ABSTRACT
This project work is
focused on management of Pension Fund in Nigeria: challenges and Prospects The
project is aimed at examining the challenges faced by management of pension
fund in Nigeria and achievement or prospects recorded so far. The writer in
reviewing literature of this work employed a historical method. In chapter
three the researcher made use of survey research plan in which questionnaires
were split into section, stratified random sampling were equally applied and
statistical data were extracted and used. Furthermore, the writer formulated
hypothesis in line with the problems and objectives of the study. However,
product moment coefficient of correlation were used to test the hypothesis in
which the following result emerged. The amount of pension fund contribution has
a high positive relationship with asset investment portfolio and prospect on
amount of contribution were recorded. The FGN bond capital market has a high
positive relation with asset investment of pension fund which created prospect
to pension fund investment system in Nigeria. Biometric system assists to
dictate fraud and encourage proper investment of pension fund in Nigeria. Data
collected were analysed and presented with tables and percentages. In view of
the findings made, the following recommendation accrued from the result of the
research work: Ethics and moral standard should be built. Prompt and regular
payment of pension should be adopted, proper investment and expansion of asset
investment portfolio should be encouraged. Adequate training should be given to
management on how to make effective and efficient use of biometric system.
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND
OF THE STUDY
The
management of Pension Fund in Nigeria is as old as Nigeria itself. Pension fund
was introduced by the colonial masters to provide income and security for old
age British citizens working in Nigeria upon retirement as a post-retirement
benefit to employees. In the view of Adesina (2006:7), Nigeria Legislative
instrument on pension matters was the pension ordinance of 1951 which had
retrospective effect from 1st January, 1946. In 1961 National provident from
(NPF) scheme was established with the legislation to address pension matters n
private organizations. Eighteen years later Pension Fund Act No. 102 with Armed
Forces Pension Act No. 103 came up the same year in 1979. In 1987 police and
other Government Agencies Pension was enacted under Pension Act No. 75. The
Local Government Pension edict followed suit in 1987. By 1993 the National
Social Insurance Trust Fund (NSITF) was established by degree No. 73 to replace
the defunct NPF. In 1994 employees in private sector were equally accommodated
by the scheme for lost of 2 employment income at old age, invalidity or death.
Due to poor funding, inadequate budget allocation huge arrears of outstanding
pensions, improper regulation and supervision, management of pension fund in
Nigeria decided to put a new Pension Reform Act in 2004. Though prior to the
reform according to Balogun (2006:18), public organization operated a defined
benefit (pay-as-you-go) scheme final entitlement were based on length of
service and terminal emoluments. The defined benefit (DB) scheme were funded by
Pension Department of the office of the Head of Service of the Federation. The
Pension Reform Act 2004 is the most recent legislation of the Federal
Government at reforming the pension fund system for both private and public
sectors. Atedo N.A. (2006:9) sees, "The Act" as a compulsory
Contributory Pension Scheme (CPS); has been established for all categories of
workers in the Federal Capital Territory Federal Public Service and in the
private sector. The Pension Fund Scheme became a challenge to the government as
it could no longer cope with payments of pensions and gratuities to retiring
work force. This is apparently due to the fact that there was no 3 plan put in
place to forestall the challenges of poor funding caused by inadequate
budgetary allocation. The administration and management of pension fund was
also generally characterized by weak regulatory framework inefficient and non
transparent (Nkanga, 2005:16). Meanwhile, according to Ahmed M. (2006:2), Board
of trustees of parastatal were free to decide on whether to maintain an insured
scheme or self administered arrangement. Moreover, prospect has been achieved
in the area of amount contributed, investment of the fund and use of biometric
to gather accurate data and reduce fraud. Based on the foregoing the researcher
intend to study management of pension fund in Nigeria, challenges prospects.
1.2 STATEMENT
OF THE PROBLEM
The
idea of management of pension fund in Nigeria was designed to carter for the
welfare of the pensionable retired workers. This had for long gained global
recognition and acceptance. Workers whether in public or private sectors are
expected to leave comfortable life devoid of any form of dependency after
retirement from active services. 4 The management of pension fund in Nigeria
have continued to pose a serious challenge to both government and private
sector organizations in Nigeria, among these problems and challenges one. -Non
availability or improper records/data storage in the system. -Improper
investment of pension fund and inadequate funding of the scheme. -In competent
and inexperience with lack of trained pension staff which has resulted in
uncoordinated administration. -Weak regulatory framework, inefficient and non
transparent system. -Perpetual frauds/irregularities without appropriate
sanction on the perpetrators, -Inability of the regulatory and supervisory
agencies to monitor pension fund schemes. -Inability to determine appropriate
investment portfolio especially in this period of economic melt down. It is
against this challenges and problem that the researcher wishes to carry out a
research work on 5 management of pension fund in Nigeria, challenges and
prospects.
