The Effect of Pensions Fund Management on Retirees in the Nigerian Police Force
Chapter One
OBJECTIVES OF STUDY
The main purpose of this study 1S to examine the effect of pension fund management and retirees in Nigeria (A case study of Nigeria Police Force, Ikeja).
Specific objectives include:
- To examine the various applicable rates
- To ascertain the problem of weakness in the administration system
- To suggest measures for combating the problem of unnecessary delay.
- To improve on the techniques for achieving desired goals
- To emphasis and postulate on a reasonable wage level for the personnel.
CHAPTER TWO
LITERATURE REVIEW
The Concept of Retirement
At face value the concept of retirement from employment is fairly simple. At a certain age you become able to retire and you stop working. Retirement has been defined as an exit from an organizational position or career path of considerable duration taken by individuals after middle age and taken with the intention of reduced psychological commitment to work thereafter. While some liken retirement to retirement because of its will fullness, the two concepts have been clearly distinguished (Adams & Beehr, as cited in Asonibare & Oniye, (2008). Where retirement signals a decreased involvement in work, retirement does not. Because of its unique nature, it is worthwhile to consider the reasons for which individuals decide to retire.
It could be argued, therefore, that the act of retirement was a progression to another stage of life where one was no longer required to work. Tyman as cited in Asonibare & Oniye, (2008), argued that the distinctions between retirement ability and eligibility became blurred as economic prosperity increased. The last four hundred years of western civilization have witnessed a fairly stable interpretation of the concept that we now accept as retirement (Tyman cited in Asonibare & Oniye, 2008):
Although the word ‘retire’ was first used in the 1600s, it connoted withdrawal from office or an official position to a country seat, that is, the exclusive preserve of an aristocratic elite who could well afford to withdraw. For the majority of workers, retirement (in the sense of word used today), occur at invalidity, the previsions of the English Poor Law acting as a defacto pension system. Thus, in the 18th and 19th centuries, 70 came to be regarded as the pensionable age because most people were considered incapable of working beyond it. In short, there existed a disability model of retirement (P., 1).
The concept of retirement has evolved through the industrial and technological revolutions of the twentieth and twenty-first centuries. Industrial relations reform, legislative change, workplace agreements, superannuation and commercial retirement funds had led to a redefining of retirement. Retirement was generally associated with age and was formally controlled through legislation argued, Whipple (2001). In the context of retirement the term ‘age’ referred to an individual’s chronological age, that is, the sheer number of years that one had been alive, as opposed to an individual’s functional age, that is, the ability of the body and mind to perform a role regardless of years. Retirement and age were therefore closely, but not inextricably, linked. It would have been fair to consider retirement as a shift from work to non-work at the attainment of a particular age but that definition failed to capture various modes of retirement that individuals ultimately pursued.
The concept of retirement that we associated with leisure, travel, family activities, hobbies, and educational pursuits is a modern idea. Asonibare & Oniye, (2008), argued that, the role of “retiree” and the stage of “retirement” we identify with today is a socially constructed concept that was created as a result of the passage of Social Security Act in 1935 in America. According to Wise (2012), with the creation of social security, a financial incentive or pension was made available to older workers to encourage them retire from the workforce and to enable younger workers take their place; thus stimulating economic growth and progress. He did not indicate whether the incentives are in form of pensions, annuities or insurance and if it is adequate and sustainable.
Retirement generally implies the terminal cessation, relaxation or changeover of financially remunerative employment. It is a life stage because it is a period of economic inactivity or a change over in one’s economic activity, socially and legally prescribed for workers in later life. Retirement is a phenomenon characterized by separation of the worker from paid employment, which has the characteristic of an occupation or a career over a period of time. It is essentially, a period of adjustment (Oniye, 2001).
The notion of ‘retirement’ itself can be difficult to capture. Oniye (2001), observed that no-one could really define who is retired and who isn’t. What might be considered as retirement to one may be viewed as a shift in priorities for another. As a concept, complete retirement could be defined in five ways: – Self-reported retirement (Anderson & Burkhauser, (as cited in Oniye, 2001, p. 6). Complete labour force withdrawal; or Receipt of a pension or social security income, Boaz, (as cited in Oniye, 2001, p. 6). Working less than a given number of hours (usually 1800) per annum, Holden, (as cited in Oniye, 2001, p. 6).; and a combination of the above, Haug, Belgarve & Jones, (as cited in Oniye, 2001, p. 6)..On the other hand, Partial retirement could also be considered as two distinct concepts: A decline in earnings and searching for new employment after quitting a career (Hanock et al (as cited in Oniye, 2001, p. 6).
