Impact of Pension Fund Management on Economic Growth in Nigeria
Chapter One
OBJECTIVE OF THE STUDY
The broad objective of this study is to investigate the relationship between pension fund management and economic growth of Nigeria. The specific objectives are to:
- Examine whether pension fund investment leads to economic growth of Nigeria.
- Determine the effects of income from pension on economic growth.
- To determine whether economic growth is driven by pension welfare.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
Pension as a scheme is designed to cater for the welfare of the personable retired workers had for long gained global recognition and acceptance. Workers generally whether those in the public and private sectors are expected to live comfortable life devoid of any form of dependency after their successful retirement from active service. The working lives of employees move continuously towards a certain direction i.e. from employment, to grow, to retirement. Some are fortunate to save enough money to take them through the retirement period or the “rainy day” while a majority leaves the service with little or no savings at all. Ideally, there, governments and organizations need to identify a way of accommodating and adequately rewarding employees’ past efforts, through organized pension plans, so that it can achieve the goals of their existence (Rabelo, 2002). Essentially, this is often through different retirement policies which include the Defined Benefit (pay-as-you-go) scheme, the National provident fund scheme and in particular the new contributory pension scheme that is expected to be fully funded. However, some of the existing pension schemes seem inadequate and/or ineffective. In Nigeria, for instance, SAS 8 was issued in1991 to direct and guide businesses on the determination and reporting of pension and retirement benefits. Its growing tribute, however, emerges from divergent schools of thought namely, the contributory, the noncontributory and the hybrid schools of thought (Kantudu, 2005). The first school of thought, emphasizing on contribution, is advocated by most accounting standards setting bodies as well as by writers (Campbell and Feldstein, 2001). These scholars argued that should the employees contribute a certain percentage to the plan the employee will be able to receive the entire or part of the benefits at retirement, or in case of termination of appointment or dismissal. The hallmark of the contributory theory is operational efficiency in computation and funding. The second school of thought (the non-contributory) also advocated by some accounting setting bodies (McGill, 1984; and Byrne, 2003). According to this school, employers alone should fund the pension asset. The belief of this school was that the singular funding made by the sponsor encourages and attracts more qualified and dedicated employees into the organization. Under this arrangement, the benefit is defined by a formula, and pension at retirement is paid either as a lump sum amount or as a life annuity (SAS 8, 1991). Consequently, pension has in recent times increasingly attracted the attention of policy makers in many countries as a means of facilitating privately funded retirement income savings by an ageing workforce (World Bank, 1994). Managing and administering pension funds have continued to pose a major challenge to government in Nigeria. Yet, pension which guarantees an employee certain comfort in his or her inactive year is critical to the sustenance of the life of the individual and the society (Nkanga, 2005). In our society today, most workers are not covered by any reasonable form of retirement benefit arrangement while the few schemes suffer from poor management. According to Komolafe (2004), the Nigerian pension system in general is very much fragmented, lacks an adequate overall policy, a legal and regulatory framework and an empowered coordinating body to supervise it. As stated by Adegbayi (2005), Nigeria must avoid minor pension reforms that are repeated periodically because of political problems associated with such adjustments. Once Defined Benefits schemes are frequently redefined, they only create uncertainty of retirement benefit. Determined to solve the numerous problems of the hitherto unfunded benefits pension system in Nigeria, the Federal Government in June 2004 through the enactment of the Pension Reform Act, 2004, introduced a contributory pension scheme. The new pension system is based on individual retirement saving accounts managed by private financial institutions.
CONCEPTUAL FRAMEWORK
Adams (2005) in his assessment of pension, declared that pension is the amount paid by government or company to an employee after working for some specified period of time, considered too old or ill to work or have reached the statutory age of retirement. Similarly Ozor (2006) explained that pension consists of lump sum payment paid to an employee upon his disengagement from active service. He further stated that pension plans may be contributory or non-contributory, fixed or variable, group or individual, insured or trustee, private or public, and single or multi-employer. Robelo (2002) asserted that pension is also a method whereby a person pays into pension scheme a proportion of his/her earnings during his working life. The contributions provide an income (or pension) on retirement that is treated as earned income. This is taxed at the investor’s marginal rate of income tax. On the other hand, gratuity entails a lump sum of money payable to a retiring officer who has served for a minimum period of time.
