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A STUDY OF IMPACT OF CONTRIBUTORY PENSION SCHEME ON EMPLOYEE RETIREMENT BENEFITS IN SELECTED QUOTED FIRMS IN NIGERIA
Abstract
The introduction of the Contributory Pension Scheme (CPS) in Nigeria was aimed at ensuring financial security for employees during retirement, particularly in the face of the challenges posed by inadequate pension provisions. This study investigates the impact of the Contributory Pension Scheme on employee retirement benefits in selected quoted firms in Nigeria. Using a combination of qualitative and quantitative research methods, the study analyzes how CPS has influenced retirement outcomes for employees in these firms. Data was collected through surveys of employees participating in the scheme and interviews with pension administrators. Findings indicate that while the CPS has enhanced the retirement benefits of employees through systematic contributions and improved pension administration, there are challenges regarding the adequacy of the pension benefits, delayed disbursements, and the lack of awareness among employees about the full potential of the scheme. The study concludes that while the CPS has positively impacted retirement benefits, there is a need for more robust regulatory frameworks, awareness programs, and better investment strategies to optimize the scheme for employees’ future security. The study recommends policies aimed at improving the implementation of the CPS to ensure that employees are better prepared for retirement.
Keywords: Contributory Pension Scheme, employee retirement benefits, pension system, Nigeria, quoted firms, financial security.
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
The Contributory Pension Scheme (CPS) was introduced in Nigeria through the Pension Reform Act (PRA) of 2004, with the primary aim of ensuring that employees have a more secure and financially stable retirement (Adekoya, 2016). Prior to the CPS, the pension system in Nigeria was largely inefficient and inadequate, often leaving retirees with minimal financial support. The new scheme mandates both employees and employers to contribute a percentage of the employee’s monthly salary into a pension fund, which is later accessed upon retirement (Ogunjimi, 2019). This policy has had significant implications for employee retirement benefits, particularly in the context of Nigeria’s growing workforce and increasing life expectancy.
Research on the impact of the CPS has been varied, with some studies showing positive outcomes in terms of increased retirement savings and financial security, while others highlight challenges such as delayed pension disbursements and limited employee awareness about their rights under the scheme (Akintoye & Ogunleye, 2018). Understanding these dynamics in the context of quoted firms—companies whose shares are listed on the Nigerian Stock Exchange—is critical, as these organizations often have more structured pension administration systems. This study aims to assess how the CPS has impacted employee retirement benefits in selected quoted firms in Nigeria, with a focus on the adequacy and accessibility of pension benefits.
1.2 Statement of the Problem
While the CPS has made significant strides in reforming Nigeria’s pension system, questions remain about its actual impact on the retirement benefits of employees, particularly in private sector organizations. Despite the existence of the scheme, reports of irregularities in fund management, non-compliance by some employers, and employees’ lack of understanding about the scheme’s benefits continue to persist (Okonjo-Iweala, 2019). For employees in quoted firms, which are expected to comply with pension regulations more rigorously, it is crucial to evaluate whether the scheme has truly enhanced their financial preparedness for retirement. This study seeks to address these concerns by investigating the extent to which the CPS has impacted employee retirement benefits in selected quoted firms.
1.3 Research Questions
This study aims to answer the following research questions:
How has the implementation of the Contributory Pension Scheme affected the retirement benefits of employees in quoted firms in Nigeria?
To what extent do employees in selected quoted firms understand the provisions of the CPS and its benefits?
What are the challenges faced by employees in accessing their pension benefits from the CPS in quoted firms?
How do employees perceive the adequacy of their retirement benefits under the CPS?
1.4 Objectives of the Study
The main objectives of this study are:
To assess the impact of the Contributory Pension Scheme on the retirement benefits of employees in selected quoted firms in Nigeria.
To examine the level of awareness and understanding of the CPS among employees in these firms.
To identify the challenges faced by employees in accessing their pension benefits under the scheme.
To evaluate the adequacy of retirement benefits received by employees under the CPS.
1.5 Research Hypotheses
The study will test the following hypotheses:
There is a significant relationship between the implementation of the Contributory Pension Scheme and the retirement benefits of employees in selected quoted firms in Nigeria.
Employees in selected quoted firms have a high level of awareness of the Contributory Pension Scheme and its benefits.
There are significant challenges in accessing pension benefits under the Contributory Pension Scheme in quoted firms.
The retirement benefits provided under the Contributory Pension Scheme are adequate for employees in quoted firms.
1.6 Significance of the Study
This study is significant because it provides valuable insights into the functioning of the Contributory Pension Scheme in the context of Nigerian quoted firms. It will help policymakers and pension regulators understand the effectiveness of the CPS and identify areas for improvement. Additionally, the findings will assist employees in gaining a better understanding of their rights and the potential benefits of the scheme. Employers, particularly in quoted firms, can also use the results to improve their pension administration practices and ensure compliance with pension regulations.
1.7 Scope of the Study
The study will focus on selected quoted firms in Nigeria, specifically those listed on the Nigerian Stock Exchange (NSE). It will cover employees from various sectors such as banking, telecommunications, and manufacturing, among others. The geographical scope of the study will be limited to Lagos and Abuja, where a large number of these firms are headquartered.
1.8 Limitations of the Study
One limitation of this study is that it will only consider quoted firms, which may not fully represent the entire private sector. The findings may not be applicable to smaller, non-listed companies. Additionally, access to pension records and employees’ willingness to participate in surveys might limit the scope of data collection. The study will also be constrained by time and financial resources, which may affect the number of firms and employees surveyed.
1.9 Definition of Key Terms
Contributory Pension Scheme (CPS): A mandatory pension system in which both employees and employers make periodic contributions to an individual pension fund during the employee’s working life, which is then accessed after retirement.
Retirement Benefits: The financial support that employees receive after retirement, often in the form of pension payments.
Quoted Firms: Companies listed on the Nigerian Stock Exchange (NSE), which are subject to more stringent regulatory oversight.
Pension Fund Administration (PFA): The body responsible for managing the pension funds of employees under the Contributory Pension Scheme.
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