CHAPTER ONE
INTRODUCTION
1.1 BACK GROUND TO THE STUDY
People need to be financially secured especially in their old age. Most people are not aware of the importance of financial security, which is an aspect of social security. Social security also known as social insurance is the government programmer that helps workers, retired worker and families achieve a degree of economic security by providing cash payment to help replace income cross as a result of retirement disability, unemployment or death. Social security has the major role of contributing toward social equilibrium and stability by aiming at making life more meaningful and qualitative to the citizens. Government is usually in change of such schemes not only because of the fundamental nature of the risks usually associated in such social insurance but also to indicate the direction for the private sector to imitate.
Social security plan was introduced in the 19th century other European and American Countries instituted social security programmer after the attainment of independence. In Nigeria, the defunct National provident Act of 1961 funded the first National social Insurance programmer which aimed at providing cash benefits to the contributors to the scheme in the event of death or retirement of the contributions the Nigeria social Insurance Trust Fund (NSITF) was to replace National Provident fund. The fundamental provision of the pension reform Act of 2004 is the employment of the NSITF to set up pension fund Administrators (PTA) that would manage and administers all pension funds in Nigeria.
1.1 STATEMENT OF THE PROBLEM
Pure pension scheme involves series of periodic payment at retirement for an employees or his dependent in the event of death. This funding is very expensive hence usually taken up by Mult-national oil companies etc. To this end Nigeria security insurance Trust fund (NISTF) established by degree 77 of 1993 to replace to old National Provident fund (NPF) and NSITF was established and managed by the federal Government for the private sector schemes. The NSITF was intended to be a social security schemes and the benefits and mostly geared toward as such. Unfortunately, the NSITF suffered a great deal of poor public perception and a less than average level of compliance. A contributory scheme which mandated private employers of five and above to vomit 10% in the ration of 3.5 percent by employee and 6.5 percent by employers was hardly adhered to. for the personal pension plan employees in private sector also has the additional voluntary contribution arrangement whereby they were able to personally contribute to insurance companies in order to build on whatever their employers have in place for them this pension fund managers. Several problem were associated to these old pension scheme that never made it work. Part of them includes;
i. Inadequate and kite funding of the scheme
ii. Poor administration and inadequate delivery structure.
Overwhelming liabilities of Pay as Go scheme rendering it unsustainable and poorly developed legal framework. Also, most time increases in benefits were politically motivated and announced without consideration given to the actual valuation of the cost. It becomes a sectors issue in the past recent years as more pensioners are falling dead on the endless given for unpaid pension. In the private sector, funding was better but structures were irregular and coverage very low. Regulation is not focus and most local private business did not precise pension benefits as a important component of an employee’s entitlement.
Another grave limitation in the private sets is the fact that the structure lacks the essential ingredients for portability form one employment to another. In almost all cases, employees collect their benefits whenever they switch job, most times spending such benefits on issues irrelevant to retirement. But to put things straight pension crisis was as a result of the unfounded public debts, poorly managed private sector and crisis in the management and administration of retirement benefit (gratuity and pension) both in public and private sector.
1.2 OBJECTIVES OF THE STUDY
The objectives of this research are
1. To examine the origin of pension burdened crisis in Nigeria.
2. To trace the origin of pension administration on Nigeria.
3. To also examine the reason for the failure of the pension scheme arrangement.
4. To examine and evaluate the new pension scheme arrangement.
5. To identify possible problems militating against pension management and administration in Nigeria.
Finally. To suggest ways of resolving the pension crisis and improving the management of pension in Nigeria.
1.3 SIGNIFICANCE OF THE STUDY
This research would aim at;
a. Enlightening employees, employers and retires on the new pension scheme.
b. Organizations like financial institution, non-financial institution, companies, regulatory and supervising agencies like National insurance commission (NATICOM), central Bank of Nigeria (CBN), NECA and Electricity Regulatory commission (ERC) etc. would again an insight on pension administration in Nigeria.
c. The research would be useful to other researchers who would be interested in researching in this area.
1.4 RESEARCH HYPOTHESIS
The much and alternative hypothesis are framed as follows.
Ho: 1 -> The new pension scheme would not ease the pension burden on employees and employers of labour.
Hi: I -> The new pension scheme would ease the pension on employees and employers of labour.
Ho:2-> The new pension scheme would not provider the necessary funding for long-term industrial growth and development in Nigeria.
Hi: 2-> The new pension scheme would provide necessary funding for long-term industrial growth and development in Nigeria.
Ho:3 -> The new pension scheme would not create poor ability and flexibility.
Hi; 3 -> The new pension scheme would create portability and flexibility.
1.5 SCOPE OF STUDY
The research would cover all the aspect of the old scheme arrangement and the new scheme as provided by the pension Act of 2004. The scope of the research would cover the deficiencies of the old pension scheme and how the new scheme will rectify these deficiencies. The research will also discuss the criticism of the new pension scheme and highlight the similarities and differences. Between the old and new pension scheme the area or scope of coverage is Nigeria.
1.6 DEFINITION OF TERMS
NPC – National Pension Commission. Also know as PENCOM
NSITF – National Social Insurance Trust Fund.
PFA – Pension Fund Administrations.
PFS – Pension Fund custodians
NECA – Nigeria Employers consultative Association
CIC – Capital issues commission now know as SEC
SEC – Securities and Exchange commission
CBN – Central Bank of Nigeria
MOF – Ministry of Finance
HOSF – Head of service of the federation.
REFERENCES
BOOKS
B. Ekwu :A hand book on pension, 1995 pg 25 Frost, F.J. and Hager, o. p. (2016): A general introduction to industrial
Investment, Heine Man London pg 79-81.
Goffi F. C (2011): Theory and practice of investment 5th edition Heine Man.
London pg 65-68.
NEWS PAPER
Akin boy Bode : The role of pension fund management in Nigeria “Business
Times” Feb 6, 2001. pg 36.
Chikelu G.P.O :New pension scheme takes effect” Jan 2nd Business time, out
19, 1992 pg 9.
Okafor F.C. Capital market. UBA position for superior service deliver.
Vanguard (Lagos) Feb 10, 2006.
The new pension reform Act 2004.
