An Assessment of Adequacy of Pre-Retirement Savings for Sustainable Retirement Income under the Nigerian 2014 Pension Scheme
Aim/purpose - The main objectives of this article are to estimate percentage of preretirement savings that is needed, based on the current salary scale, to sustain academic and non-academic staff of Federal Universities in Nigeria in retirement using University of Lagos as a case study. Design/methodology/approach - The methodology of the article was designed by modifying the life-cycle model of household behaviour combine with the target replacement ratio benchmarks for different income levels as used by Pension Commission 2004, expressed in 2013 earning terms. Finding - The research findings show that the lowest income earner with entry age of 25 years and retirement age of 65 years should, without any interruption throughout the service years, contribute a minimum of pre-retirement savings of 28.01% on an annual basis from his or her emolument to maintain the pre-retirement standard of living once he/she has ceased working. Research implications/limitations - The scope of this research study is subjected to some limitations: (1) scarcity of pension financial data in Nigeria; (2) the academic and non-academic staff of Federal Universities in Nigerian using University of Lagos as a case study. Originality/value/contribution - The study has established the minimum contribution rate into the Retirement Savings Account so as to meet the internationally acceptable replacement ratio for employees of the Nigerian Federal Universities.(original abstract)
- Abdulazeez, N. (2014). Pension scheme in Nigeria: History, problems and prospects. Arab Journal Business Management Review, 5(2), 1-6.
- Aborisade, F. (2012). Gratuity and retirement benefits and the pension reform act 2004. Ibadan: Department of Business Administration & Management Studies, the Polytechnic, Centre for Labour Studies (CLS). Retrieved from femiaborisade.blogspot.com/2012/10/gratuity-and-retirement-benefits-and.html
- Alford, S., Farnen, B. D., & Schachet, M. (2004). Light at the end of the tunnel: Getting on track for affordable retirement. Benefits Quarterly, 4th Quarter. Retrieved from https://search.proquest.com/openview/d538cc63cb3d9bbcca24b85bab0843bc/1?pqorigsite=gscholar&cbl=4616
- Antler, J., & Kahane, Y. (1987). The gross and net replacement ratios in designing pension schemes and in financial planning: The Israeli experience. The Journal of Risk and Insurance, 54(2), 283-297.
- Anyim, F. C., Olusanya, O. A., & Okere, R. C. (2014). A critique of pension reform act, 2004 in Nigeria. Journal of Arts and Humanities (JAH), 3(7). doi: 10.18533/journal.v3i7.493
- Bassey, N. E., Etim, O. U., & Asinya, F. A. (2008). An overview of the Nigerian Pension Scheme from 1951-2004. Global Journal of Humanities, 7(1 & 2). Retrieved from https://www.ajol.info/index.php/gjh/article/view/79376
- Bernheim, B. D. (1996). The Merrill Lynch baby boom retirement index: Update '96. Stanford, CA - New York, NY: Stanford University - Merrill Lynch and Co.
- Bernheim, D. B., Forni, L., Gokhale, J., & Kotlikoff, L. J. (2000). How much Americans should be saving for retirement? American Economic Review, 90(2), 288-292.
- Brady, P. (2010). Measuring retirement resource adequacy. Journal of Pension Economics and Finance, 9(2), 235-262.
- Burns, S. A., & Widdows, R. (1988). An estimation of savings needs to adequately fund baby boomers' retirement. In V. Hampton (Ed.), Proceedings of the 34th Annual Conference of the American Council on Consumer Interests (pp. 15-18). Columbia, MO: American Council on Consumer Interests.
- Burns, S. A., & Widdows, R. (1990). Sensitivity of a retirement analysis framework to changes in retirement analysis parameters. Financial Counseling and Planning, 1, 71-90.
- Butler, M. B. J., & van Zyl, C. J. (2012). Consumption changes on retirement for South African households. South African Actuarial Journal, 12. Retrieved from https://www.ajol.info/index.php/saaj/article/view/82475. doi: 10.4314/saaj.v12i1.1
- Butrica, B., Iams, H., & Smith, K. (2003). The changing impact of social security on retirement income in the United States. Social Security Bulletin, 65(3). Retrieved from https://www.ssa.gov/policy/docs/ssb/v65n3/v65n3p1.html
- Casey, B. H. (2011). Pensions in Nigeria: The performance of the new system of personal accounts. International Social Security Review, 64(1), 1-14.
- Casey, B. H., & Dostal, J. M. (2008). Pension reform in Nigeria how not to learn from others. Sage Journal Global Social Policy, 8(2), 238-266.
- Chia, N., & Tsui, A. (2003). Life annuities of compulsory savings and income adequacy 168 of the elderly in Singapore. Journal of Pension Economics and Finance, 2(1), 41-65.
