Pension is a fixed amount of money paid regularly to somebody during retirement by the government, a former employer, or an insurance company. Pension plans vary from self-directed plans such as individual retirement accounts (IRAs), to union sponsored defined benefit plans. The main purpose of a pension scheme as explained by Plamondon, P. and Latulippe, D. (2004) is to provide a certain level of income replacement at retirement. The objective of pension financing is to allocate, in an orderly and rational manner, the cost of providing these pensions. It is necessary to determine at which pace the resources will be raised over the years (the financing system) and how the annual financial burden will be shared among the financiers of the scheme. According to the International Social Security Association ( October, 2011), public perceptions of whether a contributory social security organization is efficient, effective, trustworthy and legitimate –and thus sustainable – will be to an important degree a measure of how well it is seen to govern contribution collection and compliance processes. Most pension schemes in Zambia such as the National Pension Scheme Authority (NAPSA) administer a defined benefit scheme under the provisions of the National Pension Scheme Act Number 40 of 1996. NAPSA implements policies relating to the National Pension Scheme (NPS) as well as controls and administers the operations of the Scheme. Jeffrey R. Brown and others (2010), emphasizes that by nearly any measure, state and local pension plans are important in an economy. Because the responsibility for funding these schemes lies with the sponsoring government, even taxpayers that are not employed in the public sector have a stake in how these pension funds are managed. Finances play an important, if not pivotal, role in a healthy retirement. Managing money, knowing where one stands financially, forecasting needs for the lifestyle of choice, are all necessary activities to leading a fulfilling happy retirement. Until the basic needs of life are met, the greater joys of socializing, esteem, and fulfillment cannot be achieved. Knowing how to evaluate one’s worth and forecast future needs is necessary to achieve the anticipated retirement so frequently cherished. By planning early and managing decisions and actions effectively, an individual can ensure the best possible retirement (Jean Butters, 2004). The purpose of this study is to assess the effectiveness of the current legislation governing the pension system in Zambia, its efficiency, identifying the causes of the flaws in the pension system and recommend solution based on the findings, and also compare theory with practice in administration of the pension funds.
The overall research problem to be addressed in this study is to assess the efficiency and effectiveness of the Pension fund institutions in Zambia in the management of members contributions.
The research will tackle the following question:
Are pension schemes in Zambia profitable to members?
Objective of the study
In this Study, the objective is as follows:
To analyze and assess whether a member’s contribution to a pension scheme in Zambia matches the expected economic return 1.5
Following the objective of the research given, it will enlighten members of pension schemes to make informed decisions about investment for retirement, it will highlight the current flaws in Pension Fund administration and provide practical solutions; It will highlight the need for efficient and effective communication between the pension scheme manager and respective members, hence promoting transparence.
Occupational pension plans are mandatory in Zambia. Most workers are enrolled as result of their work agreement. Contributions made to pension schemes by the members are a major source of liquid resource on the financial markets. Most...
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