Impact of Pension and Gratuity on the Life of Retiree
Chapter One
OBJECTIVE OF THE STUDY
The main objective of the study is to ascertain the impact of pension and gratuity on the lives of retirees. But to aid the completion of the study, the researcher intends to achieve the following specific objective;
- To ascertain the efficiency of the pension board’s prompt payment of pension
- To examine the standard of living of the retiree as a result of their social insurance scheme
- To examine the relationship between pension administration and the quality of retirement benefit
- To investigate the role of the pension board in improving retirement benefit
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
Social security 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 to improve the living standards among the older category, particularly with similar shifts in pension reforms, payments and the maturing of pension plans. Although, less markedly than in the more developed countries, social security has also played an important role in the development process of many Third World Nations (Nitsch and Schwarzer, 1995; Holmann and Hinz,2005; UN, 2007). Social security is the range of collective social protection measures designed to provide compensation for loss or reduction of income. It is meant to affect financial hardships suffered by workers as a result of deprivation. Its primary objective is to ensure freedom from want by collective provision for those who, because of misfortune, are temporarily or permanently without sufficient resources for their subsistence. Social security is, therefore, a basic social protection provided to vulnerable members of society against deprivation and destitution. More recently, however, governments in developed as well as developing countries have come to view changes in the regulation of laws of their social security systems as key factors in the reform of the State. This paper critically examines the case of pension reform in Nigeria, and specifically its Pension Reform Act, 2004, as an example of this type of reform, in particular, emphasizing those aspects that could, at least both in practice and theory influence the living conditions of the older persons in the country. Attempt was further made to analyse the early results of the 2004 Nigerian pension reform to find out how effectively the scheme has been able to secure retirees in their later years. To achieve this important objective of the paper, relevant literature was reviewed to find out about the general performance of the scheme and also determine the grey areas that require urgent intervention. It may not be an easy task to measure the success of pension reform―whose effects are felt only in the long run―especially when it involves changes in the objectives that gave rise to the institution itself, and where previous experience is practically limited or nonexistent. Therefore, rather than presenting a conclusive analysis of the consequences of 2004 pension reforms on the household structure of older persons in Nigeria, the intention is to review the preliminary performance of the Act and further provide insights for future research concerned with the relationships between transformations in the pension systems and the well-being of the Nigeria retirees.
THE CONCEPT OF RETIREMENT
According to Buckley (1974), retirement is an inevitable stage of ageing where the individual gradually disengages from the mainstream of active work, and social work and is eventually replaced with younger ones. Also, Cole (1997) sees retirement as the time an employee reaches the end of his working life. Shea (1991) and Maisamari (2005) remark that retirement is an aged-long practice in both private and public service. Many people especially those who never thought of retirement as a necessity often looked dejected, frustrated and depressed when suddenly they found themselves retired. The idea of retirement is of a recent origin, being introduced in the 19th and 20th centuries. The standard retirement age varies from country to country but it is generally between 55 and 70 years. The restriction on the labour working age is to prevent an ageing labour force. Thus retirement is the act of an employee’s official disengagement from a regular/permanent career job especially because the employee has reached a particular age. This will prevent an ageing labour force by allowing entrants of young- able-bodied labour for increasing efficiency.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used a 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 and gratuity on the life of retirees.
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information for the study the impact of pension and gratuity on the life of retiree. 200 staff of Enugu state pension Board was selected 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 important to ascertain that the objective of this study was to ascertain the impact of pension and gratuity on the life of retiree.
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 of pension administration in Nigeria.
Summary
In response to the plight of older persons and their families as aggravated by the failure of the previous pension schemes to guarantee retirement income, the Nigeria government in 2004 introduced a new pension scheme known as defined contribution scheme in the country. With the enactment of the Pension Reform Act in June 2004, a new pension scheme came into force. This study analyses early results of the 2004 Nigerian pension reform. At the beginning of 2011, the internet survey of the new system of privately managed funded pension accounts covered around four million Nigerians in a country with a workforce of around 50 million people. Therefore, the paper found that, the reform has failed to contribute to basic social security in old age for the majority of Nigerians employed in the informal sector while the minority of covered workers are also likely to experience problems. The analysis of the early results of the Reformt indicates that, increased savings rates might not be desirable in a country characterized by large-scale poverty. Given the lack of basic social security in the present, forced saving for the future might not be rational or desirable either for individuals or for society at large. Using funded pensions to develop the Nigerian financial market to provide long-term funding for productive investment and higher growth in the future is an experiment rather than a precondition for development in the present.
Conclusion
The importance of pension provision will continue to grow as individuals begin to place less reliance on family to look after them in old age and begin to face the reality that they need to look after themselves by building a nest egg for the future. The success of the pension reforms largely depends on the sincerity, collaboration and commitment of all stake holders like government that sets out the regulatory framework; the regulator PENCOM; financial institutions who manage and administer contributions; individuals who pay and employers who must also contribute for their employees. Pension schemes aim at ensuring that public or the private sector retirees receive their retirement benefits as at and when due and assisting improvident individuals by ensuring that they save to cater for their livelihood during old age. Almost a decade after the reform scheme became effective; there is not much evidence to show that the scheme is leading the country in the desired direction. This will ginger and encourage more and more Nigerians to believe and look forward to a comfortable retirement. We are confident that the stories of pain and death associated with payment of pension and/or gratuities to retirees will be a thing of the past and be dealt a big blow. There should be significant pool of funds that would assure Nigerian workers of a happy retirement and at the same time the funds would contribute to the growth of the nation especially in pooling funds for investment (Bassey et al. 2008).
Recommendations
The Nigerian government should encourage the option of having the banks where the salary accounts of employees are domiciled to make the pension deductions on monthly basis and have it remitted to the concerned pension fund administrators (PFA) i.e. employers should stop deducting the pension contribution at source. The review of this role is necessary because, it seems the number of defaulting firms is on the increase.
There is need for public enlightenment campaigns on the merits of a contributory pension scheme with a view of introducing in the nearest future a way of mitigating some problems faced by retirees and pensioners in collecting their entitlements due to non remittances and improper documentations.
On the part of the regulator, there is need to address issues like non-remittance of pension contributions by corporations. The issues that cause non-payment of pension and gratuities to older citizens should also be addressed.
The 2004 Pension Reform Act should make provision for Nigerians living abroad who may want to contribute to the retirement scheme in Nigeria.
REFERENCES
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- Aaron, H.J. and Robert D. Reischauer (1998), “Countdown to Reform”, Century Foundation Press, New York.
- Abdul, S.J. (2004), “Pension Administration in Nigeria-The Past to the Present” Text of Paper One Delivered at the Seminar/Workshop for Accountants, Internal Auditors and Administrative Officers of National of National Orientation Agency, Lokoja – Nigeria.
- Abel, Andrew B. (1986) “Assessing Dynamic Efficiency: Theory and Evidence. NBER Working Paper No.2097.
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- AFL – C10 (1996), Capital Strategies: Leveraging Financial Resources to Strengthen our Work Places and Communities. A Digest for Union Leaders.
- AFL-C10, Washington DC. Ajit Singh, (1996). “Pension Reform, the Stock Market, Capital Formation and Economic growth: A Critical Summary on the World Bank’s Proposals.” Centre for Economic Policy Analysis, Working Paper Series.
