EVALUATION ON PUBLIC PENSION SCHEME IN NIGERIA: THE NEED FOR URGENT REFORM

INTRODUCTION CHAPTER ONE 1.1 BACKGROUND OF THE STUDY The administration of pensions in Nigeria has a long and storied history that extends back to the 1950s. The Pension Reforms Act of 2004 brought to light the new pension system in Nigeria, which is a defined contributory plan. This is in contrast to the previous pension system, which had mostly defined benefits. The topic of retirement income has been extensively discussed in a wide variety of nations during the last several decades. In point of fact, in more recent times, policy makers in many nations have shown a growing interest in pensions as a method of supporting privately financed retirement income savings by an aging population (Olaniyan, 2017). Retirement used to signify the end of a productive life, but in today's world, it simply denotes a shift in one's way of life. This was not always the case in the past. Our life expectancy has increased because to the vast improvements in both our living conditions and our medical treatment. At the same time, our expectations for what we should be able to do in our latter years have grown. We are looking forward to years of retirement that will be full of enjoyable experiences. Nowadays, retirement is not a leisurely amble into the golden years of one's life; rather, it is an opportunity that must be seized and enthusiastically relished. It is crucial to prepare for the future, and preparing your pension is one of the most important things you can do to ensure that you will be able to live the life you want to lead once you retire (Fapohunda, 2019). Pensions as a kind of social security against old age poverty and other uncertainties have received a significant deal of attention nearly everywhere in the globe, both in developed and developing nations, in recent years. This is because pensions provide protection against both of these factors. The problem of pension programs, particularly those that are funded and handled by the public sector, has emerged as a topic of concern among economists, politicians, and the general public. This is the case not only due to the fact that such programs are essential to the health and wellbeing of retirees and the elderly, but also due to the fact that the vast majority of pension programs are not actually balanced (that is, they are not financially stable), and as a result, they are operated at deficits, which causes the present values of their future liabilities to be extremely high (Ugwu,2016). For this reason, it is necessary to provide an overview of the components that comprise a pension program plan in order to get a basic comprehension of this kind of social security service. The Nigerian government's inability to continue meeting the overhead costs of pensions, which have continued to make significant inroads into the national budget, pushed the country to the point where pension reform became an absolute necessity. By applying this strategy across the board in the economy, it was necessary to not only alleviate the problem of poverty among the elderly but also within households(Oniye,2018). The DBS, which has been run by the public sector for a significant number of years and is also sometimes referred to as a pay-as-you-go system, has not been successful in meeting the financial and development goals that the nation has set for itself (and its economy). Due to the absence of an efficient regulatory and supervisory mechanism for the system, the compliance ratio in the private sector has also been disappointingly low (Alo, 2018). From January 1, 1946, all the way up until June 2004, Nigeria had a defined benefit scheme in place. The Pension Reform Act was signed into law on June 25th, 2004, and it went into effect on July 1st of that same year. In place of the previous defined benefit (DB) system, the reform instituted a defined contributory (DC) system. Therefore,the study will examine the need for reform in public pension scheme in Nigeria. 1.2 STATEMENT OF THE PROBLEM The transition towards retirement is often cited as one of the most difficult obstacles faced by normal workers throughout the course of their careers. The transition towards retirement poses not only financial but also emotional and psychological problems for which employees need to adequately prepare themselves well in advance. In the majority of developing nations, and Nigeria in particular, the working age of public civil employees is restricted in order to avoid an ageing labor force by permitting admissions of young able-bodied labor for the purpose of enhancing productivity and efficiency (Adebayo, 2020). This is very important as a result of the fact that the Marginal Physical Productivity of Labor (MPPL) of a person will decrease as he or she gets older. So, keeping such a worker on staff at this point in time will equate to the firm effectively operating at a loss. Because of this, the legal retirement age in Nigeria's public sector is set at sixty (60) years old or thirty-five (35) years of continuous active working service before retirement. In spite of this, the Retirement Age Harmonization Act of 2012 established