ABSTRACT
This research work discussed the relevance of the new pension
reform on performance in the public sector in the ministry of finance and
ministry of defence, Alausa Lagos State. The aim and object of this study is to
examine the social, economic and motivational benefits of pension on active
labour force, retiring and retired employees also to examine how effective the
Pension Reform Act 2004 is on the Nigeria economy. Relevant data were collected
from both primary and secondary sources. Questionnaire was the main primary
data collected, instrument employed while data from various relevant publications
constituted the sources of secondary data. Chi-Square was used to analyze the
data. From this study, it can be deduced that pension is a fundamental aspect
in our economy. The pension reform Act 2004 will increase the level of
investment in the economy and also improve the standard of living of the
people. Government expenditure will reduce and government income will increase.
The public sector of the economy will benefit immensely. From the above finding
it recommends to ensure the implementation of the new pension reform act (2004)
in all organizations in Nigeria and educate all individual in the public
sector, both the retirees and the employees about the benefits of the pension
reform.
TABLE OF
CONTENT
PAGE
TITLE PAGE I
CERTIFICATE II
DEDICATION III
ACKNOWLEDGEMENT
IV
ABSTRACT V
TABLE OF CONTENT VI-VII
CHAPTER ONE: INTRODUCTION
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF PROBLEM 5
1.3 PURPOSE OF THE STUDY 5
1.4 SIGNIFICANCE OF THE STUDY 6
1.5 RESEARCH QUESTIONS 7
1.6 RESEARCH HYPOTHESES 7
1.7 SCOPE OF THE STUDY 8
1.8 LIMITATIONS OF THE STUDY 9
1.9 ORGANIZATION OF THE STUDY 9
1.10 BRIEF HISTORICAL BACKGROUND OF THE CASE STUDY 10
1.11 DEFINITION OF TERMS 14
CHAPTER TWO: LITERATURE REVIEW
2.0
INTRODUCTION 16
2.1 OBJECTIVCES OF PENSION SCHEME 18
2.2 PENSIONS IN OTHER COUNTRIES 20
2.3 ISSUES ON PENSION SYSTEM REFORMS 23
2.4 INSTITUTIONAL AND REGULATORY ISSUES IN
PENSION
SCHEME REFORMS 26
2.5 PENSION REFORM ACT 2004: (NEW PENSION ACT) 26
2.6 OBJECTIVES OF THE NEW SCHEME 28
2.7 OTHER HIGHLIGHTS OF THE PENSION ACT 29
2.8 PENSION FUNDS ACCOUNTING SYSTEM 34
2.9 DIFFERENCES BETWEEN THE OLD PENSION SYSATEM
AND THE PENSION REFORM ACT 2004 36
2.10 PENSION REFORM ACT 2004 38
2.11 THE NEW NIGERIAN PENSION SYSTEM 40
2.12 THE RELEVANCE OF THE NEW PENSION SCHEME TO
THE EMPLOYEES & RETIREES OF THE
PUBLIC SECTOR
(MINISTRY OF FINANCE/MINISTRY OF
DEFENCE) 43
2.13 CHALLENGES AND COMMENTS TO THE PENSION REFORM
ACT 2004 IN THE PUBLIC SECTOR 45
2.14 RETIREMENT ACCOUNT & REMITTANCE OF
CONTRIBUTION 47
2.15 YARDSTICKS FOR MEASUREMENT OF PENSION SCHEME
IN
THE PUBLIC SECTOR 49
2.16 SCHEDULE TO PENSION REFORM BILL 2004 54
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 INTRODUCTION 55
3.2 RESEARCH DESIGN 55
3.3 RESEARCH QUESTIONS 55
3.4 RESTATEMENT OF RESEARCH HYPOTHESES 56
3.5 SOURCE OF DATA 56
3.6 CHARACTERISTICS OF STUDY POPULATION 57
3.7 SAMPLE PROCEDURE 58
3.8 ADMINISTRATION OF QUESTIONNAIRES 58
3.9. DATA ANALYSIS 59
3.10 LIMITATIONS OF THE METHODOLOGY 60
REFERENCES 62
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA COLLECTED
4.1
INTRODUCTION 63
4.2
DATA PRESENTATION AND ANALYSIS 63
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 SUMMARY 83
5.2 CONCLUSION 84
5.2 RECOMMENDATION 85
1.
