ABSTRACT
The pension scandal
in Nigeria its impact on public fund management with special emphasis on
Nigeria Life and pension commission. Looked at the problems why government get
involved in pension matters all over the world as the following; formulating
and layingdown the legal framework of pensions management, the pension form
management itself and the regulation of pension schemes which culminated into
the major objective which is generally setting towards ascertain the impact of
pension scandal on public fund management. However this research problems were
solved by formulating the research question and hypothesis. The research
adopted the descriptive research method which uses questionnaire as major
source of collect primary data. This is primarily to solve the formulated
hypothesis as well as answer the research question. The population of this
research was determined using the Taro Yamane formular and the hypothesis were
tested using the chi-square test. However the following were discovered during
the course of these study there is a well establish legal
framework for the Nigeria pension board. Secondly of course, by the
individual member and one must ripe whatever he sold thirdly it de-emphasis the
lum-sum payment of graudities and the removes pension administration from the
public sector. The following were recommendations were professional should
employed to man and strengthen the internal control of the Nigeria pensions
board among others.
TABLE
OF CONTENTS
Title page - - - - - - - - - - i
Certification page - - - - - - - - ii
Approval page - - - - - - - - - iii
Dedication - - - - - - - - - iv
Acknowledgement - - - - - - - - v
Abstract - - - - - - - - - - vii
Table content - - - - - - - - - viii
CHAPTER
ONE
Introduction
1.1 Background of the study - - - - - - 1
1.2 Statement
of problem - - - - - - 8
1.3 Objective of the study - - - - - 11
1.4 Research questions - - - - - - - 11
1.5 Research hypothesis - - - - - - 12
1.6 Significance of the study - - - - - - 13
1.7 Scope and limitation of the study - - - - 14
1.8 Definition of terms - - - - - - - 15
References - - - - - - - - 18
CHAPTER TWO
Literature Review
2.1 Highlights of the contributory pension scheme in Nigeria 19
2.1.2 Exempt
Individuals - - - - - - - 19
2.1.3 Transitional
provisions for the public sector existing
Pensioners - - - - - - - - 20
2.1.4 Retirement benefit bond - - - - - - 20
2.1.5 Retirement
benefits bond redemption fund - - 22
2.1.6 Transitional provisions for the private sector private pension
Schemes - - - - - - - - - 22
2.1.7 Safeguards
for the pension scheme - - - 25
2.1.8 Benefits - - - - - - - - - 28
2.1.9 The
national pension commission - - - - 30
2.1.10 Governance
structure of pen com - - - - 31
2.1.11 Activities
of pen com - - - - - - 32
2.2 Elements of the new contributory pension
scheme - 34
2.2.1 Contributory
system - - - - - - 35
2.2.2 Life
insurance policy - - - - - - 38
2.3 Building on the
success of recent pension reforms - 40
2.3.1 Further deepening
of the capital markets - - 42
2.3.2 Enhancing Finance
of Nigeria’s considerable
housing needs - - - - - - - - 44
2.3.3 Governance as a
lynchpin for financial sector
Development - - - - - - - - 45
2.3.4 Strengthening
creditor rights - - - - - 48
2.3.5 Modernizing the
payments systems infrastructure - 49
2.4 The Nigerian pension system and the private
pension - 51
2.5 Effect of pension to Nigerian society - - - 53
2.6 Legacy pension schemes - - - - - - 53
2.6.1 Measures needed to
reduce high fee rates in Nigeria- 57
2.7 State Level Pension Legislation Versus
Federal pension law - - - - - - 61
2.8 Mandate and independence of Pen Com - - - 64
2.9 PFAS’ and Pen Com’s relationship to financial
service providers and other regulators - - - - 67
2.10 Pension Scandals in Nigeria - - - - - - 72
2.11 Expected Developments in the Near Future - - 76
References - - - - - - - - 77
CHAPTER THREE
Research
Design and Methodology
3.1
Research Design - - - - - - - 79
3.2
Sources of Data - - - - - - - 80
3.3
Population and
Determination of Sample Size - - 82
3.4 Methods of Investigation - - - - - - 87
Reference - - - - - - - - - - 88
CHAPTER FOUR
presentation analysis and
interpretation of data
4.1 Analysis of Data - - - - -- - - 89
4.2 Test of Hypotheses - - - - - - - 99
CHAPTER FIVE
Summary
of Findings, Conclusion and Recommendation
5.1
Summary of Findings - - - - - - - 111
5.2
Conclusions - - - - - - - - 113
5.3
Recommendations - - - - - - - 115
Bibliography - - - - - - - - - 118
Appendix - - - - - - - - - - 120
Questionnaire - - - - - - - - -
121
