IMPACT OF PENSION REFORM ON ORGANIZATIONAL PERFORMANCE IN THE PUBLIC SECTOR (A CASE STUDY OF LAGOS STATE MINISTRY OF EDUCATION)

ABSTRACT

This research work tends to examine the impact of pension reform on organizational performance in the public sector with special reference to Lagos State Ministry of Education.

Descriptive design was implored for the research design. Also a simple random sampling technique was used in the data selection. This technique was used to avoid biasness in the selection of respondents.

A sample of Fifty (50) was drawn from the population resulting to Fifty questionnaires being administered to staff of Lagos State Ministry of Education.

The data gathered were tabulated and presented in percentage. The two hypotheses formulated were analysis using Chi-Square Analysis method. Conclusions were drawn from the result of the analysis. Based on the analyasis, the result indicated that Direct contributory (DC) of the pension reform act is practically existing in the public service. Also, Direct Contributory (DC) reform Scheme has significant improvement on workers welfare

Finally Solutions were recommended to obviate deterioration on workers productivity.

TABLE OF CONTENTS

CHAPTER ONE: INTRODUCTION

1.1     Background to the Study

1.2     Statement of the Problem

1.3     Objectives of the Study

1.4     Significance of the Study

1.5     Research Questions

1.6     Statement of Hypotheses

1.7     Scope of the Study

1.8     Limitation of the Study

1.9    Definition of Terms

CHAPTER TWO: LITERATURE REVIEW

2.0        Introduction

2.1        Concept of Pension

2.2.       Objectives of Pension Administration in Nigeria

2.3        Types of Pension Scheme

2.4        Pension Reform Act 2004

2.4.1     Role of the Scheme

2.5.1     Benefits of Dc (Defined Contribution) Scheme to the Stake-Holders

2.5.2     Benefits to the Individual Workers and the Employers

2.5.3     Benefits to the Government

2.6        Challenges of the Scheme

2.7        Role of the Accountants

2.8        Role of Government

2.9        Solutions to Effective Pension Reform

2.10      Pension Reform Practice in the Ministry of Education

2.10.1  Social Responsibilities

2.10.2  Services

2.10.3  Future

2.10.4. Historical Background of Lagos State Ministry of Education

2.10.5  Statutory Responsibilities

2.10.6  Mission Statement

CHAPTER THREE: RESEARCH METHODOLOGY

3.0     Introduction

3.1     Research Design

3.2     Research Instrument

3.3     Sampling Technique

3.4     Procedure for Data Collection

3.5   Procedure for Data Analysis

CHAPTER FOUR: DATA ANALYSIS AND DISCUSSION

4.0       Introduction

4.1       Presentation of Respondents Demographic Data

4.2       Presentation of Response to Research Questions

4.3       Summary of Respondents’ Response

4.4       Test of Hypothesis

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.0   Introduction

5.1   Summary

5.2     Major Findings

5.3   Recommendation

REFERENCES

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

The pension reform act has become a socio-economic and political issue that has engaged the attention of government, employers and workers not only in Nigeria, but also in many developing countries of Africa, Asia and Latin America.

Before the enacted and established- Olusegun-Obasanjo- led- pension reform of June 25^th, 2004, Nigerian operated a defined benefit (DB) pension Scheme, which was largely unfunded and non-contributory. The system was also characterized as “pay-as-you-go” (PAYG) scheme since retires were to be supported, not by their previous contributions, but by annual budgetary provisions.

Thus, the bane of this new Olusegun Obasanjo reformed pension scheme, was to review the inefficient, ineffective and fraughting existing problems, merged with insecurity some of these problems were desertion of unfunded state run pension system which caused anguish, want and penurial existence for pensioner in their old age.

a)           Problem of the harmonization of the public and private pension system and

b)          Confusion as to the institutional regulator of the scheme

c)           Problem of determining the law as that governs the management, control administration and investment of pension funds and

d)          Bad record keeping in private and public offices making it impossible to access and quantify the contribution of individual employee and endemic corruption.

Fashoyin,(1994)

Therefore, in effect of this, the Olusegun Obasanjo-led-government incorporated the need at reversing the situation through developing a system that is sustenance and proned to providing the ultimate goal and capacity in ensuring stable source of retirement savings for each participants.