For the purposes of this work, retirement was considered to be the complete exit from the organization (Police station) Service upon attainment of a prescribed age and its associated access to Superannuation (pensions) and gratuity/annuity. Superannuation was the means by which members of the Police officers were able to finance their move to non-work and was a compulsory component of their employment remuneration. (The history of retirement of Police force retirement benefit payments and its interactive links with the ever-evolving issue of Lump sum policy as against gratuity are very complex and uncertain in Nigeria.
Theoretical Framework
This section discusses some theories relevant to the research problem of retirement policy and Police force retirement. An effective theory of retirement policy and Police force retirement should not only limit itself to the issue of sustainability and adequacy of retirement benefits, but also how the political, economic and social considerations informed their formulation, sustain them and allow them to evolve as observed by Mulligan & Salai-Martin (as cited in Maikudi, 2006). Therefore, from the theoretical view point, this study drew its bearing from four theories; the power resource theory by Walter Korpi in 1983, the Equity and Fairness theory by Stacy Adams in1963, the Continuity theory of retirement by Robert Atchley in 1971, and the Life Course Perspective Theory by Glen Elder in 1985. These theories were selected because of their ability to provide viable link between the political, economic and social dimensions that informs retirement policy formulation and life trajectories that shape individual behaviour and its impacts on society.
CHAPTER THREE
RESEARCH METHODOLOGY
Research Design
The goal of the study was to investigate the impact of pensions fund management on Police force retirement in police stations in Lagos state, Nigeria and to achieve that, descriptive survey design was employed. Descriptive survey design was used in this study is because it was concerned with describing events as they are without any manipulation of what is being observed. Also, descriptive survey research design according to Tashakkori & Teddlie (2003), and Obalola (2010), is one in which a group of people or items is studied by collecting and analysing data from only few people or items (sample) considered to be representative of the entire group, and the finding from the sample is expected to be generalised to the entire population.
Target Population of Study
The population of this study comprised of all the Police officers in all the ten police stations and pension managers in Lagos State. The State is sectioned into three senatorial zones, which are Northern Zone, Central Zone and Southern Zone.
Sample Size and Sampling Procedures
The study purposively selected three stations ALAUSA, TRAFFIC PS and MAKINDE DIVISION on the fact that they were accessible and on pension scheme. The study also randomly selected a total of 300 Police men from 1193 population of the Police officers from three stations, using Taro Yamane sampling technique (as cited in Israel, 2015). Thus, 116 Police force were proportionally sampled from ALAUSA out of 461 Police force, 96 staff were sampled from TRAFFIC PS out of 381 Police force while MAKINDE DIVISION have 88 Police force in the study out of its total 351 Police force, with two (2) Pension Managers for each stations.
CHAPTER FOUR
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
Demographic characteristics of Respondents
The demographic data on respondents are presented using simple frequency and percentage according to stations. The data are presented and analysed as follows:
CHAPTER FIVE
DISCUSSION OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
Discussion of findings
This part of the study discusses the research findings based on the objectives, research questions and hypotheses of the study presented in the chapter four as follows:
Influence of retirement benefits amount and process on Police force retirement
To measure this objective, descriptive statistics of mean, standard deviation, percentage and Analysis of variance (ANOVA) were carried out on the effect of retirement benefit amount and process on Police force retirement in police stations. Analysis of variance (ANOVA) shows that retirement benefit amount and process was positively and significantly related to Police force retirement in police stations. The result indicates F-value 0.886, at degree of freedoms of 2 and 303, p-value 0.414. Therefore, since significant value (0.414) is greater than statistical significant (0.05), the null hypothesis stated that there is no significant difference in the perceptions of Police force on the influence of payment of retirement benefit on Police force retirement in police stations in Lagos state, Nigeria was accepted. This implies that the Police officers irrespective of their working stations do not differ in their perception on the effects of retirement benefits amount and process of payment on Police force retirement.
