THE RELEVANCE OF THE NEW PENSION REFORM ON PERFORMANCE IN THE PUBLIC SECTOR (A Case Study of Selected Ministries in Lagos State, Alausa)


Content

ABSTRACT

This research work discussed the relevance of the new pension reform on performance in the public sector in the ministry of finance and ministry of defence, Alausa Lagos State. The aim and object of this study is to examine the social, economic and motivational benefits of pension on active labour force, retiring and retired employees also to examine how effective the Pension Reform Act 2004 is on the Nigeria economy. Relevant data were collected from both primary and secondary sources. Questionnaire was the main primary data collected, instrument employed while data from various relevant publications constituted the sources of secondary data. Chi-Square was used to analyze the data. From this study, it can be deduced that pension is a fundamental aspect in our economy. The pension reform Act 2004 will increase the level of investment in the economy and also improve the standard of living of the people. Government expenditure will reduce and government income will increase. The public sector of the economy will benefit immensely. From the above finding it recommends to ensure the implementation of the new pension reform act (2004) in all organizations in Nigeria and educate all individual in the public sector, both the retirees and the employees about the benefits of the pension reform.

 

 

 

 

 

TABLE OF CONTENT

                                                                                                          PAGE

TITLE PAGE                                                                                       I

CERTIFICATE                                                                                    II

DEDICATION                                                                                     III

ACKNOWLEDGEMENT                                                                     IV
ABSTRACT                                                                                        V

TABLE OF CONTENT                                                                         VI-VII

 

CHAPTER ONE:   INTRODUCTION

1.1     BACKGROUND OF THE STUDY                                              1

1.2     STATEMENT OF PROBLEM                                                     5

1.3     PURPOSE OF THE STUDY                                                      5

1.4     SIGNIFICANCE OF THE STUDY                                              6

1.5     RESEARCH QUESTIONS                                                         7

1.6     RESEARCH HYPOTHESES                                                      7

1.7     SCOPE OF THE STUDY                                                           8

1.8     LIMITATIONS OF THE STUDY                                                 9

1.9     ORGANIZATION OF THE STUDY                                             9

1.10   BRIEF HISTORICAL BACKGROUND OF THE CASE STUDY   10

1.11   DEFINITION OF TERMS                                                          14

 

CHAPTER TWO:  LITERATURE REVIEW

2.0        INTRODUCTION                                                                      16

2.1     OBJECTIVCES OF PENSION SCHEME                                   18

2.2     PENSIONS IN OTHER COUNTRIES                                         20

2.3     ISSUES ON PENSION SYSTEM REFORMS                             23

2.4     INSTITUTIONAL AND REGULATORY ISSUES IN PENSION

SCHEME REFORMS                                                                26

2.5     PENSION REFORM ACT 2004: (NEW PENSION ACT)              26

2.6     OBJECTIVES OF THE NEW SCHEME                                     28

2.7     OTHER HIGHLIGHTS OF THE PENSION ACT                         29

2.8     PENSION FUNDS ACCOUNTING SYSTEM                               34

2.9     DIFFERENCES BETWEEN THE OLD PENSION SYSATEM

AND THE PENSION REFORM ACT 2004                                 36

2.10   PENSION REFORM ACT 2004                                                 38

2.11   THE NEW NIGERIAN PENSION SYSTEM                                 40

2.12   THE RELEVANCE OF THE NEW PENSION SCHEME TO

THE EMPLOYEES & RETIREES OF THE PUBLIC SECTOR

(MINISTRY OF FINANCE/MINISTRY OF DEFENCE)                43

2.13   CHALLENGES AND COMMENTS TO THE PENSION REFORM

ACT 2004 IN THE PUBLIC SECTOR                                        45

2.14   RETIREMENT ACCOUNT & REMITTANCE OF CONTRIBUTION 47

2.15   YARDSTICKS FOR MEASUREMENT OF PENSION SCHEME IN

THE PUBLIC SECTOR                                                             49

2.16   SCHEDULE TO PENSION REFORM BILL 2004                        54

 

