AN ASSESSMENT OF EFFECTIVE MANAGEMENT OF CONTRIBUTORY PENSION SCHEME IN NIGERIA (A CASE STUDY OF CONTRIBUTORY PENSION SCHEME JIGAWA STATE)

CHAPTER ONE

1.1 BACKGROUND OF THE STUDY

  The purpose of pension scheme is to provide the employees of an organization with a number of securing, on retirement, standard of living reasonably consistent with that they enjoyed while services. In effect it is a totality of plans, procedures and legal presence of securing and setting aside of funds to meets the social obligations of care which employers are owe their employees on retirement or in case of unexpected (death) Mr. Kk Bobai (208) an employee who worked for an organization for some years is entitled to some benefits which could be in form of gratuity and pension payable to such employee by his/ or her employer at the time of retirement. Pension is viewed as a sum of money paid regularly to a person who no longer because of old age, disability or retirement or to his widowed or dependent children by the state, former employers or from provident fund to which he and his employer both contributed Mr. Osuagwu S.A.U. (2002) The pension system prior to 2004 was characterized with many problems which make the payment of the retirement benefit a failure in Nigeria. Koripamo-Agari (2009) and Yunusa (2009) pointed out that the major weakness of pension scheme was lack of adequate and timely budgetary provision coupled with rising life expectancy, increasing number of employers, poor implementation of pension scheme in the private sector due to in adequate supervision and regulation of the system and too many private sector employees were not even covered by the form of pension scheme. The management of pensions in the past had been associated with tales of woes for pensioners. Usually only the mighty and the powerful received pension without tears Besides that the pension money was so small that many people did not care whether it was paid or not how ever as the economic crunch it harder and actives workers agitated for improved pa package, the pensioners had to be considered as such pay increase demand s where were met. The harmonization of the pensions of those who retired before 1991 wit those retired there after, the pension pay increase of 180% in 1999 and 142% of 2000 raised the hope and expectations of retired pensioners so much that nearly all those who had  ignored their benefits before started pursuing payments with arrears of payment running in to several years. Idakwo (2006).

This problem associated with payment of pension in Nigeria necessitated the government during Obasanjo regime could be reformed or viewed witch gave birth to the pension reform act of 2004. Elumelu (2005) posits the 2004 pension reform act established a uniform contributory; privately managed and fully funded pension system for both the public and private sector of the country. The pension reform act of 2004 was also established to address the manifested loopholes in the old defined benefits of pension scheme and provide adequate resources to retire after retirement from the services. The large capital pool demands that there should be sound uniform investment decision making to ensure that value is added to retirement saving account (RSA) contribution. Investment is normally done in the presence of numerous risk mostly political, markets and economic in nature. Investment and market analysis of these pension assets. The fund accounting organ of PFAs record every bit of inflow and outflow pension asset in and out of the entity fund.

The aim of the research paper is to asses primarily, the impact of investment decision on pension assets in the modern contributory pension scheme in Nigeria taking legacy pension manager Ltd, Abuja, 2010, as a reference of the study.

1.2. Statement of the problem:  

Although the new reform is guided by the key principles of sustainability, accountability, equity, flexibility, there is also this fear that funds or retires saving account (RSA) contributory can be misguided by the existing trustees. Also ask a given portfolio determines the return there of. Some pension fund administrators do not have the necessary risk management profile while some fail to pay regard to challenges and prospects of contributory pension scheme in Nigeria. Rating signals needed to make sound investment decision. The decision of investment managers of the pensions fund administrators who are responsible for this process impact greatly on the contribution value due to employees (fund owners) sound investment and efficient management of the huge pension fund assets has great implication on the economy. The spread of large accumulated fund to the capital and money markets are employment opportunities creation. From The forgoing, the following specific problems will be studied:

·        An assessment of effective management of contributing pension scheme In Nigeria.

·        The status of the fund assts regulation and frame work

·        The nature and effect of risk prevailing in the pension assets.

·        Monitoring and documentation of status report by the contribution.

1.3 OBJECTIVE OF THE STUDY

The main objective of this study is to assess an effective management of contributing pension scheme fund with a view to determining its contribution to the economy through the investment excess pool of fund in the capital and money markets and creation of employment opportunities.