Conclusions
The rate of poverty in Nigeria especially among the older citizens is high, and the best method to minimize it is by providing social security package to both the working class and the unemployed which has proved difficult despite several attempts. It is the submission of this study that effective implementation of the pensions fund management is dependent on the judicious administration of the four objectives of the retirement policy (PRA, 2004) : to ensure that every person who has worked in either the public or private sector receives his retirement benefits as and when due; to assist improvident individuals by ensuring that they save to cater for their livelihood during old age; to establish a uniform set of rules, regulations and standards for the administration and payment of retirement benefits in both the public and private sectors; and to stem the growth of outstanding pension liabilities.
However, findings on the impact of the Retirement Policy (Pension Reform Act) 2004 on Police force retirement in police stations so far indicates that payment of retirement benefit to retirees is far from being achieved as many retired Police force and other employees are facing difficulties in getting their benefits paid as and when due. The results also show that, the none or delay payments of retirement benefits which drive its legitimacy from the rules and regulations in the 2004 PRA has diminished Police force trust in the policy and has caused them to seek other employments elsewhere living the police stations under staff.
Secondly, the Pensions fund management is still poorly administered because of its inability to meet its set targets of assisting improvident individuals by ensuring that they save to cater for their livelihood during old age and the continued mismanagement and misappropriation of pension funds that have characterized the Old PA YG System still persist.
Thirdly, the policy objective to establish a uniform set of rules, regulations and standards for the administration and payment of retirement benefits in both the public and private sectors unify those rules and regulations across all sectors of the Nigerian public and private sectors was not achieved as indicated by low coverage and disparities in pension benefits among ministries and parastatals. This has also enhanced academic desire for retirement to look for better paying organizations.
Fourthly, the fact that, there are still outstanding retirement benefits (yet to be paid) indicates that, pension and gratuity liabilities are still accumulating. Therefore, the growth in pension liabilities has not been stemmed. The funding of the new retirement policy has not also been adequate because of the accumulated liabilities mismanagement and outright diversion of pension funds. Also corrupt practices such as inflation of pension budgets and misrepresentation of pension liabilities have also contributed to the problem. These problems have continued de-motivate Police force; enhance their desire for departure(retirement) from these stations and to seek lucrative jobs elsewhere with good pay and retirement packages which implications for educational management.
Finally, the fear is that the pensions fund management may equally fail like the old PAYG scheme if the four objectives are not effectively tackled with required financial commitment, discipline and good management culture. Effective administration of these objectives may make Police force view retirement and the policy with positive passion and not a nightmare thereby enhancing their retention.
Retirement among Police force is also high enough to cause a lot of concern for effective management of education. In view of the above, it will be reasonable to conclude that Retirement Policy has significant effect on Police force retirement if they are poorly managed as the case with the Nigerian Retirement Policy (Pension Reform Act, 2004).
Recommendations for Practice
The following recommendations are made based on the findings of this study:
- On the amount and process of retirement benefit payment, the study recommends for the increase in the amount of retirement benefits through increase in contribution by increasing Police force pay package, and the process of payment should be simplified through removing unnecessary bottle necks and the establishment of PENCOM offices in all the 36 states of the federation that has the power and resources to compute individual retirement package without having to travel to Abuja. The pension management offices in all the police stations should also be empowered to process their staff retirement benefits.
- On Establishment of Uniform Rules, Regulations and Standards, the federal government should establish unified rules, regulations and standards across board and ensure that PENCON is solely responsible for the administration of the retirement policy. It should ensure that PENCOM puts in place adequate administrative tools like monitoring and supervision framework, relevant legislations and sanctions for defaulters. It should also ensure immediate prosecution of offenders and all corrupt practices.
- On enhancement of individual savings for retirement, the study recommended for federal government to as a matter of urgency ensures the increase and implementation of the take–home salary package which will enable the Police officers to save more for their retirement. The present low salary cannot permit the individuals enhance their savings for retirement because it cannot meet their monthly basic needs requirements effectively. This will also help to minimize the present rate of retirement among academics.
- On the growth of pension liabilities, the study recommends for immediate clearing of the outstanding pension liabilities through a onetime pay off. Therefore, Government should undertake a nationwide estimation and correct calculation of the outstanding liabilities and clear them by paying them off on the spot. Proper budgeting should enable the authority achieve that with adequate monitoring and supervision.
- In final analysis, the study recommends for a three component model of public (state apparatus), private operators and trade unions (pressure group) partnership for effective and efficient management of the pensions fund management to ensure it provides adequate benefits on a sustainable bases.
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