CHAPTER THREE:       RESEARCH METHODOLOGY

3.1     INTRODUCTION                                                                      55

3.2     RESEARCH DESIGN                                                               55

3.3     RESEARCH QUESTIONS                                                         55

3.4     RESTATEMENT OF RESEARCH HYPOTHESES                      56

3.5     SOURCE OF DATA                                                                  56

3.6     CHARACTERISTICS OF STUDY POPULATION                        57

3.7     SAMPLE PROCEDURE                                                            58

3.8     ADMINISTRATION OF QUESTIONNAIRES                              58

3.9.    DATA ANALYSIS                                                                      59

3.10   LIMITATIONS OF THE METHODOLOGY                                 60

       REFERENCES                                                                            62

 

CHAPTER FOUR:          PRESENTATION AND ANALYSIS OF DATA COLLECTED

4.1       INTRODUCTION                                                                      63

4.2       DATA PRESENTATION AND ANALYSIS                                   63

 

CHAPTER FIVE:           SUMMARY, CONCLUSION AND RECOMMENDATION

5.1     SUMMARY                                                                               83

5.2     CONCLUSION                                                                         84

5.2     RECOMMENDATION                                                               85

5.3        SUGGESTIONS AND FURTHER STUDIES                              86

BIBLIOGRAPHY                                                                       87

          QUESTIONNAIRE                                                                    88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Pension is an important aspect of our economy which cannot be ignored in the present and future growth of any country.  Every worker would inevitably reach a non-active age hoping to have worked well enough to have something to fall back on.

According to Central Bank of Nigeria (CBN) briefs “issues in pension system reforms”, the most attractive incentives to employees in both public and private sectors are the hope of receiving pension income after active service.

Pension is a regular payment by an employer to a retired employee or a regular payment from a private company to a person who have contributed to a pension fund for much of his working life.  It can also be defined as a periodic payment or allowance to an individual or to his family because of some meritorious service done or when conditions such as age, length of services etc has been met.

According to “Collins Gem English Dictionary”. Pension is a regular payment to people above a certain age, retired, employees, widows, etc.

Also, according to oxford advanced learner’s dictionary, it defined pension as an amount of money aid regularly by a government or company to somebody who is considered to be too old or too ill to work.

In the process of granting pensions to employees, a pension scheme was set up.  “A pension scheme” is a systematic plan by an employer to provide for its employees on their ceasing to be employed either on retirement or on changing jobs.

The history of pension in Nigeria is relatively short when compared to that of the other countries. The first public sector pension’s legislation pension ordinance was enacted in 1951 retroactive January 1, 1946.  The law allowed governors to grant pensions in accordance with the regulations which were reviewed from time to time with the approval of the secretary of state for colonial affairs in the united kingdom government.  The resting period was fixed at 10 years of service. The legislation provided for pension and gratuity but they weren’t a right.

There were several amendments to this legislation at and after independence until a comprehensive pension’s law, pension decrees Nos. 102 &103 of 1979.  The first known private sector initiative in Nigeria at establishing a formal pension and gratuities scheme fro its employees was by “Nigerian Breweries in 1954” and this was followed by united African Company (UAC) in 1957.

In the public sector, the federal civil service has a pension scheme that was financed from the general revenue known as “hon-contributory”.  It is a fully unfunded defined benefit one.  It means that workers are being taxed to some extent to pay the pension of those who have retired.

The pension plans was mostly treated as expenditure items in the annual budget by the federal government, the federal capital territory reach of the 26 states government and the local government.

The based plans of the public sector include all employees in the local government, state government, quasi government corporations and the federal civil service. As at December 31st, 1996, about 1.5 million are covered by the existing pension arrangement, representing about 3.5 per cent of estimated labour force.  The retirement age in the public sector was 60yrs except that judges of appeal and supreme court can retire at  70yrs and the voluntary retirement age was 45yrs whichever came first having completed 15 yrs service period.

