The Impact Of Contributory Pension And Gratuity Scheme In Public Service (A Case Study Of Federal Polytechnic Nekede Owerri)

Project and Seminar material for Public Administration

Project and Seminar material for Public Administration


Abstract


This project work is focused on the impact of pension scheme in Nigeria public services dated back from 1951. The various pension scheme introduced and used came as a result of various constitution reform that took places before Nigerian attained independence status in 1960 and republication status in 1963. The entire scheme operated failed both the British and those introduced during Nigeria republic and till date.

The “Olusegun Obasanjo regime” through its wisely to introduced the latest pension scheme of 2004, to ensure that retirees are paid their retirement benefit immediately they retire from active service. In establishing the 2004 act No 2 on pension reform “the private sectors was also incorporated in the scheme. Obasanjo regime saw the need to establish a pension scheme that will cover both the public and private sector of Nigeria economy. In this an attempt shall be made to expose the previous scheme both the public and private sectors of our economy


Table Of Contents


Preliminary Page(s)

  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of content

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objective of the study
  • 1.4 Research Questions
  • 1.5 Significance of the study
  • 1.6 Scope of the study
  • 1.7 Limitation of the study
  • 1.8 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Introduction
  • 2.2 Objective of the scheme
  • 2.3 Structures of pension schemes
  • 2.4 Mode and method of contribution of the scheme
  • 2.5 The scheme as it affect the private sector
  • References

Chapter Three

3.0 Research Design and Methodology

  • 3.1 Introduction
  • 3.2 Research Design
  • 3.3 Sources / Methods of Data Collection
  • 3.4 Population and Sample Size
  • 3.5 Sampling techniques
  • 3.6 Validity and Reliability and Measuring Instrument
  • 3.7 Methods of Data Analysis

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 Introduction
  • 4.2 Presentation of Data
  • 4.3 Analysis of Data
  • 4.4 Interpretation of Results

Chapter Five

5.0 Summary, Conclusion and Recommendation

  • 5.1 Introduction
  • 5.2 Summary of Findings
  • 5.3 Conclusion
  • 5.4 Recommendations
  • References
  • Appendix
  • Questionnaires

Chapter One


1.0 Introduction

1.1 Background Of The Study

Pension can be seen as a periodic payment made by an employer to its employee until death, this is in consideration of the past service rendered to the establishment. This payment is made to an employee during his / her life time to enable him live and enjoy some or all the essentials he was used during his working life. Guardian (2002).

Gratuity is part of retirement benefit paid in lump sum to a retiring officers this lump sum is paid once to this officers who has served in public service.

Basically during the pre-colonial rule in Nigeria our people were very conscious of providing for themselves (in advance) what to eat at old age. They were very much engaged in domestic activities that yielded for them some were trades hunters crept makes and above all farmers. From these activities they made wealth some marry as many wives they needed had many children. And this children were trained so that they can cater for their parents at old age. Some of them save a lot of money waiting for their death.

These were activities demoting the provision that should be made for old age when the body might have become weak. This in true sense was a form of pension scheme. Other recognized pension and gratuity scheme in Nigeria dates back were from the colonial rules and administration of the country by the British until 1960 when Nigeria attained independence status and from 1963 October 1st. it became a full republican nation and public service were fully Nigerians. In 1963 republican constitution of Nigeria ushered in fully public service to suit the interest of the public servant.

However it can not be ruled out that clues were drawn from the British style to the public servants. Since then the scheme are been reviewed periodically till the present contributory pension scheme 2004. For instance Oruebor A.A in his book on public Administration (theories and element) stated that after the general Nigeria civil service strike 1945 the British Government set up the sir Walter Harragin commission in 1947 to review the condition of service. The book stated in addition that Harragin commission introduced voluntary retirement at the age of thirty five (35) from this time the innovation came to been till date.

The old pension scheme known as the national provident scheme (NPS) replaced Nigeria social insurance trust fund and new contributory pension scheme Oruebor A.A further stated that the Udorji commission appointed by Yakubu Gowons government on September 25, 1972 was charged to review other condition of service examine the legislation relating to pension. Therefore the public “Contributory pension scheme” is not out of place as the latest in practice.

The contributory pension and gratuity scheme has played a lot of impact in the life of the retirees both in public and private sectors. The contributory pension scheme in Nigeria was enacted into law in the year 2004. This act of 1990 which was a review of pension decree 102 of 1979 and others. And this viewed the payment of pension and gratuity from the consolidated revenue fund. When the pension was no longer adequate to meet the demands for fund to pay pensioner only government now absorbs the entire cost.

The Obasanjo government of 2004 saw the pending problems associated with the existing pension scheme which is know as the Obasanjo contributory pension scheme reform. The enactment of the pension reform act of 2004 no. 2 came into force on 25th June 2004. The scheme covers the overall employers of the Nigeria economy i.e. it is nor only for the public sector, companies and organization that have employee and employers relationship. These two sectors (public and private) work toward a sustainable and development growth of the economy.