1.3 OBJECTIVE
OF THE STUDY
The
study will examine management of pension fund in Nigeria; challenges and
prospects. Thus the study is set out to achieve the following objective. -To
identify the challenges and prospects of management of pension fund in Nigeria.
-To ascertain if management of pension fund have enlarged the amount
contributed through contributory scheme in Nigeria. -To evaluate and see if
there are any prospect in management of pension fund assets investment
portfolio in Nigeria. -To know whether the new biometric system has contributed
to check fraud and enhance management of pension fund in Nigeria. -To find out
whether investment of pension fund has an input in FGN bond capital market in
Nigeria. 6 -To advice management of pension fund in Nigeria on the strategies to
improve pension fund management.
1.4 RESEARCH
QUESTION
The
research is set out to answer the following questions. !What are the challenges
and prospects of Management of Pension Fund in Nigeria? !Does the amount
contributed in pension fund through contributory scheme witness growth as a
result of increase compliance by employers and employees from management of
pension fund in Nigeria? !What value of assessment can be accorded to pension
fund investment portfolio on pension assets management in Nigeria? !Does the
new biometric programme system assist to check fraud and enhance management of
pension fund in Nigeria? !Does the investment of pension fund has any input in
FGN bon capital market in Nigeria? 7 !What are the strategies to improve
pension fund management in Nigeria?
1.5 RESEARCH
HYPOTHESIS
As
a guide in the collection of data for the study certain hypothesis have been
formulated which include: Hi:The amount of pension fund contribution has a
significant effect on assets investment portfolio of pension fund management in
Nigeria. Ho:The amount of pension fund contribution has no significant effect
on assets investment portfolio of pension fund management in Nigeria. H2:FGN
bond capital market has a significant effect on assets investment of pension
fund management in Nigeria. Ho:FGN bond capital market has no significant
effect on assets investment of pension fund management in Nigeria. H3:Biometric
system encourage staff training dictate fraud and has significant effect on
investment of pension fund management in Nigeria. 8 Ho:Biometric system
encourages staff training, dictate fraud and has no significant effect on
assets investment of pension fund management in Nigeria.
1.6 SIGNIFICANCE
OF THE STUDY
The
research is systematically meant to be practical and educative in the sense
that it is going to assist in exposing some of the challenges and prospect in
management of pension fund in Nigeria. Essentially, this work is a step in a
right direction to assist and enlightened the general public and the
stakeholders in the pension scheme. Furthermore, employers of labours and the
employees (which include those still in the service and those who have retired
from service) the pros and corns of investment in pension fund and the benefits
of contributing to the scheme. This research work will equally serve as a guide
for those in academic institutions, the regulatory authorities, the government
and the banking industry, other areas that needed adjustment in the scheme that
will benefit the workers at the old age, so as to actualize the motives of
establishing the 9 board, this will add more knowledge to those in the field of
research and improve more literature in the field. Finally the study is aimed
at been beneficial to policy makers, corporate and non corporate and non
corporate organizations in Nigeria on how many invested in the possession fund
scheme are been utilized and invested.
1.7 SCOPE
AND LIMITATION OF THE STUDY
The
scope of the study is centre on management of pension fund in Nigeria;
challenges and prospects. Due to the nature of the study the scope of the study
will cover National Pension Commission of Nigeria in Enugu. The choice of
limiting the scope to National Pension Commission in Enugu is for easy
assessment of data and information required for the research work. It is
necessary to mention that the research was beset with many problems such as:
dearth of data, in complete response and some misleading information from
respondents.The researcher was objective in analyzing the data generated from
the respondents. 10 Other limitation of the study, were lack of finance coupled
with very short period which the research used in combining the academic programme
and other personal obligations. However, these limitations are considered so
serious as to affect its validity. Meanwhile the scope of time coverage for the
research will be a period of six years since the new pension act was in 2004.
1.8 DEFINITION
OF TERMS
Joint
Tax Board This is an approved body that monitor the activities of private
sector pension schemes.
!Nigeria
Social Insurance Trust Fund (NSITF) Provide and enhance social protection to
private sector employees.
!National Pension Commission (PENCON) Is an
apex body of pension industry in Nigeria that regulate and supervise the business
of pension companies.
!National
Insurance Commission (NALCOM) It is an independent body responsible for
licensing and regulating insurance companies in Nigeria.
!Pension
Reform ACT 2004 (PRA) This is the body under the Pension Reform Act 2004 that
regulate the activities of all pension matters.
!Pension Fund Administrators (PFAs) They are
Private Limited Liability Companies licensed to manage pension funds under the
Pension Act 2004.
!Pension
Fund Custodian (PFCs) They are banks license to hold the pension fund assets on
behalf of the PFA.
!Retirement Savings Account (RSA) This is
where the monthly contributions of employees are kept for safe custody.
!Security
and Exchange Commission (SEC) These are manages under pension scheme license to
manage pension funds.