- Clacher, I., Hatchett, J., & Hurd, M. (2012). Meeting defined benefit pension obligations: Measurement, risk and flight paths. The actuarial profession, making finan cial sense of future. Presented to the Institute and Faculty of Actuaries at 16 January 2012 in Edinburgh and 30 January 2012 in London. Retrieved from www.actuaries.org.uk/system/files/documents/pdf/
- Department of Work & Pension. (2013). Framework for the analysis of future pension incomes (Pensioner Income Series 2011-12, p. 11). Retrieved from https://assets. publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/254321/framework-analysis-future-pensio-incomes.pdf
- Duncan, G. J., Mitchell, O. S., & Morgan, J. N. (1984). A framework for setting retirement savings goals. Journal of Consumer Affairs, 18(1), 22-46. Retrieved from https://onlinelibrary.wiley.com/doi/full/10.1111/j.1745-6606.1984.tb00317.x
- Eme, O., & Ugwu, C. S. (2011, October). The laws and administration of retirement in Nigeria: A historical approach. Kuwait Chapter of Arabian Journal of Business and Management Review, 1(2). Retrieved from https://www.arabianjbmr.com/pdfs/KD_VOL_1_2/1.pdf
- Eme, O. I., Uche, O. A., & Uche, I. B. (2014). Pension reform act 2014 and the future of pension administration in Nigeria. Arabian Journal of Business and Management Review (OMAN), 4(2), 156-166.
- Engen, E. M., Gale, W. G., & Uccello, C. E. (2000). The adequacy of household saving (CRR WP 2000-01). Boston: Center for Retirement Research at Boston College. Retrieved from http://www.bc.edu/crr
- Federal Government of Nigeria. (2001). Blue Print on the contributory scheme: Summary of proceedings at the national workshop on pension reforms. Retrieved from https://femiaborisade.blogspot.com/2012/10/gratuity-and-retirement-benefits-and.html
- Grech, A. G. (2013). How best to measure pension adequacy (CASE 172). London: Centre for Analysis of Social Exclusion, London School of Economics. Retrieved from http://eprints.lse.ac.uk/51270/1/__Libfile_repository_Content_Grech, AG_Grech_How_best_measure_2013.pdf
- Haveman, R, Holden, K., Wolfe, B., & Sherlund, S. (2005). Do newly retired workers in the U.S. have sufficient resources to maintain well-being? (Working Paper No. 0012). Madison, WI: La Follette School of Public Affairs. Retrieved from: http://www.lafollette.wisc.edu/publications/workingpaper
- Holzmann, R. (2012, August). Global pension systems and their reform: Worldwide drivers, trends, and challenges (Discussion Paper No. 6800). Kuala Lumpur - Bonn - Washington, DC: Institute for Economic Policy Analysis. University of Malaya - IZA - CESifo - World Bank.
- Holzmann, R., & Hinz, R. (2005). Old-age income support in the twenty-first century: An international perspective on pension systems and reform. Washington, DC: The World Bank. Retrieved from http://www.un.org/chinese/esa/ageing/pdf/HolzmannHinz_OldAgeSupport.pdf
- Ibiwoye, A., & Adesona, T. A. (2012). Actuarial perspectives on pension reform: A closer look at Nigeria's individual account system. Insurance Markets and Companies: Analyses and Computation, 1(2), 108-117. Retrieved from https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/3515/IMC_2010_2_Ibiwoye.pdf
- Keynes, J. M. (1936). General theory of employment, interest and money. Cambridge: Cambridge University Press.
- Kritzer, B. E. (1996). Privatizing social security: The Chilean experience. Social Security Bulletin, 59(3), 45-55.
- Lee, E. M. (1986). An introduction to pension schemes. London: Institute of Actuary and Faculty of Actuaries in Scotland - Chameleon Press.
- Leonesio, M. V. (1996). The economics of retirement: A nontechnical guide. Social Security Bulletin, 59(4). Retrieved from https://pdfs.semanticscholar.org/c2ac/23768b8b5c0973e3cccb5bea8091c55f03cb.pdf
- Li, J., Montalto, C. P., & Geistfeld, L. V. (1996). Determinants of financial adequacy for retirement. Financial Counseling and Planning, 7, 39-48.
- MacDonald, B-J., Moore, K., Chen, H., & Brown R. (2011). Canadian national retirement risk index: Employing statistics Canada's LifePaths to measure the financial security of future Canadian seniors. Journal of Canadian Public Policy, 37(1), 73-94. Retrieved from www.afc-fac.ca/documentations/MacDonaldMooreChenBrown2011.pdf
- Mitchell, O. S, & Moore, F. J. (1998). Can Americans afford to retire? New evidence on retirement saving adequacy. The Journal of Risk and Insurance, 65(3), 371-400.
