AN APPRAISAL OF THE CONVERGENCE OF PENSION FUND ADMINISTRATION IN NIGERIA WITH INTERNATIONAL STANDARDS
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?
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.