Analysis of the Factors That Determine the Choice of Pension Fund Administrator in Kano State
Chapter One
Objective of the study
The objective is aim to investigate the factors that determine the choice of pension fund administrator in Kano State. The specific objectives are;
- To find out the effect of political factor on the choice of pension fund administrator in Kano state
- To find out the effect of environmental factor on the choice of pension fund administrator in Kano state
- To find out the effect of risk factor on the choice of pension fund administrator in Kano state
CHAPTER TWO
REVIEW OF RELATED LITERATURE
CONCEPTS AND MEANING OF PENSION FUND
The pension fund scheme exist to provide post retirement benefits to employees. Pension scheme was introduced into Nigeria during colonial era to provide old age. British citizens income and security upon retirement from active service. Nigeria first ever legislative instrument on pension matter was the pension ordinance of 1951, which had retrospective effect from 1st Jan. 1946. The National Provident Fund (NPF) scheme established in 1961 to address pension matters for private organization followed by Act No. 102 and Armed forces pension Act 103 in 1979. The police and other government agencies pension scheme was enacted under pension Act No. 75 of 1987, followed by Local Pension edict which culminated into establishment of Local Government Staff Pension Board, of 1987.
In the view of Adesina (2006:7), the primary goals of pension system should be to provide adequate, affordable, sustainable and robust retirement income, while seeking to implement welfare improving scheme in manner appropriate to individual country. Adequate system of pension fund scheme provide benefits that are sufficient to prevent old age poverty on a country specific absolute level in addition to providing a reliable means to smooth life time consumption for vast majority of the population, while according to Robalino, D. (2005:120) pension fund scheme should be affordable system in any country, with the financing capacity of individuals and society does not unduly displace other social or economic imperatives or have untenable fiscal consequences. He argued that affordable and sustainable system of pension is one that is financially sound and can be maintained over a foreseeable horizon under a broad set of reasonable assumptions.
The design of a pension fund system or its reforms must explicitly recognize that pension benefits are claims against future economic output (Robert, 2005:112). He further suggested that to fulfil their primary goals, pension systems must contribute to future economic output. Reforms should, therefore be designed and implemented in a manner that supports growth and development and diminishes possible distortions in capital and labour markets. Mean while the corporative vision and mission statement of National Pension Commission according to the Annual Report (2010:1) corporate vision is “To be a world-class organization that ensures the prompt payment of retirement benefits and promotes sustainable pension industry that positively impact on the economic development of Nigeria”. The mission statement is “To be an effective regulator and supervisor that ensures the safety of pension assets and fair return on investment utilizing appropriate technology with highly skilled and motivated staff?
Pension fund therefore is a fund saved while on active service or working which will yield or mahire at old age on retirement from active service for adequate and sustainable health.
Chapter Three
Research methodology
Research Design
The research design adopted in this research work is the survey research design which involves the usage of self-designed questionnaire in the collection of data. Under the survey research design, primary data of this study will be collected from National pension commission of Kano state in order to determine the factors that determine the choice of pension fund administrator in Kano. The design was chosen because it enables the researcher to collect data without manipulation of any variables of interest in the study. The design also provides opportunity for equal chance of participation in the study for respondents.
Population of Study
The population of study is the census of all items or a subject that possess the characteristics or that have the knowledge of the phenomenon that is being studied (Asiaka, 1991). It also means the aggregate people from which the sample is to be drawn.
Population is sometimes referred to as the universe. The population of this research study will be Seventy-five (75) selected staffs of National pension commission of Kano state
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSION
This chapter is about the analysis and presentation of data collected from the field through questionnaire. The analysis of the data with particular question immediately followed by the presentation of findings.
As mentioned in chapter three, 50 questionnaires were administered and 50 were retrieved and necessary analysis was carried out on them and presented as follows:
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain analysis of the factors that determine the choice of pension fund administrators in Kano state. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of factors that determine the choice of pension fund administrators
Summary
This study was on analysis of the factors that determine the choice of pension fund administrators in Kano state. Three objectives were raised which included: To find out the effect of political factor on the choice of pension fund administrator in Kano state, to find out the effect of environmental factor on the choice of pension fund administrator in Kano state and to find out the effect of risk factor on the choice of pension fund administrator in Kano state. The total population for the study is 75 staffs of national pension commission in Kano. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
From the discussion of findings, it is clear that this research work has explored the importance of influence of factors on investment decisions in Nigerian PFAs. It has also demonstrated the extent to which economic, risk and other qualitative factors determine the choice of asset allocations of PFAs.The result of this research is also connected with a critical sector of Nigerian economy which needs a serious attention, therefore it is important to mention that this work would serve as an initial effort for further research in order to improve the development of a more comprehensive asset portfolio investment decision making by the PFA managers. The research concluded that if Pencom would be a bit flexible in its regulatory restriction of investment areas of PFAs, it would enhance a better investment decision making process. This will also go a long way in determining the competence of the PFA mangers with regards to investment management, which will eventually boost their competitiveness
Recommendation
PFAs need to come up with a favourable investment policy; on this, three components need to be considered. These include: Defining an acceptable level of risk tolerance; Setting parameters for short-term asset allocation; Setting parameters for long-term performance. PFAs should maintain a fair balance between returns on investment and the pension risks i.e. they should ensure that all investment decisions are made in the best interest of their contributors; diversification of investments, maturity matching etc. Pencom should continue to develop favourable investment and valuation guide lines, and to ensure compliance as well as taking prompt corrective actions where necessary. However, Pencom should allow fund managers some flexible on asset allocation so that they can create optimum portfolio mix and get rewarded for intelligent risk taking; as good as regulatory restrictions on asset allocation might be, it has the tendency of inhibiting growth as it prevents creativity and innovative thinking on the part of the fund manager
References
- Akinwale, O. S., & Abiola, O. R. (2007). A Conceptual Model of Asset Portfolio Decision Making: A Case Study in a Developing Economy. African Journal of Business and Management, 1(7).
- Amoo, B. A. G. (2008). Maximising the Impact of the New Pension Scheme in Nigeria: Issues, Prospects and Challenges. CBN Bullion, 32(2).
- Andersen, J. V. (2008). Models of Investment Decision Making in Finance. In Encyclopaedia of Complexity and Systems Science. Retrieved from: http://arXiv.org/abs (12 March, 2011).
- Anthony, E., & Mustapha, I. (2010). Factor Analysis o f I n v e s t m e n t D e c i s i o n i n N i g e r i a n I n s u r a n c e Companies. Interdisciplinary Journal Of Contemporary Research In Business, 2(8).
- Banc Garanti Limited (BGL) (2010). Situating Nigeria in the Global Pension Industry.
- Black, F., & Scholes, M. (1973). The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81, 637-654.
- Child, D. (1970). The Essentials of Factor Analysis. New York: Holt, Rinehart and Winston. Retrieved from: www.books.google.com (12 March, 2011).
- French, S. (1986). Decision Theory: An Introduction to the Mathematics of Rationality. E l l i s H o r w o o d : Chichester.
- French, N, &. Gabrielli, L. (2005). Judgements, Forecasts and Decisions: An Analysis of Fund Managers over Time. Paper Presented at Ares 21st Annual Meeting, Santafe.
- Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. The Review of Economics and Statistics (The MIT Press), 47(1).
- Markowitz, H. (1959). Portfolio Selection: Efficient Diversification of Investments. New York: John Wiley and Sons.