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
The concept of pension
could be said to be as old as man and his working environment. Even in
primitive time, man was inclined to put aside something, in cash or kind, but
mostly in kind to take care of the rainy day. The rainy day also included old
age. In modern times it is generally conceived as the sum of money paid
regularly by employers to former employees who have retired from their service
usually as a result of attaining a fixed age limit in service or due to other
reasons like sickness, widowhood or disabled people, or by former employers or
financial institutions to retired people. Pension fund or pension plan or
pension scheme is a system in which people receive a pension according to how
much they have contributed to the pension fund.
Longman (1995) defines pension as an amount of
money paid regularly by government or company to someone who can no longer earn
money by working for government or employer especially because of old age or
sickness. Raji (2006) defined pension as a post-employment benefit paid to a
pensioner to make that person financially independent at old age. From these
definitions, the general notion about pension is that it is an arrangement made
in the present (now) in order to secure an income in the future (later), which
involves both the employer and the employee.
On the concept of
retirement, Raji (2006) sees it as post employment; Longman (1995) as stop
working at one’s job usually because of age, while Oxford Advanced Learner’s
Dictionary explains it as the event or state in which one stops doing one’s
regular work/job especially because one has reached a particular age. The
particular age for retirement is different in different countries and for
different jobs in certain cases. The United States of America (USA) for
instance, through its Social Security Act (1935), designated the people aged 65
and over as aged. There is no such Act in Nigeria and no such clear cut
designation in retirement age. While the official
retirement age in the USA is 65 years
irrespective of which sector of the economy (public or private) one works,
various chronological ages at which one retires is the case in Nigeria. Judges
retire at 70, university academics used to be 65 but now 70, state civil
services 55, federal civil servants, 60, and private sector, 60 and 65
depending on the company. However, due to retrenchment in Nigeria, people are
forced to retire before they reached the stipulated retirement age. In Nigeria,
the systems of providing financial security for old age has been under strains,
transforming from the National Provident Fund (NPF) to National Insurance Trust
Fund (NSITF), and to the Retirement Savings Account (RSA) under the Pension
Reform Act (PRA) 2004.
As a result of the global changes and
challenges of the modern population dynamics evidenced in the pressures of
urbanization, industrialization, demographic mobility, and information and
communication technology, the
traditional ways of supporting the old in
Nigeria appears to have come to a near-collapse (Demaki, 2006). For example,
the extended family ties of togetherness, closeness and physical presence of
loved ones and family members seem to be losing ground as a result of the GSM
technology. Children, grandchildren and other relatives now call parents and
old ones on phone without physically being there to see and solve their
financial, psychological and other security problems.
The surest way through which the elderly who
have retired from active work life can solve their financial and other problems
in Nigeria could have been through their pension pay packets but unfortunately,
these are usually not made available to them as at when due because of the way
and manner government and other employers of labour handle pension issues. They
subject pensioners to all sorts of strenuous and stressful conditions
associated with the multiple screening exercises to qualify to draw pensions.
In Nigeria, it has been observed that it takes years to process pension papers
and to make available the money to the pensioners, some of whom would have died
while waiting for the maturity of their pension claims.
This ugly scenario is worse for retired
teachers than for other classes of pensioners because of their large numbers
and the fact that teachers are usually the last to be attended to in Nigeria in
everything. This is so because government and the general polity despise
teachers and see them as underdogs of the economy and socio-political system.