2.
3.
4.
5.
5.3
SUGGESTIONS
AND FURTHER STUDIES 86
BIBLIOGRAPHY 87
QUESTIONNAIRE 88
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
Pension is an
important aspect of our economy which cannot be ignored in the present and
future growth of any country. Every
worker would inevitably reach a non-active age hoping to have worked well
enough to have something to fall back on.
According to
Central Bank of Nigeria (CBN) briefs “issues in pension system reforms”, the
most attractive incentives to employees in both public and private sectors are
the hope of receiving pension income after active service.
Pension is a
regular payment by an employer to a retired employee or a regular payment from
a private company to a person who have contributed to a pension fund for much
of his working life. It can also be
defined as a periodic payment or allowance to an individual or to his family
because of some meritorious service done or when conditions such as age, length
of services etc has been met.
According to
“Collins Gem English Dictionary”. Pension is a regular payment to people above
a certain age, retired, employees, widows, etc.
Also, according
to oxford advanced learner’s dictionary, it defined pension as an amount of
money aid regularly by a government or company to somebody who is considered to
be too old or too ill to work.
In the process
of granting pensions to employees, a pension scheme was set up. “A pension scheme” is a systematic plan by an
employer to provide for its employees on their ceasing to be employed either on
retirement or on changing jobs.
The history of
pension in Nigeria is relatively short when compared to that of the other
countries. The first public sector pension’s legislation pension ordinance was
enacted in 1951 retroactive January 1, 1946.
The law allowed governors to grant pensions in accordance with the
regulations which were reviewed from time to time with the approval of the
secretary of state for colonial affairs in the united kingdom government. The resting period was fixed at 10 years of
service. The legislation provided for pension and gratuity but they weren’t a
right.
There were
several amendments to this legislation at and after independence until a
comprehensive pension’s law, pension decrees Nos. 102 &103 of 1979. The first known private sector initiative in
Nigeria at establishing a formal pension and gratuities scheme fro its
employees was by “Nigerian Breweries in 1954” and this was followed by united
African Company (UAC) in 1957.
In the public
sector, the federal civil service has a pension scheme that was financed from
the general revenue known as “hon-contributory”. It is a fully unfunded defined benefit
one. It means that workers are being
taxed to some extent to pay the pension of those who have retired.
The pension
plans was mostly treated as expenditure items in the annual budget by the
federal government, the federal capital territory reach of the 26 states
government and the local government.
The based plans
of the public sector include all employees in the local government, state
government, quasi government corporations and the federal civil service. As at
December 31st, 1996, about 1.5 million are covered by the existing
pension arrangement, representing about 3.5 per cent of estimated labour
force. The retirement age in the public
sector was 60yrs except that judges of appeal and supreme court can retire
at 70yrs and the voluntary retirement
age was 45yrs whichever came first having completed 15 yrs service period.
There are two
main types of benefits being provided by the public sector and they are;
1. Gratuity which ranges from 100% to 140% of
total emoluments for 10-14 yrs service and 100% to 300% for 15yrs – 35yrs
service
2. Pension
which ranges from 30% of total emolument after 10 yrs to 70%
In the late
90’s, the burden of pension payment increased as a result of increasing number
of people which longer life span and demand for enhanced pensions and observe
of regulations. In all, the existing
pension schemes have institutional problems and they lack administrative and
technical capacity to administer pension efficiently. There was no uniform set of rules, regulation
and standards for the public sector, private sector and the informal sector
(those who are neither working for the government on private sector)
In addition, no other social or welfare schemes in Nigeria that the old
pensioners in the public, private and the informal sector could fall back on to
augment their income until 2004 when the pension reform act was enacted.
