THE PROBLEMS AND CHALLENGES OF NIGERIA CONTRIBUTORY PENSION SCHEME TO NIGERIA CIVIL SERVANTS

THE PROBLEMS AND CHALLENGES OF NIGERIA
CONTRIBUTORY PENSION SCHEME TO
NIGERIA CIVIL SERVANTS

ABSTRACT

This research work is on the problem and challenges of Nigeria contributing pension scheme to Nigeria civil servants specifically as it effect regular payment of pension, arrear/debt of pension, issue of ghost pensionnaire, effect of change of jobs and pension administrator and the level of implementation and supervision of rules, regulation and standards in the industry.  The researcher employed questionnaire, chi-square for the research work. This method was applied because information could be source from Nigeria Civil Servants PenCom workers and pensionnaire retirees. The result indicate that payment of pensionnaires are not regular, arrears/debt of pensionnaires has not been cleared, issued of ghost worker are still not cleared, and low level implementation and supervision of rules and regulation of PenCom; all these constitute problems and challenges for PenCom and pensionnaires. Finally, Having found the above problem and challenges of Nigeria pension scheme to Nigeria Civil Servant the researcher recommended that an institution should be build to train staff to handle pension matter and serious measure should be taken to fish out ghost workers and pay arrears of pensionnaires.

CHAPTER ONE

1.0       BACKGROUND OF STUDY

1.1       INTRODUCTION

The Nigeria Pension Schemes exist to provide post- retirement benefits to employees. It was introduced by the colonial master to provide income and security for old age British citizen working in the country upon retirement.

According to Adesina B. (2006:7) Nigeria first ever legislative instrument on pension matters was the pension ordinance of 1951, which had retrospective effect from 1st January, 1946. Then followed by the National Provident Fund (NPF) scheme established in 1961 was the first legislation enacted to address pension matters of private organizations. Pension Act No. 102 of 1979 came up 18 years later, as well as the Armed Forces Pension Act No. 103 of the same year. In 1987 Police and other Government Agencies’ Pension scheme was enacted under Pension Act No 75. This was followed up by the Local Government Pension Edict which foresaw the establishment of the Local Government Staff pension Board of 1987.

By 1993 the National Social Insurance Trust Fund (NSITF) scheme was established by Decree No. 73 of 1993 to replace the defunct NPF, in 1994 employees in private sectors were equally accommodated by the scheme, for lost of employment income in old age, invalidity or death.

Most pension schemes in the public sector have the problem of been poorly funded or unfunded, owing to inadequate budget allocation. This situation resulted to outstanding pension deficits of about two trillion naira before the commencement of the Pension Reform Act of 2004 (PRA). Apart from this the administration of the scheme was generally weak, inefficient and non transparent. There was no authenticated list/data base on pensionnaires, while 14 documents are required to file pension claims. Also there was a restrictive and sharp practice in the investment and management of pension fund, this created the problem of pension liabilities to the extent that pensionnaires were dying on verification queues and over three hundred parastatals schemes were bankrupt before the new scheme came on board.

On the issue of private sector, most employees were not covered by any form of retirement benefit arrangements. Most of their pension schemes were that of resignation rather than retirements. Therefore at that period the pension schemes in Nigeria were largely unregulated, without standard or supervision and highly diversified before the advent of the PRA 2004. Meanwhile, before the enactment of Pension Reform Act of 2004, there were three regulators, namely Securities and Exchange Commission (SEC,) National Insurance Commission (NAICOM) and the Joint Tax Board (JTB). (Ahmad M. K. 2006:2).

Moreover, the Pension Reform Act of (2004), according to Atedo N.A (2006:19) ‘the Act’ a compulsory contributory pension scheme (“the scheme” or “CPS”) has been established for all categories of workers in the Federal Capital Territory, Federal Public Service and in the Private Sector. This scheme waved the era of pay -as- you-go and put in place a full funding of scheme which is compulsory for all. It provides the categories of schemes to apply to the National Pension Commission (‘Pension’) to continue but be managed according to the Act. The major differences between the new and previous scheme are under the Contributory Pension Scheme (CPS) employer and employees make founded contributions into a Retirement Savings Account (‘RSA’) for the benefit of the employee or his legal beneficiaries under the CPS, PenCom is the sole regulator for all pension funds they are required to be managed and administered by private owned and licensed PFAs selected by each employee, while the PFA appoints the PFC to be in charge and responsible for the assets as a third party. PenCom also issue guidelines for the investment of pension fund. Each employee is to receive pension for life for which he/she contributed for under CPS. Based on the foregoing, the researcher is to study the challenges and problems of Nigerian contributory pension scheme to Nigeria Civil Servants.

1.2   STATEMENT OF PROBLEMS

Nigerian Contributory Pension Scheme is to enable the contributors like Nigerian Civil Servant, Public Servants, Private Employee and Voluntary Contributors to enjoy retirement benefit at their old age, not withstanding this importance, the contributory pension scheme is faced with a lot of challenges and problems. When the issue of pay-as-you-go (P.A.Y.G) scheme was involved it became unsustainable due to lack of adequate and untimely budgetary provisions and increases in salaries and pensions. There were lack of effective regulation and supervision of the system, no prompt payment of the contribution due to salaries not paid on time or arrears of salaries owned. It was poorly funded or unfunded, owing to inadequate budget allocations.

The administration was generally weak, inefficient and non transparent improper investment and management of pension funds created problems of liabilities pension scheme in Nigeria were largely unregulated, without any standard or supervision and highly diversified.

