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CHALLENGES
FACED BY RETIREES IN ACCESSING PENSION FUNDS
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Retirement is a phase of life that every
employee must reach whether prepared for or not. It is the point in time when
an employee chooses to leave his or her employment permanently (which could be
voluntary or involuntary), and generally coincides with the employee’s
eligibility to collect retirement resources ranging from social security to
company pensions, etc. It is an inevitable stage in someone’s life be it in the
private or public service, it is a period in time whereby one’s effort in an
organization and role as a paid worker ceases, (Agoro, 2009; Ahmed, 2007;
Bassey & Asinya, 2008).
The Concept
of pension could be said to be as old as man and his working environment. Even
in primitive time man was inclined to put aside something in cash or in kind,
but mostly in kind to take care of the rainy day. The rainy day also included
old age. In modern times it is generally conceived as the sum of money paid
regularly by employers to former employees who have retired from their service
usually as a result of attaining a fixed age limit in service or due to other
reasons like sickness, widowhood or disableness (Nyong & Duze, 2011).
World-wide,
even in the most advanced economies of the world, like the United State of
America (USA), United Kingdom (UK), and France, Pension administration and
issues related to the treatment of the aged and the infirmed pose very deep and
disturbing problems (Ahmad & Oyediran, 2013). The difference as observed by
Kolawole (2003) between advanced societies and ours however is the sense that,
the power of imagination, creative thinking and planning are brought to bear on
complex social problems.
Workers
generally whether those in the public or private sectors are expected to live
comfortable life devoid of any form of dependency after their successful
retirement from active service. Rabelo (2002) cited in Sule and Ezegwu (2009)
argues that, the working lives of employees move continuously towards a certain
direction i.e. from employment to growth to retirement. Some are fortunate to
save enough money to take them through the retirement period or ―the rainy day‖
while a majority leave the service with little or no savings at all. Ideally,
the governments and organizations need to identify a way of accommodating and
adequately rewarding employees‘ past efforts through organized pension plans,
so that, they can achieve the goals of their existence. This is often achieved
through different retirement policies which include the defined Benefit
(pay-as-you-go) scheme, the National provident fund scheme and the contributory
pension scheme that is expected to be fully funded (Sule & Ezegwu, 2009).
The idea of
pensions and its significance was supported by divergent schools of thought. These
schools of thought according to Kantudu (2005) are: the contributory school of
thought, non-contributory school of thought and the hybrid school of thought.
The first school of thought, emphasizing on contribution is advocated by most
accounting standards setting bodies as well as by scholars such as Campbell and
Fieldstein (2001). The school of thought argued that should the employees
contribute a certain percentage to the plan; the employee will be able to
receive the entire or part of the benefits at retirement or in case of
termination of appointment or dismissal. This is based on the principle of
operational efficiency in computation and funding. According to Kantudu (2005)
the second school of thought (the non-contributory) was.also advocated by some
Accounting Standards setting bodies and scholars like McGill (1984) and Byrne
(2003). According to this school of thought, employers alone should fund the
pension asset. The belief of this school was that, the singular funding made by
the sponsor encourages and attracts more qualified and dedicated employees into
the organization. Under this arrangement, the benefit is defined by a formula
and pension at retirement is paid either as a lump sum amount or as a life
annuity. The third school of thought is the Hybrid School of Thought. According
to this school, Pension funds are defined as a collective pension plans that
benefit from some (but varying) risk sharing between participants and with the
sponsors and usually offer guarantees and conditional indexation.
During
retirement, a retiree public officerusually receives certain benefits in the
form of gratuity and pension. Gratuity is the sum total lump paid to a worker
on existing from the service either through withdrawal or retirement, while
pension is the sum of annuity paid periodically, usually monthly to a public
servant who disengages from service after attaining a specified age limit
usually 60 years or 35 years of active service, (Ezeani, 2001; Ebosele, 2001).
In other words, gratuity and pension are post-employment benefits. These
benefits are designed to prevent a sudden sharp drop in the financial capacity
and living standard of the worker as would happen with the stoppage of his
monthly salary and allowances after disengagement. The lump sum or gratuity he
is paid is meant to enable the retiree finance any post-retirement endeavour of
his choice while the pension replaces the monthly salary the retiree gets while
he was still in active serve, (Babasola, 2000).
In this way,
the retiree having spent a substantial part of his productive life working to
earn a living, can in his old age (that is, at retirement) sustain and maintain
a standard of living comparable to what he was used to while in active service.
It is based on this that most progressive government enact laws to back up
their policies on employment, retirement and pension in both the public and
private sectors of the economy. To Casey (2011) and Taiwo (2014), pensions as a
form of social security against old-age poverty and other uncertainties have
attracted great interest virtually everywhere in the world, both in developed,
developing and under-developed countries. Therefore, this study focuses on the
challenges faced by retirees in accessing pension funds in Ogun state, a case
study of Abeokuta south LGA.
1.2 STATEMENT OF THE PROBLEM
One of the
greatest challenges that face typical employees throughout their working life
is life after retirement. Retirement concerns emotional, psychological, as well
as financial challenges that workers have to prepare well ahead of time. The
fact that retirement happens at old age, health is also an important
consideration. In planning towards retirement however, most workers in the past
that did not plan ahead of their retirement have many times blamed themselves
for short-sighted vision. Today, with the failures experienced in the public
sector pension schemes, there is a major paradigm shift amongst workers as how
to manage their lives in retirement.
Some of the
issues affecting the proper operations of the pension scheme includes: lack of
accountability and transparency in the management of the contributed funds,
fraud and irregularities, lack of annual auditing and publication of annual
audit reports of the Trustees, illegal dissolution of the Trustees and the
appointment of unqualified staff in the management Board of the Trustees
contrary to the provisions of the Nigeria pension and gratuity law 2006.
Pension
programmes, especially those that are publicly financed and administered, have
become an issue of concern to economists, policymakers and the general public.
This is not only because such programmes are central to the well-being of
pensioners and the elderly, but also because the majority of pension programmes
are not actuarially balanced (that is they are not financially stable) and as
such, they are run at deficits, thus making the present values of their future
liabilities to be enormous. In some countries, especially those that are
economically advanced, pensions are usually extended to other categories of
people apart from retirees, such as widows, orphans, disabled people (in the
form of disability pensions), and the elderly or the aged. These problems
necessitates the need to carry out a study on the challenges faced by retirees in
accessing pension funds in Ogun state, a case study of Abeokuta south LGA.
1.3 OBJECTIVES OF THE STUDY
The general
objective of this study is to examine the challenges faced by retirees in
accessing pension funds in Ogun state, a case study of Abeokuta south LGA. The
specific objectives include the following:
1. To find out if retirees in Abeokuta south
LGA have issues in accessing their pension funds.
2. To ascertain the roles of the government
in the challenges faced by retirees in accessing pension funds in Abeokuta
south LGA.
3. To determine the level of funding of
contributory pension scheme significantly affected the payment of retirement
benefits in Abeokuta south LGA.
4. To examine the extent to which compliance
with the Contributory Pension Scheme law affects the payment of retirement
benefits in Abeokuta south LGA.
5. To investigate the influence of corruption
on the challenges faced by retirees in accessing pension funds in Abeokuta
south LGA.
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