The scheme is “mandatory and not optional” for application and implementation of all employee in the public service the federation (Federal state local government and federal capital territory (Abuja) and private sectors.


1.2 Statement Of The Problem

This year 2013 is the seventy two (72) year the contributory pension and gratuity scheme came into force in Nigeria, unfortunately the issue of pension and gratuity is still a big problem to the nation and among retires. Most of the problem faced by the retires are;

  1. Poor management
  2. Termination of appointment
  3. Employers bankruptcy

The problem of poor management is one of the problem faced by the retires because some of the feels that government work is handled by leisure faire were by suffering the retirees. However the above problems and other to come letter should be addressed. And pension system of Nigeria was largely characterized by pay as you earn (PAYE) which is a non-contributory pension scheme and was be deviled by many problem. And this problem contributed to a set back for the scheme this includes non-availability of records, uncoordinated administration inadequate functions, outright fraud, irregularities, conflicting laws diversion of remitted or allocations fund and presence of ineligible pensioners on the pension pay role and this makes it imperative to embark on reform to restore the hope of pensioners and the entire Nigeria workers.

The pension scheme act 2004 stated that in section (3) (1) that not withstanding the provision of sub-section (2) of section 10 of this act states that any employee who are at the commencement of this act is entitled to retirement benefit under any pension scheme existing before the commencement of the act, but any employee who has (3) or less years to retire shall be exempted from the scheme.

By this provision it means that calculating from June 2004 3 years exemption period expires on June 2007 therefore any employee who will retire from July 2007 is not exempted but should be included in the scheme. Now that the pension and gratuity of public worker are not been paid at the actual time what will not happened to those retires who retired since 2007, until now there gratuity have not been paid. This posses a very big problems to the retires because some of them has developed heart failure while some lost their life as a result of the trauma.

Finally the contributory pension and gratuity scheme would have bring a lasting solution to this problem but up till now the appropriate measure for the scheme to take off has not been made despite the compulsory and mandatory nature of it most of the money that are been relied for pensioners were with held and corners into private accounts for the interest their pox living the pensioners at their own faith.


1.3 Objective Of The Study

In view of the forgoing statement of the problem, therefore it is necessary to carryout this study with a view of identifying the causes or impediment of the scheme in Imo State and with particular reference to Federal Polytechnic Nekede Owerri. Also an attempt shall be made to find out the real aims and objective of Federal government in introducing the scheme. Therefore the objectives of this study can further be stated as follows.

  1. To investigate what the federal government really has in mind for introducing the scheme.
  2. To find out weather the new scheme has advantage over the old scheme.
  3. To really know weather the scheme can contribute to the nation economic growth and development.
  4. To establish a derivable benefit or loss by the employee.
  5. An attempt shall be made to review the old pension scheme in order to have a clear assessment of the view scheme.
  6. It is also necessary to find out similar scheme to contributory pension scheme that has existed before in Nigeria or weather the scheme is completely new and strange.

1.4 Research Question

The oral research question raised in the course of this study shall be drawn from the statement of the problem. This is in view of the fact that the scheme has been implemented in Federal Polytechnic Nekede Owerri and Imo State.

  1. Do you know about the contributory pension scheme?
  2. Has it been implemented in Federal Polytechnic Nekede and throughout Imo State?
  3. Are there skilled staff to turn the scheme?
  4. When did the scheme take off?
  5. Has adequate structure been put in place to run the scheme?
  6. How do employees feel about the scheme?

1.5 Significance Of The Study

This study is very important because the pension scheme is completely very new to most employers of today. Also this is the third time pension scheme cuts across the entire public and private sectors of the Nigerian economy. All this years Nigeria has been running pension scheme in its public service style from the British pattern. The study shall therefore help to make effective comparism between the old pension scheme and the new scheme.

The new pension scheme (2004) PRA is the most recent legislation of the Federal government aimed at addressing the associated problems of the old pensions scheme. This study help us to unravel the problem of retirees pension and the expose the aim and objective of federal governmental introducing the scheme.

The work will also highlight the demerit and merit that is associated with the schemes, with the view of establishing weather the scheme favours the retires or not. Also the impact the scheme has employee shall be expose because the impact may be negative or positive both depending on our findings.

Finally the course of implementing the scheme solution shall be made for effective and efficient management and administration of the scheme. The scheme suffered a lot of problems as highlighted by many scholars like Aron, Edith Chinelo Inhorticle.


1.6 Scope Of The Study

The study covers the impact of contributor pension and gratuity scheme in public service and the academics and non academics of federal polytechnic nekede. Information was base on primary and secondary data from senior staff commission Federal Polytechnic Nekede.


1.7 Limitation Of The Study

It is necessary to highlight some of the problems. The researcher encountered in course of carrying out the research work they includes;

Financial Constraint:

This is one of the problems that delayed my work. Base on the fact that there are some vital information that are needed for the success of the work which finance hinders.

Delay in getting vital information by some public servants in Federal Polytechnic Nekede and this becomes problematic in the research work especially in completion of the questionnaire given to them.

Time Constraint:

That is combining my studies with the research work was a serious problem in carrying out the research work.