- Montalto, C. P. (2001). Retirement wealth and its adequacy: Assessing the impact of changes in the age of eligibility for full social security benefits (CRR WP 2001). Boston: Center for Retirement Research, Boston College. Retrieved from http://www.bc.edu/crr
- Moore, F. J., & Mitchell, O. S. (1997). Projected retirement wealth and savings adequacy in the health and retirement study (Working Paper No. 6240). Cambridge, MA: National Bureau of Economic Research.
- Moore, J. F., & Mitchell, O. S. (2000). Projected retirement wealth and savings adequacy in the health and retirement study. In O. S. Mitchell, P. B. Hammond, & A. M. Rappaport (Eds.), Forecasting retirement needs and retirement wealth (pp. 1-44). Philadelphia: University of Pennsylvania Press.
- Moore, K., Robson, W., & Laurin, A. (2010). Canada's looming retirement challenge: Will future retirees be able to maintain their living standards upon retirement? (Pension Papers No. 317). Toronto: C.D. Howe Institute. Retrieved from: https://pdfs.semanticscholar.org/44af/197c7bcde4ad4f2a1cf585df904281c41f2e.pdf
- Munnell, A. H., & Soto, M. (2005, August). What replacement rates do households really experience at retirement? (Working Papers No. 10). Boston: Center for Retirement Research, Boston College.
- Munnell, A. H., Webb, A., & Golub-Sass, F. (2012, November). The national retirement risk index: An update (Brief's Key 12-20). Chestnut Hill, MA: Center for Retirement Research at Boston College.
- Nigeria Pension Act. (2014). Nigeria Pension Reform Act 2014: Establishment of the contributory pension scheme. Retrieved from https://nass.gov.ng/document/download/5971
- OECD. (2011). Net pension replacement rates, in pensions at a glance 2011: Retirement-income systems in OECD and G20 countries. Paris: Author. doi: 10.1787/pension_glance-2011-18-en
- Palmer, B. A. (1989). Tax reform and retirement income replacement ratios. The Journal of Risk and Insurance, 56(4), 702-725.
- Palmer, B. A. (1992). Establishing retirement income objectives: The 1991 retire project report. Benefits Quarterly, 8(3), 6-15.
- Palmer, B. A. (1994). Retirement income replacement ratios: An update. Benefits Quarterly, 10(2), 59-75.
- Palmer, B. A. (2008). 2008 GSU/AON retire project report 08-01, Georgia State University, Georgia. Retrieved from: http://rmictr.gsu.edu/Papers/RR08-1.pdf, 14 March 2010.
- Palmer, B., DeStefano, R., Schachet, S., & Paciero, J. (2004). Replacement ratio study: A measurement tool for retirement planning. London: Aon Consulting. Retrieved from http://www.aon.com/about/publications/pdf/issues/rs
- Purcell, P. J. (2012). Income replacement ratios in the health and retirement study. Social Security Bulletin, 72(3). Retrieved from: https://www.ssa.gov/policy/docs/ssb/v72n3/v72n3p37.html
- Reno, V. P., & Lavery, J. (2007, May). Social security and retirement income adequacy (Social Security Brief, No. 25). Washington, DC: National Academy of Social Insurance.
- Schulz, J. H., & Leavitt, T. D. (1983). Pension integration: Concepts, issues and proposals. Washington, DC: Employee Benefit Research Institute.
- Sogunro, A. B. (2016). On the adequacy of pension scheme, using the salary structure of federal universities in Nigeria (Ph.D. thesis). Akoka, Yaba, Lagos: Department of Actuarial Science & Insurance, University of Lagos.
- Tudor, C. (2012). Evaluating the retiring pensions by simple replacement rates and current values of the retiring pensions. International Journal of Research & Reviews in Applied Sciences, 12(2), 173-178. Retrieved from https://www.arpapress.com/Volumes/Vol12Issue2/IJRRAS_12_2_02.pdf
- Yuh, Y., Hanna, S. D., & Montalto, C. P. (1998). Mean and pessimistic projections of retirement adequacy. Financial Services Review, 9(3), 175-193. doi: 10.1016/S1057-0810(99)00009-8
- Veit-Wilson, J. (1998). Setting adequacy standards: How governments define minimum incomes. The policy press, Bristol: University of Bristol. Retrieved from: http://www.bristol.ac.uk/Publications/TPP/
- Wolfson, M. (2011). Projecting the adequacy of Canadians' retirement incomes: Current prospects and possible reform options (IRPP Study 17). Montreal: Institute for Research on Public Policy.