that judicial officers and academic staff of tertiary institutions must work until they are 70 years old before they are eligible for retirement. This was done out of the belief that "the older, the wiser" applies to those fields (Oniye, 2018). The struggles that a large number of retirees in Nigerian society are going through have captured the attention of everyone and anybody who has paid careful attention to the situation. These issues appear to range from the unexpected passing of a loved one to the loss of one's regular monthly salary, anxiety regarding a residential home, the absence of employment, a diminishing status, a decline in physical capacity and a worsening health condition, as well as aging and physical incapacity. Many retirees in Nigeria have been subjected to unimaginable suffering and even loss of life as a result of the delay in payment of pensions and gratuities. As a result, retirement has become something that many employees fear. This issue is made much more difficult to solve due to a lack of preparation and management for the post-retirement era and circumstances. Therefore, this study will examine the need for reform in public pension scheme in Nigeria 1.3 OBJECTIVES OF THE STUDY Generally, this study will aim to examine the need for reform in public pension scheme in Nigeria. The specific objectives outlined below will guide the study: i. Ascertain whether pension schemes in Nigeria has been unsustainable. ii. Determine the rate public pension scheme were adequate to provide the needed benefits of retirees. iii. Investigate the problem of pension schemes in Nigeria and contributing factors. iv. Establish plausible needs for reform in public pension scheme in Nigeria. 1.4 RESEARCH QUESTIONS i. Has existing public pension schemes in Nigeria been unsustainable? ii. What is the rate public pension scheme were adequate to provide the needed benefits of retirees? iii. What are the problem of pension schemes in Nigeria and contributing factors? iv. What are the plausible need for reform in public pension scheme in Nigeria? 1.5 RESEARCH HYPOTHESES The following hypothesis have been formulated for the study: Ho1: Existing public pension schemes in Nigeria has not been unsustainable. Ho2: The rate public pension scheme were adequate to provide the needed benefits of retirees is not low. 1.6 SIGNIFICANCE OF THE STUDY The study will be significant to pension board, employees because pension schemes can provide protection in the form of lump sums and pensions to dependants in the event of a member's death. Additionally, subsequent researchers will use it as literature review. This means that, other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regards to the need for reform in public pension scheme in Nigeria. 1.7 SCOPE OF THE STUDY Generally, this study will examine the need for reform in public pension scheme in Nigeria. The study will by extension ascertain whether pension schemes in Nigeria has been unsustainable; determine the rate public pension scheme were adequate to provide the needed benefits of retirees; investigate the problem of pension schemes in Nigeria and contributing factors; and establish plausible needs for reform in public pension scheme in Nigeria. Notably, this study will be delimited to Leadway Pensure, Lagos State, where the respondents will be obtained. 1.8 LIMITATION OF THE STUDY The major limitation experienced in this study is the Pension Fund Administrators itself. Most of the information provided by the Legacy Pension Manager required explanation as to the reason behind such activities and actions. Nevertheless, there is always solution to a problem the problems were to an extent surmounted. There is also a limitation to textbooks, Journals and other materials in the library which are relevant to the research work. I have to source for some materials outside the library. Furthermore, inadequate finance has an effect on this research work due to the current situation of the economy which makes prices of things very high viz-a-vis the cost of transportation the pension fund administrator to obtain relevant materials to this research work were very expensive. However, the challenges were brought under control to ensure the success of this work. Specifically, the researcher made use of a self-structured questionnaire which was distributed to the respondents on a one-on-one basis to ensure complete responses, and also to explain the purpose of the research to them and get their responses. This was done to reduce the level of bias if the respondents were to think the information was for any other purpose outside the study, To this end, informed consent were obtained form the respondents to ensure their voluntary participation in the study. 1.9 Definition of terms Pension: A pension is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments. Retirement: Retirement is the withdrawal from one's position or occupation or from one's active working life. A person may also semi-retire by reducing work hours or workload. Reform: Reform consists of changes and improvements to a law, social system, or institution. A reform is an instance of such a change or improvement.