There are two main types of benefits being provided by the public sector and they are;

1.   Gratuity which ranges from 100% to 140% of total emoluments for 10-14 yrs service and 100% to 300% for 15yrs – 35yrs service

2.  Pension which ranges from 30% of total emolument after 10 yrs to 70%

In the late 90’s, the burden of pension payment increased as a result of increasing number of people which longer life span and demand for enhanced pensions and observe of regulations.  In all, the existing pension schemes have institutional problems and they lack administrative and technical capacity to administer pension efficiently.  There was no uniform set of rules, regulation and standards for the public sector, private sector and the informal sector (those who are neither working for the government on private sector)

In addition, no other social or welfare schemes in Nigeria that the old pensioners in the public, private and the informal sector could fall back on to augment their income until 2004 when the pension reform act was enacted.

1.2   STATEMENT OF PROBLEM

The statement of the problem of this research work evolves round the terms and concepts used whose local point is in the “impact and effect of the new pension reform on performance in the public sector”

1.3   PURPOSE OF THE STUDY

This study aims to;

(i)          Examine the social, economic and motivational benefits of pension or a active labour force, retiring and retired employees.

(ii)        Analyze the pension reform Act 2005

(iii)      Examine how effective the Pension Reform Act 2004 is on the Nigeria economy.

(iv)       Highlight likely constraint of the Pension Reform Act 2004

(v)         Evaluate the past and future performance of the pension fund administrators on the economy and suggest future opportunities or prospect.

 

1.4   SIGNIFICANCE OF THE STUDY

The effectiveness of the Pension Reform Act 2004 lies in the level of its efficiency. As part of the important institutions in Nigeria, significantly, this study will be of great importance in the following areas;

(i)          It will help to highlight major problems involved in pension in Nigeria

(ii)        It will be useful to students of relevant study or discipline in understanding and understudying the problems and benefits of the Pension Reform Act 2004.

(iii)      It will serve as a guide for potential investors in the stock exchange market so that they will se the investment opportunities in pension as laid down by the Pension Reform Act 2004.

(iv)       It will be of great help to the Pension fund administration in improving their areas of inefficient.

(v)         This study will also provide analysis on pension in Nigeria

 

1.5   RESEARCH QUESTIONS

The following research questions are considered necessary.

      I.        Does the New Pension reform have a positive impact on the performance of active public servants?

    II.        Does the New Pension Reform have a significant impact on the welfarism of retired public servants?

  III.        How have the Pension Funds Administrators contributed to the success of the new pension scheme as promoted by the Pension Reform Act of 2004?

 

1.6   RESEARCH HYPOTHESES 

The hypothesis for this research is as follows;

1.        The impact of New Pension Reform  on performance of active public servants

Ho:   The New Pension Reform does not have a position impact on the performance of active public servant.

H1:  The New Pension Reform has position impact on the performance of active public servant.

 

2.        The impact of the New Pension Reform  on the welfarism of retired public servants

Ho:   The New Pension Reform does not have a significant impact on the welfarism of retired public servants.

H1:   The New Pension Reform has a significant impact on the welfarism of retired public servants.

1.7    SCOPE OF THE STUDY

The Reform Act 2004 58 (2) states that the scheme shall apply to all employee in the public service of the federation, federal capital territory and the private sector. This research will be limited to the extent of available facts and figures.

The place selected for the study is Lagos State Ministry of Finance/Lagos State Ministry of Defence There are several organization in Lagos state and this research will focus on the time frame of the last four to eight years.

 

 

1.8   LIMITATIONS OF THE STUDY

This research work will be limited by;

(i)          Inaccessibility to respondents.

(ii)        Low level of education of respondents

(iii)      Attitude of people to research works.

(iv)       Lack of time

(v)         Geographically, it will be limited to Lagos state

(vi)       Literature to be reviewed.

(vii)     Records are not readily available.

(viii)   Delayed collection of questionnaire.

 

1.9   ORGANIZATION OF THE STUDY

This research work will be five (5) chapters for easy comprehension and proper organization. Chapter one will consist of the introduction, statement of problem, research questions, research hypothesis, purpose, scope and limitation of the study, significance of the study, organization, definition of terms of study. Basically, it gives an insight into what the project work is all about. Chapter two reviews relevant literature and the theoretical frame work on the subject matter, and chapter three states the methodology in which the research work is based on. Chapter four states the data analysis and interpretations and highlights the view of respondent on the subject matter. Chapter five state the summary, conclusion and recommendations of the research topic and with references.

