, Conclusion and Recommendations

5.1 Introduction

This chapter deals on the summary of the findings, conclusions of the study, recommendation, suggestions for further studies.


5.2 Summary of Findings

This study was undertaken to appraise the contributory pension scheme and retirees. The study opened with chapter one where the statement of the problem was clearly defined. The study objectives and research hypotheses were defined and formulated respectively. The study reviewed related and relevant literatures. The chapter two gave the conceptual framework, empirical and theoretical studies. The third chapter described the methodology employed by the researcher in collecting both the primary and the secondary data. The research method employed here is the descriptive survey method. The study analyzed and presented the data collected in tables and the hypotheses were tested using the Cronbach’s Alpha to test hypothesis. While the fifth chapter gives the study summary and conclusion.


5.3 Conclusion and Recommendations

Based on the study conducted, this research gave the researcher room to conclude that contributory pension scheme is one of the essential ingredients needed in both public, private enterprise and corporate organizations because it has impact on efficient utilization of employees in achieving the present and future goals of an establishment.

Furthermore, planning for employee stipend after retirement is vital to the financial strength of firms. Hence, effective pension measures will ensure that efficiency is kept at adequate levels which will assist in reducing redundancy, conflict and frivolity leading to increase profit and competitive advantage for the organisation through employee competency and productivity.

In accordance with the findings and conclusions arrived at, the following recommendations are suggested:

  1. Management should give adequate analysis to the function of pension scheme adopted and accord it the pride of place in the system. Employee should be recognised and motivated to see their ability and capability as important either towards the future of the organisation or individual life after meritorious service.
  2. Research has revealed that satisfactory pension provision serves as part of motivation as it helps to enhance employee performance and also assist to increase organisational productivity. Pension mode embarked upon by an organisation should be based on identified needs of the employees and should be objective to achieve the organisation goals as a going concern.
  3. The structure of the pension package means a lot to the workforce; hence organization should embark on an effective comparative analysis of its pension style before determining how its employees could be compensated. This will help the organisation to retain and attract competent employees and reduce wastage.
  4. Finally, regulators of the contributory pension scheme should at interval inspect the operators on prompt payment of retirement benefits to retirees to avoid frivolous deals and where found otherwise, sanction should be desirable to shield competency of the scheme.

An Appraisal Of Contributory Pension Scheme And Retirees’ Welfare In Nigeria


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