IMPACT OF LIFE ANNUITY AS PAYMENT OPTION ON NIGERIAN PENSION FUNDS

Halimah Sani Sambo () and Shehu Jafaru Salisu ()
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Halimah Sani Sambo: Ahmadu Bello University, Zaria, Nigeria
Shehu Jafaru Salisu: Ahmadu Bello University, Zaria, Nigeria

Proceedings of Administration and Public Management International Conference, 2020, vol. 16, issue 1, 103-111

Abstract: The contributory pension scheme (CPS) urshered in 2004 a new generation of pension management in Nigeria. This scheme came forward with three options for the retiree to choose as to how he wants his/her pension funds to be paid according to PRA 2014. The options are lumpsum, programmed withdrawals and life annuity. However, the impact of selecting life annuity that provides protection against longevity risk is what has not been investigated in Nigeria. Using pension fund contribution and the explanatory variables. The study utilized the Smart Partial Least Squares (PLS) using time series data for sampled Pension Fund Administrators (PFAs). Results revealed that the coefficient of life annuity significantly affects the pension funds contributions. This suggests withdrawal from the scheme is continuous until the retiree dies. Therefore. Leaving no precise exist boundary and as such making the fund volatile. The paper recommends PFAs should increase their investment in risky assets to give them the opportunity of reaping more returns on pension contribution. It further recommends appropriate investment portfolio mix on behalf of retirees to hedge against risk of eroding the long-term funds since life annuities cannot be bequested.

Keywords: Life annuity; Pension Fund & Nigeria (search for similar items in EconPapers)
Date: 2020
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