According to Adebayo (2006) and Ugwu (2006), there are four main classification of pensions in Nigeria, namely, retiring pension, compensatory pension, superannuating pension and compassionate allowance. This was supported by Amujiri, (2009) who defined compassionate allowance as a pension scheme that is not admissible or allowed on account of a public servants removal from service for misconduct, insolvency or incompetence or inefficiency. In the same vein, Dhameji and Dhameji (2009) tried to link commitment to motivation and opined that commitment is also tied to how well an employee is motivated. Motivation here entails the process of influencing employee’s behaviour towards the attainment of organizational goals.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to examine the impact of pension fund management on economic growth in Nigeria.
SOURCES OF DATA COLLECTION
Data were collected from two main sources namely:
- Primary source and
- Secondary source
Primary source: Personal interview was conducted with staffs of National Pension Fund (PENCOM) and National Bureau of Statistics (NBS).
Secondary source: The secondary formed the major theoretical part that was derived through critical review of library and also other related literature (material written by others researchers).
POPULATION OF THE STUDY
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on the study impact of pension fund management on economic growth in Nigeria. 200 staffs of National Pension Fund (PENCOM) and National Bureau of Statistics (NBS) were randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY CONCLUSION AND RECOMMENDATION
INTRODUCTION
It is pertinent to note that this research was aimed at examining the effect of pension management scheme on economic growth in Nigeria, thus the topic “impact of pension fund management on economic growth in Nigeria”.
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges associated with pension reform scheme in Nigeria.
SUMMARY
The findings arising from the data obtained from both primary and secondary sources in the course of this research work are summarized as follows: The challenges and prospect in management of pension fund in Nigeria are
- Policy implementation; though has been one of the major challenge there has been prospect and improvement on supervision and regulation of the policy.
- Arrears of pension; there are prospect hence most of the arrears has been settled.
- Contribution of pension fund; the new act of 2004 allowed both private and public employees to participate and this brought improvement, growth and prospect in the management of pension fund industry.
- In assessing management performance on assets investment they were rated good.
- Use of biometric system has encouraged staff training, fraud detecting, and accurate debt of arrears to pension fund encourage, growth and prospects to the capital market.
CONCLUSION
The study is directed at examining the challenges and prospect of management of pension fund in Nigeria. These challenges which has been identify as contribution, non-availability of records/data, inadequate funding, use of biometric system, incompetent and inexperience of pension staff, uncoordinated administration, perpetual fraudulent activities/irregularities, improper investment of asset fund in a good portfolio, and unimproved bond capital market has witness some improvement and prospect in them. These were presented in the research. The research show that most of this challenges has been from time immeorial but drastic improvement and prospect are witnessed. Management has to speedy up in some areas where they are lacking behind especially on prompt and regular payment of pension. Education as we know is a bedrock of every society but experience are highly needed with good ethics and moral mind to handle issue concerning old people and their funds. No organization in the world can do without finance and fund. Therefore management should adopt the strategy that will move the organization forward and bring life to it.
RECOMMENDATION
Base on the finding and conclusion, the following recommendation are hereby made:
- Ethnics and moral standard should be built.
- Training and retaining of staff and management of pension fund in Nigeria should be adopted.
- More local and foreign seminars, and workshop should be conducted regularly to sensitize both workers, staff, management and pensioners.
- An institute/school of pension fund school be established to carry out most of the enlightenment function these to reduce cost of running training programmes.
- Prompt and regular payment of pension should be adopted and practiced.
- Ghost pensioners should be identified and wiped out.
- Adequate investment of asset fund portfolio of pension fund should be maintained.
REFERENCES
- Ahmed, M.K. (2007). “Outlook of the Nigerian pension sector”. PenCom, Abuja.
- Achimugu A, Ocheni SI, Akubo D (2015). Evaluation of the Contribution of Portfolios of New Contributory Pension Scheme on Nigerian Economy, European Centre for Research Training and Development United Kingdom.
- Adams RA (2005). Public Sector Accounting and Finance, Lagos Corporate Publisher Venture.
- Adegbayi A (2005). Pension Industry Development in Nigeria, Provision of Pension Reform Act, 2004. www.Leadway.com
- Aire JU (1974). Problems of Social Security in Nigeria. Quarterly J. Admin. 8(4):409-425.
- Ako MK (2004). Overview of the Contributory Pension Scheme; Paper Presented to the Nigerian Employers Consultative Association (NECA), Lagos. Monday 26th August, 2004 (accessed 11 April, 2016).
- Amstrong M (2010). Hand Book of Personnel Management Practice, (10th ed.), London: Kogan , P 221.
- Abromovitz, L. (2003), Protecting and Rebuilding Your Retirement. New York: AMACOM USA.
