ABU Journal, Department Of Public Administration
Volume No: 3|
THE DECUMULATION OF PUBLIC PENSION FUND ASSETS: THE LITMUS TEST FOR CONTRIBUTORY PENSION SCHEME IN NIGERIA
DR. BAYERO BUKKUYUM KASIM AND DR. AHMAD SANUSI
DEPARTMENT OF PUBLIC ADMINISTRATION, FACULTY OF MANAGEMENT SCIENCES AND&NBSP;USMANUDANFODIYO UNIVERSITY, SOKOTO, NIGERIA.
This paper examined the progress of contributory pension scheme (CPS) in Nigeria. The accumulation phase of the CPS is quite successful on account of large amount of savings from public and private sectors employers-employees contributions and privatized management of pension which engendered efficiency. The paper intends to examine the state of existing method of decumulation of pension fund assets in CPS, assess the potential dysfunction of programmed withdrawal and to mke recommendations The paper posits that the decumulation phase or payout stage of the CPS is going to be more difficult, as adequate preparation has not been made toward utilizing of accumulated pension fund assets to provide stream of income to retirees for life. Lump sum and programmed withdrawals are fraught with dangers of retirees outliving their pension and exposing them to poverty while in retirement. The paper affirmed that since in the next couple of years significant number of current contributors will go into retirement and start to draw from their retirement savings, efficient means of decumulation of pension fund assets must be developed. An effective mechanism of decumulation of pension fund assets, which will ensure prompt, timely and sustained payment of benefits, which is embedded in the Nigerian financial system midwife by Banks and life insurance companies will guarantee optimal pension for Nigerian workers. To address issues germane to this study, data on accumulation and investment performance of pension fund assets are analyzed using descriptive statistical technique. The paper recommends that in the light of profligacy of average Nigerian worker, lump sum and programmed withdrawals are not good options of providing pension, rather an annuity is regarded as the best means of providing pension to retired public sector employees in Nigeria.
The findings from the results have shown that decumulation of public pension fund assets in Nigeria by retirees that maintained retirement savings accounts under contributory pension scheme had commenced though, not significant number started to draw down from the scheme. But, what becomes very clear was that available means of decumulation of pension fund assets are lump sum and programmed withdrawals. Though regulated, these methods of paying retirement benefits are accompanied with risks of squandering the pension assets within a short time span, which will engender post- retirement poverty. Where a retiree outlives his pension he becomes a social and economic burden to both state and society.