Weather Condition / Climatic Condition:

There some time ram will hinder my movement in carrying out the research work.


1.8 Definition Of Terms

Good research ethics demands that terms be defined in right sense where they are used to remove any ambiguous meaning. The following terms are defined as they are used in the study;

Scheme:

Refers as pension arrangement for employee on retirement.

Old Scheme:

This refers to an existing pension scheme before the latest contributory pension scheme.

New Scheme:

This refers to the contributory pension scheme.

Contributory Pension Scheme:

This refers as the employer and employees contribution on monthly basis for employees retirement benefit (71/2% each)

Employer:

This refers to the body or organization that pay the employee for the services done.

Employee:

This refers as a worker service sealing for working for an organization for a period of time before retirement.

Retirement Benefit:

This refer as money or right that is given or due to any employee on leading or refiring from service.

Pension:

This refers as financial consideration periodically paid to a former and retire employee.

Monthly Pension:

This is an amount payable to a retired employee on monthly basis till death.

Gratuity:

This refers to a bulk money payable to a retired employee once.

NPF:

Refer as National Pronounce Fund.

NSITF:

Refers as National Security and Insurance trust Fund.

Public Sector:

This refers to government public service including government palatals.

Private Sector:

This refers as private and limited liabilities companies operating independently from government.

Superannuation:

This is a form o country pension scheme operating in the church of Nigeria e.g. Anglican commission.

Voluntary Retirement:

Refers as when a work leaves the service or vacates his will without attending the maximum age for service or completing the maximum period of service.

Compulsory Retirement:

This is a situation where by worker is forceful retired from service according to the wish of the employer.

Saving Account:

Refers to the bank account where contributions of both employee and employer are paid in for the employee and retirement.

PTA:

Refers to pension Fund Administration

PTC:

Refers as Pension Fund Custodian

NPC:

Refers to National Pension Commission

Harmonization Of Pension:

This refers as the upwards review of the monthly pension in line with the upward review of the salary structure.


Chapter Five


5.0 Summary, Conclusion And Recommendation

5.1 Introduction

In this chapter the study has been able to evaluate the impact of pension and gratuity in the public service using federal polytechnic nekede as a case study based on the that research here by summarized the findings conclude and them recommend on a way forward in the issue of pension and gratuity in public service.


5.2 Summary Of Findings

To establishing the findings in this study a case full review of the provisions of the old pension scheme and the new pension scheme. These therefore formed the basically of the findings in the over all study were expressed in form of the merits and demerits of the two scheme. These would help in summarizing and concluding the study for effective recommendations to be made for the success of the new scheme.

The attention given to the two effective comparisons enable us to find out the real impact the new scheme has on the employee in general including federal polytechnic staff. This is because the federal polytechnic staff and other civil servants running the same salary structure as established by federal government at any point in time.
Moreso, it objective of the scheme centered primarily on the reformation of the old pension scheme, for the betterment of the workers at retirement and for improved economic advantage to the nation.


5.3 Conclusion

From the objective point of review contributory pension scheme is well and good because a retiree will or without any rigorous process being to earn and draw from his savings account as his right immediately he leaves the service. But from the subjective the basic principle and objective for which the British introduction pension scheme for Nigeria civil servants in 1951. The policy should have been the total responsibility to the government to pay into the employee’s monthly emolument in the preparation for his retirement. This is because pension right were basically the employee appreciation for a job well done to a worker that served mentoriously for an approved record of time whether the workers retired on grounds of old age or length services.


5.4 Recommendation

The researcher have the following recommendation as regard to the impact of pension and gratuity in public service.

  1. In Nigeria, government should revisit and review the law and make the 15% monthly pension contribution by the employer and employee, the absolute responsibility of the employer based on the employee’s monthly emolument.
  2. On the part of Imo state and federal polytechnic nekede, efforts should immediately be made for adequate and implementation of the new pension scheme, since the scheme is strictly compulsory. This will save the state from being sanctioned by the federal government and also save her employees who are due for retirement since 2008 and after.
  3. Imo State should undertake the appropriate procedure to set up all the machines required for the implementation of the scheme these include setting state pension departments throughout the state public services including the local governments. All these and other structure are prescribed in the pension reform act of 2004.
  4. On another note sufficient awareness about the scheme should be created more with in the employee cadre for whom the scheme is meant for and this can be achieved is meant for and this can be achieved by government organizing series of workshop and seminars for the worker and the emphasis of labour.
  5. In view of the technicalities involves in pension management administration and computation in this our compute age its manpower to handle the job that should be provided and skilled labour is not available it becomes necessary. Therefore knowledgeable people should be remitted and trained on the job in federal polytechnic nekede the service should alice to his responsibility in the aspect of his functions. This is because since pension matter are being related from his office throughout the nations. The scheme will not be implemented without the relevant guidelines and regulation on the implementation of the scheme to all ministries parastatals, government agencies and local government.

In view of the above, I sincerely suggest that central bank of Nigeria (CBN) should have been the best body to serve as the pension fund to administrator (PTA) for they are pension scheme.


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