MANAGEMENT OF PENSION FUND IN NIGERIA: CHALLENGES AND PROSPECTS

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CHAPTER ONE

 INTRODUCTION

1.1    Background of the Study …………………………………………. 1

1.2    Statement of the Problem ……………………………………….. 3

1.3    Objective of the Study …………………………………………….. 5

1.4    Research Question  ………………………………………………… 6

1.5    Research Hypothesis  …………………………………………….. 7

1.6    Significance of the Study ………………………………………… 8

1.7    Scope and Limitation of the Study …………………………… 9

1.8    Definition of Term  ………………………………………………… 10

          CHAPTER TWO

LITERATURE REVIEW

2.1    Concepts and Meaning of Pension Fund ………………. 12

2.2 Types of Pension Fund Scheme ………………………………. 14

2.3 Institutional Framework  …………………………………………….. 17

2.4 Objective of Pension Reform Act 2004 ……………………… 19

2.5 The Problems and Challenges of Pension Fund in Nigeria ……………………… 21

2.6 Contribution of the Pension Fund Scheme ………………… 24

2.7 Benefits of Pension Fund Scheme  …………………………… 26

2.8 Factors Affecting Pension Fund in Nigeria ………………… 30

2.9 The Role of Financial Institution in Pension Management   ………………………………………………………. 33

2.10 Opportunities and Challenges for Financial Institutions on Pension Industry …………………….. 36

2.11 Challenges and Prospect in management of Pension Fund in Nigeria  ……………………………………….. 41

2.12 Shortcoming in the Implementation of the New Pension Reform Act ……………… 47

2.13 Funded Pensions in Nigeria Political Economy

2.14 Overview of Pension Fund Act Investment and Risk Management ………….. 48

2.15 Provision Relating to Risk Management ………………….. 52

2.16 Pension Risk Management Operation Process ……….. 54

2.17 Implications of the New Funded Pension Scheme in Nigeria ………….. 58

 

          CHAPTER THREE

          RESEARCH METHODOLOGY

3.1Research Design ……………………………………………………… 64

3.2    Sources of Data ……………………………………………………. 65

3.3    Area of the Study ………………………………………………….. 65

3.4    Population of the Study …………………………………………. 66

3.5    Sample Size Determination  ………………………………….. 66

3.6 Method of Data Collection  ………………………………………… 67

3.7 Method of Data Analysis …………………………………………… 68

3.8 Validation and Reliability of the Instrument ………………… 69

          CHAPTER FOUR

          PRESENTATION ANALYSIS OF DATA

4.1    Presentation of Data ……………………………………………… 70

4.2    Hypothesis Testing ……………………………………………….. 89

4.3    Data Analysis ……………………………………………………….. 99

 

          CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1    Summary of Findings ………………………………………….. 103

5.2 Conclusion ……………………………………………………………… 104

5.3    Recommendation ……………………………………………….. 105

5.4    Suggestion for Further Studies ……………………………. 106

BIBLIOGRAPHY …………………………………………………. 108

APPENDIX…………………………………………………………. 112

                                          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 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

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

 

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