1.2 STATEMENT
OF PROBLEM
The statement of
the problem of this research work evolves round the terms and concepts used
whose local point is in the “impact and effect of the new pension reform on
performance in the public sector”
1.3 PURPOSE OF THE
STUDY
This study aims to;
(i)
Examine the social, economic and motivational benefits of
pension or a active labour force, retiring and retired employees.
(ii)
Analyze the pension reform Act 2005
(iii) Examine how effective the
Pension Reform Act 2004 is on the Nigeria economy.
(iv) Highlight likely constraint
of the Pension Reform Act 2004
(v)
Evaluate the past and future performance of the pension fund
administrators on the economy and suggest future opportunities or prospect.
1.4 SIGNIFICANCE OF
THE STUDY
The effectiveness of the
Pension Reform Act 2004 lies in the level of its efficiency. As part of the
important institutions in Nigeria,
significantly, this study will be of great importance in the following areas;
(i)
It will help to highlight major problems involved in pension
in Nigeria
(ii)
It will be useful to students of relevant study or discipline
in understanding and understudying the problems and benefits of the Pension
Reform Act 2004.
(iii) It will serve as a guide for
potential investors in the stock exchange market so that they will se the
investment opportunities in pension as laid down by the Pension Reform Act
2004.
(iv) It will be of great help to
the Pension fund administration in improving their areas of inefficient.
(v)
This study will also provide analysis on pension in Nigeria
1.5 RESEARCH QUESTIONS
The following research questions are considered
necessary.
I.
Does the New Pension reform have a positive
impact on the performance of active public servants?
II.
Does the New Pension Reform have a significant
impact on the welfarism of retired public servants?
III.
How have the Pension Funds Administrators
contributed to the success of the new pension scheme as promoted by the Pension
Reform Act of 2004?
1.6 RESEARCH HYPOTHESES
The hypothesis for this research is
as follows;
1.
The impact of New Pension Reform on performance of active public servants
Ho: The New Pension Reform does not have a
position impact on the performance of active public servant.
H1: The New Pension Reform has position impact on
the performance of active public servant.
2.
The impact of the New Pension Reform on the welfarism of retired public servants
Ho: The New Pension Reform does not have a
significant impact on the welfarism of retired public servants.
H1: The New Pension Reform has a significant impact
on the welfarism of retired public servants.
1.7 SCOPE OF THE STUDY
The Reform Act 2004 58 (2)
states that the scheme shall apply to all employee in the public service of the
federation, federal capital territory and the private sector. This research
will be limited to the extent of available facts and figures.
The place selected for the
study is Lagos State Ministry of Finance/Lagos State Ministry of Defence There
are several organization in Lagos state and this research will focus on the
time frame of the last four to eight years.
1.8 LIMITATIONS OF THE
STUDY
This research work will be
limited by;
(i)
Inaccessibility to respondents.
(ii)
Low level of education of respondents
(iii) Attitude of people to
research works.
(iv) Lack of time
(v)
Geographically, it will be limited to Lagos state
(vi) Literature to be reviewed.
(vii) Records are not readily
available.
(viii) Delayed collection of
questionnaire.
1.9 ORGANIZATION OF
THE STUDY
This research work will be
five (5) chapters for easy comprehension and proper organization. Chapter one will
consist of the introduction, statement of problem, research questions, research
hypothesis, purpose, scope and limitation of the study, significance of the
study, organization, definition of terms of study. Basically, it gives an
insight into what the project work is all about. Chapter two reviews relevant
literature and the theoretical frame work on the subject matter, and chapter
three states the methodology in which the research work is based on. Chapter
four states the data analysis and interpretations and highlights the view of
respondent on the subject matter. Chapter five state the summary, conclusion
and recommendations of the research topic and with references.
1.10 BRIEF HISTORICAL
BACKGROUND OF THE CASE STUDY
An Overview of Ministry of Finance
The
Ministry of Finance is a unique agency that provides the financial backbone
that helps government translate its vision of providing the dividends of
democracy to the teeming population of Lagos State.