1.10 BRIEF HISTORICAL BACKGROUND OF THE CASE STUDY

An Overview of Ministry of Finance

The Ministry of Finance is a unique agency that provides the financial backbone that helps government translate its vision of providing the dividends of democracy to the teeming population of Lagos State.

Designated the ministry of Finance and Economic Development at inception in April 1968, the Ministry had Alhaji Chief I. A. S. Adewale as its pioneer Commissioner.

Late in 1995, the Economic Development was separated from Ministry of Finance and merged with Budget to become the Ministry of Economic Planning and Budget while Ministry of Finance stands on its own.

The Finance Ministry then was structured into six Directorates consisting of the three common services personnel Management, Planning, Research and Statistics as well as Finance and Supplies and three other professional Directorates Public Finance, Computer Services and Central Internal Audit.

At inception, the Ministry operated through three (3) Agencies: Finance Headquarters, the State Treasury Office, and the Board of Internal Revenue. However, the Board of Internal Revenue, which is saddled with the responsibility of collecting tax-related Internally Generated Revenue (IGR) for the State Government, was upgraded and became semi autonomous in Year 2006 to enhance revenue generation, transparency and accountability. Also, the PF/DMO, hitherto a Department in the Ministry was equally elevated to an Agency status in 2005 with a Permanent Secretary as head. This autonomy has however not diminished the performance of the responsibilities of the Ministry of Finance.

The Finance Headquarters is one of the arms of the Ministry of Finance and is headed by a Permanent Secretary. The Headquarters serves as the coordinating arm of the Ministry. It currently has staff strength of 112 Officers. The Office is also the pool house of all Internal Auditors; who are deployed to other Government Ministries, Departments and Offices in the State. There are 154 Internal Auditors working in different Government Agencies in the State who ensure compliance with laid down financial guidelines and early detection of financial malpractices.

An Overview of Ministry Of Defence

Vision

In recognition of the challenges of the new millennium, a military sector with modernized equipment, well-trained in all aspects of military operation, fully professionalized, compact and mobile with adequate equipment, fire-power and communications, capable of fulfilling its constitutional responsibilities and performing its international peace-keeping role proudly and efficiently is in place.

Mission

"To provide administrative and support services, timely and effective to enable the Armed Forces of the Federal Republic of Nigeria to build and maintain a modern, compact, strong, professional, mission-capable and mission-ready armed forces for the defence of national territory, maritime interest, airspace and the protection and defence of the Constitution of the Federal Republic of Nigeria, and to contribute to peace-making and peace-keeping duties worldwide under sub-regional and global organizations of which Nigeria is a member".

Military

The military is responsible for protecting the country in the event of war and the President automatically becomes the Commander-in-chief of the Armed Forces. He is the number one officer in the military and has the power to call up and give orders to the military.

It also appoints people to the following top positions:

  • National Security Adviser (NSA)
  • Chief of Defence Staff (CDS)
  • Chief of Army Staff (COAS)
  • Chief of Naval Staff (CNS)
  • Chief of Air Staff (CAS)

 

 

1.11 DEFINITION OF TERMS

Earnings:              Money earned for work done

Expenditure:         An amount of money spent

Income:                 Money which a pension, a country, etc earns from investing money from business.

Inflation:               General rise in the prices of goods and services in a particular country, resulting in a fall in the value of money

Investment:          The act of investing money in something.

Macroeconomics: The study of large economy systems, such as those of whole countries or areas of the world.

Market value:        What something would be worth if it was sold

Pensioner A person who received a pension

Pension Fund Administration: Anybody corporate incensed by the Nigerian Pension Commission as a pension administrator ad includes Nigeria social Insurance Trust Fund 

Pension Scheme: A system in which you and usually your employer  pay money regularly into a pension

Questionnaire:      Written list of question that are answered by a number of people so that information can be collected from the answers.

Reforms:

Retirements:        The act of stopping work because you have reached a particular age.

Salary:                   Money that employees receive during their job especially professional employees at the end of every month.

Verification:         To check that something is true or false.

 

 

 

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