The specific objectives are:

·        To examine how contributory pension scheme influence the gross domestic product (GDP).

·        To examine the roles of an assessment of effective management of contributory pension scheme in Nigeria.

·        To identify possible challenges effecting contributory pension scheme.

·        To suggest possible solutions to improve pension administration in Nigeria.

     1.4 RESEARCH QUESTIONS

I.            How does contributory pension scheme gross domestic product (GDP) IN NIGERIA?

II.            What are the roles of contributory pension scheme to an effective management development?

III.            What are the possible challenges affecting contributory pension to an assessment of contributory pension scheme in Nigeria?

     1.5 Research hypothesis.

·        Hypothesis I-HO: Contributory pension scheme has no significant and positive effect on gross domestic product (GDP)

·        Hypothesis II HO: The risk prevalent in pension fund investment has no significant effect on pension management.

·        Hypothesis III HO: There Is No Challenge  regarding contributory pension scheme.

1.6 Significant of the study

  Every country faces many choices in dealing with micro and macro economic issues. These choices are made daily in more or less coordinated ways with a long or short term perspective. The pre-pension reform Act 2004 was a ‘’pay as you go’’ (PAGA) pension scheme faced with a lot of challenges that give birth to the new contributory pension scheme. The significance of this work therefore can never be overemphasized as it will avail the stake holders the necessary and basic understanding on how their mutual interests are protected. The contributors would have a grasp of how their retirement saving account (RSA)  funds are managed by pension fund administrators (PFAs) and safe custody by pension fund custodians (PFCs) and its effect in economy. It is also of importance to pension commission (PENCOM) and the government at different levels as it provide avenue to overcome the short-comings in the modern system. New pension scheme came in to existence in 2004.

Consequently, this is undoubtedly a new horizon that calls for detailed research.

Pension fund accounting us a new area that needs input from scholars, hence, this study will help other researches with interest in pension.

1.7 Scope of the study

This study is on the issue of pension administration in Nigeria from 2005 to 2015. How ever, the area of coverage of the study of contributory pension scheme, its operation and problems (challenges) provisions, operation mechanisms and most centrally, the work will be restricted to new pension scheme: contributory pension scheme with particular references to pension fund administrator, using legacy pension as a case study.

1.8 Limitation of the study.

Major limitation experienced in this studying is the pension fund administrators itself. Most of the information provide by the legacy pension manager required explanation as to the reason behind such activities and actions. Nevertheless, there is always solution to a problem the problems were to an extent surmounted. There is also a limitation to textbooks, journals and other materials in the library. In addition, there was sufficient time for the study. In fact, it is very difficult for a student to go for a research work due to the current situation of the economy which makes prices of things very high viz-avis the cost of transformation the pension fund administrator to obtain relevant materials to this research work were very expensive.

How ever the challenges were brought under control to ensure success of this research work.

1.8.1 PENSION SCHEME: is a totality of plan procedures and legal processes of securing and setting aside fund to meet the social obligation of care which employers owe their employees on retirement, disability or to their dependents in case of death. Mrs. K.K. BOBAI (20008)        

1.8.2. Contributory pension scheme : This is the one of the Nigerian reforms established in the year 2004 during Obasanjo administration, it is contributory fully funded, privately managed, is was established to address the manifested loopholes in old defined benefits pension scheme and provide adequate resources to utilize after retirement fro the services. M. S. O. Osagwu (2007)

1.8.4 Pension fund administrator (PFA) is an entity licensed by national pension commission to manage the pension assets.

    1.9 Organization of the study.

The research work contained chapter 1-5 which are the general introduction: this consist of background of the study, statement of the problem, objectives of study, research questions, research hypothesis, significance of the study, scope and definitions of terms and organization of the study. Chapter two is the literature review that has in it the introduction, theoretical framework, conceptual and empirical literature. While chapter three is the research methodology, it is contained the introduction, research design, area of the study population size of the study, sample size and sampling technique, sources of data collection and method of data analysis. However in the subsequent chapter that is chapter four, would see how the data is presented and analyzed and finally chapter five is the summary of the work, conclusion and recommendations. Analyze and finally chapter five is the summary of the work, conclusion and recommendations. At lastly is the references.

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