For instance, Mezieobi and Mezieobi (2006) report
that retired teachers wait for as long as fifteen years before they are paid
their gratuity and even longer for their pension entitlements. According to
them, it would be miraculous to get the teacher-retirees paid their retirement
benefits and pensions without subjecting their leaders to un-ending fruitless
dialogues with former employers. It is known that a major motivator to
productivity is the improved working conditions which include retirement
benefits. If the productivity of teachers must be high and sustained, then
their pension needs must be well catered for especially these days that the
falling standard in education is partly blamed on the non-commitment of
teachers (Duze, 2005; Orok, 2005; Undie and Usen, 2007).
The experienced teachers are the ones
approaching retirement and if nothing concrete is planned towards their
retirement in form of appropriate and reliable pension schemes, the school
system may begin to lose their wise inputs since they may begin to get
distracted trying to find means of making ends meet at retirement.
There is therefore urgent need to provide
adequate and effective financial security for retired teachers in Nigeria in
the form of a well-planned and packaged pension scheme. It is in this light
that this paper examines the Pension Reform Act (PRA) 2004 and retirement
planning in Nigeria focusing on the following:
1. The historical background of the PRA 2004.
2. The nature of retirement planning in Nigeria
under the PRA 2004.
3. The significance of PRA 2004 and retirement
planning in Nigeria.
4. The current status of the PRA 2004 in
attaining its objectives in Nigeria.
The x-ray of these will throw light on the
state of affairs in caring for retired Nigerians, including teachers (some of
whom would still contribute to the nation’s economic growth in their private
ventures), through the PRA 2004.
1.2 STATEMENT OF PROBLEM
The
frequent cases of pension scandal in our country is now taken as the utmost
concern to financial experts and micro encomiasts. This has also initiated that
task of seeking solutions to eliminate its occurrences. To some countries, the
issue of pension scandal is an internal and external vice in the Nigeria
pension system. They argue on this because a good number of pension scandal
occur in the country with the knowledge of outsiders and pension officers. The privilege of receiving gratuity and
pension appears the greatest manifestation of the victory of labour in his
fight with the employer over his exploitation. For stability of the employment
contract, labour had to look forward to the enjoyment of a favourable welfare
package when he leaves employment due to old age or disability. With the
institutionalization of pensionable employment, the attractiveness of any
employment contract is being judged in terms of whether it is pensionable or
not.
Pensionable jobs pay less current
salaries/wages while non-pensionable jobs pay more. Individuals do not usually
have a choice whether to take a pensionable job or not but they struggle to
pick available jobs. This is the case in Nigeria presently. If the salary
premium of unpensionable jobs over pensionable ones is high enough, individual
workers can save, invest and make provision for old age and accidental
disability. With successful investments of their savings, workers on
non-pensionable employments would, on retirement, be as well off as those on
pensionable jobs.
Economic theory would thus predict as high
a premium of non-pensionable over pensionable jobs in a market economy to permit
individuals to undertake the level of savings and investments that would make
both kinds of job equally attractive in the long run.
The rational individual entering the labour
market and in a position to choose between pensionable and non-pensionable jobs
has a set of parameters that he needs to make some assumptions about their
future values. These include changes in the remuneration for the jobs, the rate
of inflation, the level of interest rates, the size, survival probability and
future solvency of the employer, and the probability of major external
destabilizing forces. For the risk-averse individual in an inherently unstable
economy, a consideration of these factors would favour a career in a
pensionable organization.
For a variety of reasons, governments all
over the world get involved in pension matters in the form of laying down the
legal framework, pension funds management and regulation of pension schemes.
The Federal Government of Nigeria (FGN) recently overhauled the legal framework
for pension administration in Nigeria by promulgating the Pension Reform Act
2004 (PRA’04). The PRA’04 was passed into Law on June 23, 2004 by the National
Assembly and assented to by President Obasanjo on June 25, 2004.