With this face in June, 2004 of the pension Reform Act, 2004, a new pension was replace as against the previous DB Scheme(Defined Benefit).

The new Scheme in-place of DB(Defined Benefit), was the DEFINED CONTRIBUTION (DC) Scheme, which was contributory in nature, and mandatory on employers and workers (in the public and private sector organizations with 5 or more employees) to contribute 7.5% each of the emoluments of the employee into a retirement savings account (RSA). However, for the military, the contribution rate is 2.5% with the government contributing 12.5%. This system has a number of features making it an increasingly vital component of the pension systems of many countries not only in the Organization of Economic Corporation and Development (OECD) countries, but also amongst the developing countries, particularly in Asia and Latin America.

However, the current reforms are necessary in order to correct and repeat the old pension Act 1990. According to Ibrahim ,(2004) who is a member of the national pension’s reforms commission, the rationale for the pension reform includes:-

·        Weak and inefficient administration of the old pension Schemes.

·        Unsustainable outstanding pension liabilities estimated at N2billion and    

·        Unregulated pension Scheme with highly diversified arrangement.

The current reform and necessary in order to bring sanity to a system that was glaringly unable to cope with the challenges of the country’s pension system. When faced with a situation of this kind, there are often two policy options introduction of half-hearted measures that might have some appeal, but which may address the symptom rather than the cause of the problem; or the adoption of reforms that address the essential factors behind the underlying weaknesses of the previous Scheme and adopt measures for which experience of other countries and their own domestic imperatives points towards a huge potential for success, if only there is the determination to pursue them. Of course, the government decided to adopt the latter option. The government to President Olusegun Obasanjo has the determination to pursue them and make a success out of the current arrangement. Understanding and support of everybody, not least an important stakeholder like this body, is required for the success of the Scheme, more importantly to ensure retirees receive their benefit as at when due.

1.2   STATEMENT OF THE PROBLEM

Regardless of the new scheme established to revamp the nation’s old pension scheme, there are challenges that must be unraveled to make the new system function. Experiences of other countries seems to suggest that a strong regulatory and over sight body is required in order to deal with the major constraints that could truncate the success of the Scheme. If unregulated, private pension institutions could in their bid to compete against each other and maximize profit, pursue promotional; expenses that could make the Scheme costly. Literature however reveals that:

·        A weak regulatory environment could jeopardize the success of the Scheme especially when private pension institution embark on high-risk investment Schemes that could escalate the risk of bank-ruptcy.

·        The weak regulatory system promotes difficulties for the Scheme in coping with macro-economic fluctuation especially during inflation and downsizing.

·        Despite it’s reforms, there is still the existence of irregular pension payment that has led to the impairment and untimely death of retirees on-cue or clamor for their entitlements.

When weighed against the enormous potential benefits of the new Scheme, these challenges are well worth facing with all the DC Scheme (Direct Contribution). Therefore curbing these anomalies requires an effective and re-engineered National pension commission (NPC) whose mandate is to provide overall regulatory and oversight functions on all issues concerning pensions in Nigeria.

1.3   OBJECTIVES OF THE STUDY

The holistic objective of this research is to access the practice of pension reforms in Lagos state ministry of Education, with reference to it’s pensions. It is mandate

1.        To examine if retirement benefit is received as at when due

2.        To ascertain and affirm it’s implementative  cause of saving

3.        To know if employees needs has been successfully catered for from the Scheme

4.        To affirm it’s feasibility and how true its being practiced         

5.        To know if it’s been properly administered in it’s payment and monitored via it’s uniform rules, regulations and standards set for the public service of the federation, federal capital and private sector

6.        To know the extent at which the new pension reform scheme been benefitted enjoyed and felt.

7.        To ascertain how effective or otherwise has been the activities of the PFC (Pension Fund Custodian), PFA (Pension Fund Administration) and NPC ( National Pension Commission)

1.4       SIGNIFICANCE OF THE STUDY

1.          The study is important because the outcome will enable the researcher to know how effective and practicable the new pension reform (DC) (Direct Contribution) has been in Lagos State ministry of education.

