A list of problems of pension funds administration in Nigeria and what you need to know. A pension is a periodic payment made to a person who has meritoriously over a number of years in a job or position for the government or a company. Pensions are a matter of legislation in Nigeria although not every capable workplace currently pays pensions to their workers, no matter the amount of work or the number of years for which the worker or workers have served the company.
A pension fund is money that has been set aside to cover the cost of making the periodic payments to the workers for whom it was organized. Pension funds are not intended to sit in a bank vault only for the administrators to dip hands every time they want to make a pension payment. Pension funds are huge amounts of money that are intended to make profits from which the payments would be made. The profits should be made by trading in stocks and bonds, or any other investment vehicle that the stakeholders may have agreed upon.
It is important to note that there are different types of pension schemes that are being operated in Nigeria, and they are
- Contributory pension scheme
- Defined Benefit type of pension scheme.
Except in special cases in which the government or an agency of the government has undertaken to self administer their own pension fund, Pension funds are handled by special financial agencies or insurance companies with expertise in handling client monies and pension fund contributions. They are licensed to take the contributions from the workers and their employers with the assurance that upon the retirement of the former they will make pension payments to them.
Financial activities are fraught with challenges, and pension fund administration in Nigeria is no different. So what are the challenges of Pension Fund Administration in Nigeria? That is what this article is intended to find out and discuss. Let us do so in the following paragraphs.
Problems Of Pension Fund Administration In Nigeria
Under the two major categorizations of pension funds that have been mentioned above, there are several minor types of pension funds that each differ from the other in one small way or the other. In other to bring out the individual challenges without leaving anyone out, it will be necessary to list them out and then highlight their challenges. That is exactly what we will do.
Transitional Pension Management:
Transitional means changing or undergoing change. Transitional Pension Management is a structure that is created to accommodate workers who have joined the Nigerian workforce from other countries. These may be workers in multinational conglomerates who have been transferred from the branches in other countries to serve in Nigeria or people who have on their own accord migrated into Nigeria from other countries.
Challenges of Transitional Pension Management:
- Lack of proper liaising with the overseas pension management firm that was previously in charge of the individuals’ pension administration. This can have a ripple effect causing many more problems some of which we will discuss.
- No Proper Documentation of the employees’ contributions to the scheme.
- Delayed payment of pension entitlements and even sometimes the outright refusal of payment of pension entitlements. Sometimes, due to the poor documentation, there could be a pension fund misappropriation.
- Too many routine pensioners papers verification by the pension administrators, for example, the Pension Transitional Arrangements Directorate. This strenuous and yet frequent procedure has often caused more damage than good and has led to Nigeria’s pensioners dying while undergoing these exercises, as they are forced to endure long periods without payments while the new registration is ongoing.
- Lack of effective enforcement of the existing pension laws has been one of the major challenges that have been facing pension administration in Nigeria. Nigeria has many good laws that are supposed to regulate the activities of pension fund administrators and is constantly updating the laws with new ones, but a major problem has been the enforcement of the laws. There is no effective monitoring much less enforcement, and so despite the good laws there is no enforcement.
Guaranteed Minimum Pension
As the name implies this is the minimum pension that a person who is duly employed is to be paid by right, as empowered by Nigerian legislation. This structure has its own challenges as well.
Although, all in all, this was initiated with very good intentions it has brought about a number of challenges.
- Non payment of the contribution by the employees. This is a safety net that the government has devised for the protection of the Nigerian Workers, but for some reason bothering on poor sensitization of the very workers they are trying to protect, the scheme has never really taken off.
- Others have said that there is still a matter of computation involved with has yet to be resolved. The excuse may not be a very good one, particularly because it seems like the scheme is being overlooked or ignored, and Evey establishment is being allowed to negotiate and determine its own pension plan.
Additional Voluntary Contributions:
These are additional monies that are contributed to augment the pension plans of workers who are already enlisted to a pension plan. This will make their pension plans more robust, and give them more leverage against the forces of inflation while enhancing their chances of a better lifestyle after retirement.
Challenges of Additional Voluntary Contributions:
- This pension plan has suffered in Nigeria, there is inadequacy in terms of evaluating individual DC member plan, that is a good estimate of individual pension benefit that is likely to accumulate at the time of retirement by PFAs, that is the metric that will help to set a clear cut goal that will be the target, so that the retiree will have a sustainable income after retirement, without affecting his lifestyle.
- Voluntary Additional Contributions, by there very nature are not to be enforced, because they are voluntary. However, because they are not mandatory they are usually overlooked and ignored, both by the employees and by the employer.
- There is really no incentive that can motivate workers to save more money towards their retirement. Most workers just spend their money with the expectation that it is the government’s responsibility to take care of hem when they retire.
Conclusion On The Problems Of Pension Fund Administration In Nigeria
As you have seen from the article in the paragraphs above the Nigerian pension management situation is full of challenges ranging from a lack of interest on the part of workers to a lack of government involvement in the areas of monitoring, enforcement, and sensitization of the workers involved. Many of the challenges that we have discussed would be reduced top the barest minimum if the government would get its act together and work for the benefit of the Nigerian worker, thus giving them hope of an escape from the grasp of poverty once they have received their last official paycheck as workers.
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