PENSION SCANDAL IN NIGERIA; ITS IMPACT ON PUBLIC FUND MANAGEMENT
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 reforms40
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
2.10Pension Scandals in Nigeria - - - - 72
2.11Expected 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 questions are the research questions
1) What are 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 offensecausedorexperienced;reproachorreprobationcalledforthbywhatisregardedaswrong,criminal,heinous,or flagrant: opprobriumordisgrace.
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'slife 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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