Designated the ministry of Finance
and Economic Development at inception in April 1968, the Ministry had Alhaji
Chief I. A. S. Adewale as its pioneer Commissioner.
Late in 1995, the Economic
Development was separated from Ministry of Finance and merged with Budget to
become the Ministry of Economic Planning and Budget while Ministry of Finance
stands on its own.
The Finance Ministry then was
structured into six Directorates consisting of the three common services
personnel Management, Planning, Research and Statistics as well as Finance and
Supplies and three other professional Directorates Public Finance, Computer
Services and Central Internal Audit.
At inception, the Ministry
operated through three (3) Agencies: Finance Headquarters, the State Treasury
Office, and the Board of Internal Revenue. However, the Board of Internal
Revenue, which is saddled with the responsibility of collecting tax-related
Internally Generated Revenue (IGR) for the State Government, was upgraded and
became semi autonomous in Year 2006 to enhance revenue generation, transparency
and accountability. Also, the PF/DMO, hitherto a Department in the Ministry was
equally elevated to an Agency status in 2005 with a Permanent Secretary as
head. This autonomy has however not diminished the performance of the
responsibilities of the Ministry of Finance.
The Finance Headquarters is one of
the arms of the Ministry of Finance and is headed by a Permanent Secretary. The
Headquarters serves as the coordinating arm of the Ministry. It currently has
staff strength of 112 Officers. The Office is also the pool house of all
Internal Auditors; who are deployed to other Government Ministries, Departments
and Offices in the State. There are 154 Internal Auditors working in different
Government Agencies in the State who ensure compliance with laid down financial
guidelines and early detection of financial malpractices.
An Overview of Ministry Of Defence
Vision
In recognition of the
challenges of the new millennium, a military sector with modernized equipment,
well-trained in all aspects of military operation, fully professionalized,
compact and mobile with adequate equipment, fire-power and communications,
capable of fulfilling its constitutional responsibilities and performing its
international peace-keeping role proudly and efficiently is in place.
Mission
"To
provide administrative and support services, timely and effective to enable the
Armed Forces of the Federal Republic of Nigeria to build and maintain a modern,
compact, strong, professional, mission-capable and mission-ready armed forces
for the defence of national territory, maritime interest, airspace and the
protection and defence of the Constitution of the Federal Republic of Nigeria,
and to contribute to peace-making and peace-keeping duties worldwide under
sub-regional and global organizations of which Nigeria is a member".
Military
The military is responsible
for protecting the country in the event of war and the President automatically
becomes the Commander-in-chief of the Armed Forces. He is the number one
officer in the military and has the power to call up and give orders to the
military.
It also appoints people to
the following top positions:
- National Security
Adviser (NSA)
- Chief
of Defence Staff (CDS)
- Chief
of Army Staff (COAS)
- Chief
of Naval Staff (CNS)
- Chief
of Air Staff (CAS)
1.11 DEFINITION OF TERMS
Earnings: Money earned for work done
Expenditure: An amount of money spent
Income: Money which a pension, a country, etc earns from
investing money from business.
Inflation: General rise in the prices of goods and services in a particular
country, resulting in a fall in the value of money
Investment: The act of investing money in something.
Macroeconomics: The study of large economy
systems, such as those of whole countries or areas of the world.
Market value: What something would be worth if it was sold
Pensioner A person who
received a pension
Pension Fund Administration: Anybody corporate incensed
by the Nigerian Pension Commission as a pension administrator ad includes
Nigeria social Insurance Trust Fund
Pension Scheme: A system in which you and
usually your employer pay money
regularly into a pension
Questionnaire: Written list of question that are answered by a number of people
so that information can be collected from the answers.
Reforms:
Retirements: The act of stopping work because you have reached a particular
age.
Salary: Money that employees receive during their job
especially professional employees at the end of every month.
Verification: To check that something is true or false.
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