AN EVALUATION OF IMPACT OF PENSION SCHEME ON EMPLOYEE RETIREMENT BENEFITS OF QUOTED FIRMS IN NIGERIA

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IMPACT OF PENSION SCHEME ON EMPLOYEE RETIREMENT BENEFITS OF QUOTED FIRMS IN NIGERIA

Abstract

This study examines the impact of pension schemes on employee retirement benefits in quoted firms in Nigeria. With the introduction of the Contributory Pension Scheme (CPS) in 2004 under the Pension Reform Act, Nigeria sought to address the challenges of inadequate retirement benefits and ensure financial security for retirees. Despite this reform, concerns remain about the effectiveness of pension schemes in providing sufficient retirement benefits to employees in the private sector, particularly in quoted firms.

Using a mixed-methods approach, the study collected primary data through surveys and secondary data from financial reports of selected quoted firms in Nigeria. The data were analyzed using descriptive statistics and regression analysis to assess the relationship between pension schemes and employee retirement benefits. The findings reveal that the implementation of the CPS has significantly improved the adequacy and sustainability of retirement benefits for employees in quoted firms. However, challenges such as delayed remittances, low contribution rates, and inadequate awareness of pension rights persist, limiting the full potential of the scheme.

The study concludes that while the CPS has positively impacted employee retirement benefits, there is a need for stricter regulatory enforcement, increased contribution rates, and enhanced public awareness to optimize its effectiveness. The findings contribute to the discourse on pension reforms in Nigeria and provide recommendations for policymakers, employers, and pension fund administrators to improve retirement benefits for employees in quoted firms.

Keywords: Pension scheme, retirement benefits, Contributory Pension Scheme, quoted firms, Nigeria.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Retirement is a significant phase in an employee’s life, marking the transition from active employment to a period of reliance on accumulated savings and pension benefits. The provision of adequate retirement benefits is crucial for ensuring financial security and improving the quality of life for retirees. In Nigeria, the pension system has undergone significant reforms over the years, with the introduction of the Contributory Pension Scheme (CPS) in 2004 under the Pension Reform Act (PRA) being a landmark development (National Pension Commission [PENCOM], 2014).

The CPS was designed to address the shortcomings of the previous Defined Benefit Scheme (DBS), which was characterized by inadequate funding, mismanagement of pension funds, and delayed payment of retirement benefits (Adegbayi, 2017). Under the CPS, both employers and employees are required to contribute a percentage of the employee’s monthly income to a Retirement Savings Account (RSA), managed by licensed Pension Fund Administrators (PFAs). This scheme aims to ensure transparency, accountability, and sustainability in the management of pension funds.

Despite the reforms, concerns remain about the effectiveness of the CPS in providing sufficient retirement benefits, particularly for employees in quoted firms in Nigeria. Quoted firms, which are companies listed on the Nigerian Stock Exchange (NSE), play a significant role in the Nigerian economy, contributing to employment and economic growth. However, the impact of the CPS on the retirement benefits of employees in these firms has not been extensively studied. This study seeks to fill this gap by examining the impact of the pension scheme on employee retirement benefits in quoted firms in Nigeria.

1.2 Statement of the Problem

The introduction of the CPS in Nigeria was a significant step toward addressing the challenges of the previous pension system. However, there are ongoing concerns about the adequacy and sustainability of retirement benefits provided under the scheme. Employees in quoted firms, who are expected to benefit from the CPS, often face challenges such as delayed remittances of pension contributions, low contribution rates, and inadequate awareness of their pension rights (Oluwole, 2019). These issues raise questions about the effectiveness of the CPS in ensuring financial security for retirees.

Furthermore, there is limited empirical research on the impact of the CPS on the retirement benefits of employees in quoted firms in Nigeria. Most studies have focused on the public sector or the general workforce, leaving a gap in understanding the specific experiences of employees in quoted firms. This study, therefore, seeks to investigate the impact of the pension scheme on employee retirement benefits in quoted firms in Nigeria, with the aim of providing evidence-based recommendations for improving the scheme.

1.3 Objectives of the Study

The study aims to achieve the following objectives:

To examine the implementation of the Contributory Pension Scheme in quoted firms in Nigeria.

To assess the impact of the pension scheme on the retirement benefits of employees in quoted firms.

To identify the challenges faced by employees in accessing their retirement benefits under the CPS.

To propose strategies for improving the effectiveness of the pension scheme in providing adequate retirement benefits.

1.4 Research Questions

The study is guided by the following research questions:

How is the Contributory Pension Scheme implemented in quoted firms in Nigeria?

What is the impact of the pension scheme on the retirement benefits of employees in quoted firms?

What challenges do employees face in accessing their retirement benefits under the CPS?

What strategies can be implemented to improve the effectiveness of the pension scheme in providing adequate retirement benefits?

1.5 Hypotheses

The following hypotheses were formulated to guide the study:

There is no significant relationship between the implementation of the Contributory Pension Scheme and the adequacy of retirement benefits for employees in quoted firms.

There is no significant difference in the retirement benefits of employees in quoted firms before and after the introduction of the CPS.

The challenges faced by employees in accessing their retirement benefits do not significantly affect their satisfaction with the CPS.

1.6 Significance of the Study

This study is significant for several reasons. First, it provides empirical data on the impact of the Contributory Pension Scheme on the retirement benefits of employees in quoted firms in Nigeria. This information can inform policymakers, employers, and pension fund administrators in improving the effectiveness of the CPS.

Second, the study raises awareness about the challenges faced by employees in accessing their retirement benefits under the CPS. By highlighting these challenges, the study advocates for reforms to ensure the sustainability and adequacy of retirement benefits.

Finally, the study contributes to the existing body of knowledge on pension reforms in Nigeria, particularly in the context of quoted firms. It provides a foundation for further research on this important topic.

1.7 Scope of the Study

The study focuses on the impact of the Contributory Pension Scheme on the retirement benefits of employees in quoted firms in Nigeria. It examines the implementation of the CPS, its impact on retirement benefits, and the challenges faced by employees in accessing these benefits. The study is limited to firms listed on the Nigerian Stock Exchange (NSE) and covers the period from 2004 (the introduction of the CPS) to 2023.

1.8 Operational Definition of Terms

Pension Scheme: A system designed to provide income to individuals after retirement, typically funded by contributions from employers and employees.

Retirement Benefits: Financial and non-financial benefits provided to employees upon retirement, including pensions, gratuities, and other entitlements.

Contributory Pension Scheme (CPS): A pension system where both employers and employees contribute a percentage of the employee’s income to a Retirement Savings Account (RSA).

Quoted Firms: Companies listed on the Nigerian Stock Exchange (NSE) and publicly traded.

Retirement Savings Account (RSA): An account opened by an employee with a Pension Fund Administrator (PFA) for the purpose of saving for retirement.

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