1.3
OBJECTIVE OF THE STUDY
This research work is generally set towards
ascertaining the impact of pension scandal in public fund and management
.furthermore, the study is;
1)
To examine the facts contained in the detection and control pension scandal in
Nigerian pension system .
2) To research into the reason why people
involve in pension scandal.
3) To
examine the effect of pension scandal in Nigerian pension system.
4) To recommend solutions that may help in
checking pension scandal in Nigerian pension system.
5) To identify the problem the country face as a
result of Nigerian pension scandal.
1.4 RESEARCH
QUESTIONS
Owing
to the need for a compressive study of this topic, the researcher deemed it
necessary and reasonable to postulated the following research questions. This
research has no doubt that the answers to these questions will help him to draw
conclusions and recommendations are necessary.
The
following question are the research questions
1)
What is the commonest causes of pension scandal, can this be checked and
controlled?
2) Has the pension scandal in the country helped
to impede problems towards economic failure (distressed)?
3) What measure do the Nigeria pension scheme
adopt to check pension scandal in the country.
4) To what extend does pension scandal affect economic growth and development of the
country?
1.5 RESEARCH
HYPOTHESIS
To
fulfill the above outlined purpose, the research declares the following
propositions.
Ho: Most pension scandals have not succeeded
because of the complexity of pension scheme.
H1: Most pension scandals have succeeded because
of the complexity of pension scheme.
Ho: pension scandal in the country has helped to
impede problems towards economic failure (distressed).
H1: pension scandal in the country has not helped to impede problems towards economic
failure (distressed).
Ho: Nigerian pension system do not place any value on the pension
scandals.
H1: Nigerian pension system place adequate value on pension scandals.
1.6 SIGNIFICANCE
OF THE STUDY
This
study is intended to highlight the indispensable impact of pension scandal in
Nigerian pension system.
This project will equally to be of
immense help to other establishments and organisation both in public and
private sector. The dive need to establish a visible of control as a means
of controlling Nigerian pension system
should not be over-emphasised.
This research work will be useful to the
management of Nigerian pension scheme should use the findings of this research
to equip the audit department (i.e audit department and inspection). This
department being the watch – dog of the scheme should be given more power to
operate. This will also help readers
and those who may wish to make reference on the topic of study may be while
undertaking similar research work.
Government agencies can install adequate
internal control measures to avert the incessant scandals and fraud rampant in financial houses,
ministries and parastals today.
1.7 SCOPE
AND LIMITATION OF THE STUDY
This research work on pension scandal in
Nigeria: its impact in public fund management
it covers facts on the issue. This research work has a lot of
difficulties. Firstly, top pension
officers were reluctant to give away relevant statistical data on pension
scandals that occurred in the organization.
1.8 DEFINITION OF TERMS
Pension:
this is a regular payment made during a person's retirement from an investment
fund to which that person or their employer has contributed. It is a post-retirement
benefits
that an employee
might receive from some employers. A pension is essentially compensation
received by the employee after he/she has
retired.
Scandal:
An action or event regarded as morally or legally wrong and causing general
public outrage: "a bribery scandal". This is an offense caused or experienced; reproach or reprobation called forth by what is regarded as wrong, criminal, heinous, or flagrant: opprobrium or disgrace.
Public fund:
Government spending or is classified by economists into three main types.
Government acquisition of goods and services for current use. It is money
funded in government securities or through the levy of taxes from a
governmental entity.
Management: The
process of dealing with or controlling things or people: "the management
of deer". The responsibility for and control of a company or similar
organization: "the management of a newspaper".
Retirement: The period
of a person's
life
during which he/she is no longer working, or the commencement of that period.
The standard
age for retirement in the United States is considered 65, although many
individuals choose to retire
earlier or later due to personal or financial
reasons. After retirement, an individual's needs are usually funded
through any combination
of sources
including a pension plan,
a retirement acount such as a 401(k) plan,
Social Security,
and/or a savings
account/nest egg.
Savings: An economy of or
reduction in money, time, or another resource.
The money one has saved, esp. through a bank or official scheme
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