In 2004 the Pension Reform Act (PRA) went into solving the above problems and challenges. They inherited the debt owed or arrears of pension, they were faced with issue of ghost pensionnaires and no accurate data base on pensionnaires. The cost of information technology as regard the materials and other items required to meet their promise of timelessness in prompt payment of pension, as and when due with date. What about workers/employee who changed from their previous work to a new one and those that decided to move from one pension administrator to another? Moreover, there are issues of risk management as regard investment of funds collected from the contributors. The rules, regulations and supervision of the system were ineffectively implemented. It is against this problems and challenges of Nigeria contributory pension scheme to Nigeria Civil Servant that the researcher wished to carryout the research work.

1.3 OBJECTIVE OF THE STUDY

The study will examine the problem and challenges of Nigeria contributory pension scheme to Nigeria Civil Servants. Thus, the study is set out to achieve the following objectives:

1. To know if the pensionnaires on regular bases receive their retirement benefits as and when due with date.
2. To find out if the debt or arrears of pensionnaires inherited by PenCom has been cleared.
3. To know if the issue of ghost pensionnaires has been nailed to bud.
4. To determine the effect of change of job and pension administrator in the pension scheme
5. To know if proper supervision and implementation to the set of rules, regulations and standards for administration are maintained.

1.4       RESEARCH QUESTION

The research is set out to answer the following questions:

1. Do pensionnaires receive their retirement benefits regularly as and when due (monthly basis) in Nigeria?
2. What is the position of debt/arrears of pensionnaires inherited by PenCom in the contributory pension scheme in Nigeria?
3. Do we still have ghost pensionnaires in the contributory pension scheme in Nigeria?
4. What effect do change of jobs and pension administers have on the contributory pension scheme in Nigeria?
5. What is the impact of improper supervision and implementation to the set of rules, regulations and standards for administration are maintained?

1.5       RESEARCH HYPOTHESIS

The research will be guided by the following hypothesis:

H0: The debt or arrears of pension inherited by PenCom do not serve as a challenge and problem to Nigeria Contributory Pensions Scheme to Nigeria civil Servants.

H1: The debt arrears of pension inherited by PenCom serve as a challenge and problem of Nigeria Contributory pension Scheme to Nigeria civil Servants.

H0: Change of jobs and pension administrator do not serve as a challenge and problems of Nigeria Contributory Pension Scheme to Nigeria civil Servants.

H1: Change of job and pension administrators serves as a challenge and problem of Nigeria Contributory Pension Scheme to Nigeria Civil Servant.

H0: Ghost pensionnaires do not serve as problem and challenges of Nigeria Contributory Pension Scheme to Nigeria Civil Servants.

H1: Ghost pensionnaires serve as a problem and challenge of Nigeria contributory pension scheme to Nigeria Civil Servants.

1.6       SCOPE AND LIMITATION OF THE STUDY

The scope of this study is centered on challenges and problem of Nigeria Contributory Pension Scheme to Nigeria Civil Servants. It will be viewed from some pension administrators, ministry and forms and shall cover Enugu metropolis as a source of information to enable the researcher carryout his project work.

It is necessary to mention that the researcher was beset with many problems in the course of this work. There was dearth of data to divulge some of the questions which were not answered, due to uncooperative attitude of some workers in the selected areas. Most often information was not revealed by the administrators/institutions due to reasons best know to them as confidential and restricted areas. The researcher believed that those problems may affect the result of this work. Apart from the aforementioned all other errors and omissions are precisely those of the researcher.

1.7     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 problems of Nigeria contributory pension scheme to Nigeria Civil Servants.

Essentially, this work is a step in a right direction to assist and enlighten the general public on the challenges and problems of Nigeria contributory pension scheme to Nigeria civil servant.

Furthermore, there is a need to provide a reference document for further investigation and evaluation of challenges and problems of PenCom to Nigeria Civil Servant. This research work will go a long way to increase the availability of literature in field of finance.

Finally, the study is aimed at been beneficial to policy maker, regulators, public and private employees and employers, voluntary contributors, general public, Enugu State, the federal Government and administrators of pensions.

1.8   DEFINITION OF TERMS

NPF National Provident Fund was established in 1961 for non pensionable private sector employee. It was saving schemes were employee and employer contribute on monthly based.

NSTIF The Nigeria Social Insurance Trust Fund was established by decree No. 73 of 1993 to provide enhanced social protection to private sector employees PRA Pension Reform Act 2004 is the most recent legislation of the Federal Government at reforming the pension system. It establish a Uniform pension System a single authority regulate all pension matters. SEC Securities and exchange commission is a licensed pension fund managers. JTB Joint Tax Board approved and monitored all private pension schemes with enabling powers from schedule 3 of the personal Income Tax Decree 104 of 1993.

NAICOM National Insurance Commission, an agency responsible for licensing and regulating insurance companies in the country. CPS Contributory Pension Scheme: it is a marked departure from pay-as-you-go Defined Benefit (DB). It is schemes that improve the pension situation in both the private and public sectors by making full funding of the scheme compulsory.

PFA Pension Fund Administrator is limited liability companies duly licensed by PenCom as special purpose vehicle to carryout pension business only. PFC Pension Fund Commission provides strict and adequate supervision of the industry. RSA Retirement Saving Account: This were monthly pension contributions are kept PENCOM The National Pension Commission: was established to regulate, supervise and ensure the effective administration of pension matters in Nigeria.

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