AN APPRAISAL OF THE CONVERGENCE OF PENSION FUND ADMINISTRATION IN NIGERIA WITH INTERNATIONAL STANDARDS
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AN APPRAISAL
OF THE CONVERGENCE OF PENSION FUND ADMINISTRATION IN NIGERIA WITH INTERNATIONAL
STANDARDS
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Pension
generally is a way of catering for the welfare of retirees. It is a periodic
income or annuity payment made at or after retirement to employees who has
become eligible for benefits through age, earnings and service. According to
Alo (2004), many countries of the world are currently grappling with pension
reforms in the face of pressures from ageing populations.
Series of
pension administration schemes have emerged in Nigeria before and after
independence. In the words of Sule and Ezugwu (2009), the exact origin of
pension fund administration in Nigeria is debatable; however the history of
pension in Nigeria could be traced to the prolonged battle between workers and
employers of labour affirming that the victory of employees over employers
marked the privilege of receiving gratuity and pension in Nigeria.
The 1951
Pension Ordinance was the first legislative act on pension in Nigeria followed
by the establishment of the National Provident Fund (NPF) in 1961 to cater for
pension issues in the private sector. In 1979, the Pension Act No.102 was
instituted and the Armed Forces Pension Act No. 103. Subsequently in 1987, the
police and other government agencies pension scheme was established under
Pension Act No.75 of 1987. Similarly in 1987, the Local Government Staff
Pension Board was established to take care of pension matters among local
government employees (Sule and Ezugwu, 2006). The shortcomings and associated
impediments of the previous scheme heralded the National Social Insurance Trust
Fund (NSITF) in 1993, to address pension and retirement issues in the private
sector. Pension schemes in Nigeria over the years have always come from
budgetary allocations, noncontributory and not fully funded thereby creating bottlenecks,
series of death after retirement due to delay or lack of payment after
retirement. These whole issues led to the 2004 pension reform also known as the
Contributory Pension Scheme.
The new
pension scheme requires pension funds to be privately managed by licensed
Pension Fund Administrators. Pension Fund Administrators (PFAs) have been duly
licensed to open Retirement Savings Accounts (RSA) for employees, invest and
manage the pension funds in a manner as the National Pension Commission
(PENCOM) may from time to time prescribe, maintain books of accounts on all
transactions relating to the pension funds managed by it, provide regular
information to the employees or beneficiaries and pay retirement benefits to
employees in accordance with the provisions of the Pension Reform Act 2004.
Before it is issued with an operating license, the Pension Fund Administrators
must be a limited liability company whose sole object is the management of
pension funds (PENCOM, 2005). To discourage frivolous applications and to
ensure credibility, such company must have a paid up share capital of
N1,000,000,000 and demonstrate professional capacity to manage pension funds
and administer retirement benefits (PENCOM, 2005). The current Pension reform
Act 2004 could be said to be in conformity with the international standard and
best practices in Pension fund administration.
Some of the
key indicators that indicate the convergence of pension fund administration
towards international standard include to ensure that workers receive their
retirement benefits as and when due; assist improvident individuals save in
order to cater for their livelihood during old age; and to establish a uniform
set of guidelines and standards for administration and payment of retirement
benefits. However, the researcher is examining the convergence of pension fund
administration in Nigeria with international standard.
1.2 STATEMENT OF THE PROBLEM
Pension fund
administration in Nigeria has been poor as the schemes were characterized by
delays and sometimes non-remission of benefits to beneficiaries across the
public sector. Orifowomo (2006) asserts that insufficient monitoring of pension
activities by the regulatory authorities coupled with clear legal and
administrative sanctions for erring parties led to poor compliance by
stakeholders. Furthermore, there were no provisions for individual retirement
savings account nor periodic publishing of statement of accounts and returns.
Likewise, employees were not at liberty to choose their pension fund
administrators and were subsequently at the mercy of the fund managers. The
Pension Reform Act 2004 was enacted partly as a result of the failure of
previous schemes to address the pension needs of Nigerians and partly as a
result of the quest by stakeholders to evolve a scheme that would provide for
both the public and private sector employees and of international standard. The
researcher is curious to ascertain if the pension reform system in Nigeria has
converge with international standard considering the ineffectiveness, delays
and poor services that has characterized the system.
1.3 OBJECTIVES OF THE STUDY
The
following are the objectives of this study:
To examine the issue of pension fund
administration in Nigeria.
To examine the level of convergence of
pension fund administration in Nigeria with international standards.
To identify the shortcomings in the pension
fund administration in Nigeria
1.4 RESEARCH QUESTIONS
What are the issues with pension fund
administration in Nigeria?
What is the level of convergence of pension
fund administration in Nigeria with international standards?
What are the shortcomings in the pension
fund administration in Nigeria?
1.5 HYPOTHESIS
HO: Pension
fund administration in Nigeria is not in convergence with international
standards
HA: Pension
fund administration in Nigeria is in convergence with international standards
1.6 SIGNIFICANCE OF THE STUDY
The
following are the significance of this study:
The outcome of this study will be useful
for administrators in Pension fund administration in the process of
streamlining the sector in line with international standard.
The results of this study will also educate
the general public on the benefits of better pension fund administration in
Nigeria.
This research will be a contribution to the
body of literature in the area of the appraisal of the convergence of pension
fund administration in Nigeria with international standards, thereby constituting
the empirical literature for future research in the subject area.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study
will cover the convergence of pension fund administration in Nigeria with
international standards considering all the various pension reforms in Nigeria
that are aimed at achieving best practices in pension fund administration.
LIMITATION
OF STUDY
Financial
constraint- Insufficient fund tends to impede the efficiency of the researcher
in sourcing for the relevant materials, literature or information and in the
process of data collection (internet, questionnaire and interview).
Time constraint- The researcher will
simultaneously engage in this study with other academic work. This consequently
will cut down on the time devoted for the research work.
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