2.          The outcome will unveil varieties of the ascribed and stated pension fund administration used by the ministry

3.          It will assist the researcher to understand how workers can allocate their retirement savings and diversity their investment over a range of investment instrument

4.          The result will assist in facilitating on how retirement savings account can be maintained by each employee.

5.          It will assist the researcher in ascertaining how proper-maintenance of the Retirement Savings Account (RSA) tend to generate massive long-term fund that could be available for investment.

6.          The outcome will address how government stands to benefit on extent to which fiscal discipline can be imposed in the budgetary process to how pension obligations is can be accurately determined.

7.          It will assist the researcher to know the parameters on how current weak regulatory systems can be remedified as against it’s back drop relating to inflation and downsizing via recession

8.          Finally, the outcome will enable the researcher to identify and enquire other sources and modalities through which it’s current weak regulatory system can be curbed.

1.5   RESEARCH QUESTIONS

Based on the research objectives, the study therefore seeks to provide answers to the following questions:

·        Is the pension Reforms via RSA (Retirement Saving Account) practically existing and functioning in Lagos State Ministry of Education?

·        Has the pension Reform being benefiting to meeting the welfares of employees at workplace?

·        Are employees receiving their retirement benefit as at when due?

·        Are there other paid out benefit attached to the scheme inform of life annuity in protection of longetivity risks etc.

·        What are the basic rules, regulation and standards enacted, being complied to ensuring effective pension Scheme

·        How active is the  framework  and modalities to sustainable pension Schemes in areas of Pension Fund Administration  (PFA) been, devoid of scams and misappropriations

1.6   STATEMENT OF HYPOTHESES

HYPOTHESIS 1

H⁰    Direct contributory (DC) of the pension reform act is practically not existing in the public service.

H¹    Direct Contributory (DC) of the pension reform act is

practically existing in the public sector.

HYPOTHESIS II

H⁰    Direct Contributory (DC) reform Scheme has no significant improvement on workers welfare

H¹: Direct Contributory Pension (DC) reform scheme has a significantly improvement on workers welfare.

1.7   SCOPE OF THE STUDY

The study examines the state of pension Reforms in the public sector, with special focus on the Lagos State Ministry of Education, Alausa, Ikeja, Lagos State. In reference to the impact of the National Pensions Commission, towards ensuring compliance and sanity in coping and tackling the challenges of the nation’s pension plagues.

The target respondents aimed for the study are majorly public servants from the top, middle and lower staff of the organization.

1.8   LIMITATION OF THE STUDY

The limitating factors encountered in the course of this study were:

·        Limited time to the assigned research and response giving

·        Distance

·        Stress and it is vigors

·        Traffic barriers

·        Poor participation on the part of the workers due to busy schedules or task delegated to be immediately attended to.

·        Collection of incomplete data in-contradiction to the initial numbers distorted

·        Limited time

·        Lack of co-operation from respondents

·        Financial constraints and

·        Secrecy to sensitive question due to fear of uncertainty

1.9    DEFINITION OF TERMS

·        PENSION: is the entitlement or rights given to an employee/ employees after meeting some specific requirement; thus given as periodic payment or gratuity. Exist both in the public and private sectors

·        DIRECT CONTRIBUTORY  (DC): The newly introduced and enacted pensions Act of 2004, through the Olusegun Obasanjo regime, that was used in place of the initial D.B (Defined Benefit) and correct the inefficiencies and deficiencies of the old system.

·        EMOLUMENTS: A specific percentage of employee salary which is automatically deducted as saving in accumulation of the entitlements to be received after retirement. It could be annual or monthly.

·        PARAMETERS: As known as modalities ,explains the solutions of panacea to which an existing problem can be tackled.

·        REGULATION ENVIRONMENT: Meaning the basic institutions and activities through which pension is determined and operated-upon, such as:

§  PFA (Pension Fund Administrator)

§  PFC (Pension Fund Custodian)

§  NPC ( National Pensions Commission)

·        SCHEME: A program package or specific provision design for some basic or particular set of people or individuals

·        RETIREMENT SAVING ACCOUNT (RSA): An accounting record open-ended by the pension fund administrator for every registered employees through which their deducted emolument is been stated, monitored and managed.

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